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Description
Flashcards by Fred Clayton, updated more than 1 year ago
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Created by Fred Clayton
over 9 years ago
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| Question | Answer |
| Accelerator Process | Where any change in demand for goods/services beyond current capacity leads to a greater % increase in demand for capital goods needed by firms to produce extra goods/services |
| Actual Economic Growth | A measure of economic growth, adjusted for inflation |
| Aggregate Demand | The total demand/spending in an economy at different price levels over a given time period C+I+G+(X-M) |
| Aggregate Supply | The total amount of goods & services which can be supplied in an economy at different price levels over a given time period |
| Allocative Efficiency | When the price of a good is = to price that consumers are willing to pay for it, which happens when all resources are allocated efficiently |
| Asymmetric Information | When buyers have more information than sellers (or opposite) in a market |
| Balance of Payments | A country's international transactions, i.e. a record of the flows of money into and out of a country |
| Budget Deficit | When government spending is greater than it's revenue |
| Budget Surplus | When government spending is less than its revenue |
| Cartel | A group of producers that agree to limit production in order to control the price of goods and services |
| Circular Flow of Income | The flow of national output, income & expenditure between households and firms national output=national income=national expenditure |
| Complementary Good | A good that is often used with another good-these goods are in joint supply |
| Composite demand | When a good is demanded for two or more different uses e.g. milk can be used in production of ice-cream & chocolate |
| Consumer Surplus | When a consumer pays less for a good than they were prepared to, this amount of money is the consumer surplus |
| Cost-Push Inflation | Inflation caused by the rising cost of the inputs to production |
| Cross Elasticity of Demand (XED) | A measure of how the quantity of demanded of one good/service responds to a change in the price of another good/service |
| Current Account on the Balance of Payments | A record of a country's international flows of money. Consists of: trade in goods, trade in services, international flows of income (salaries, interest, profit & dividends) & transfers |
| Cyclical Unemployment | Unemployment caused by a shortage in demand in an economy e.g. when there's a slump |
| Demand-Pull Inflation | Inflation caused by excessive growth in aggregate demand compared to aggregate supply |
| Demerit Good | A good/service which has greater social costs when it's consumed than private costs. Demerit goods tend to be overconsumed |
| Deregulation | Removing rules imposed by the government that can restrict the level of competition in a market |
| Derived Demand | The demand for a good/factor of production due to its use in making another good/service |
| Disposable Income | Income, including welfare benefits, that is available for households to spend after income tax has been paid |
| Dividend | A share in a firm's profits that is given to the firm's shareholders |
| Economic Cycle | The economic cycle (or the business/trade cycle) is the fluctuation in actual growth a time period (several years/decades) |
| Economic Growth | An increase in an economy's productive potential. Measured as the rate of change of the GDP/GDP per capita |
| Economies of Scale | The cost advantages of production on a large scale |
| Equilibrium | When the quantity supplied is equal to the quantity demanded (market clearing price) |
| Equity | Fairness |
| Exchange Rate | Price at which one currency buys another |
| Externalities | External costs/benefits to a 3rd party that isn't involved in the making, buying/selling & consumption of a specific good/service |
| Factors of Production | The four inputs needed to make the things people want: land, labour, capital & enterprise |
| Fiscal Policy | Government policy that determines the levels of government spending & taxation. Often used to increase/decrease AD in an economy |
| Free Market | A market with no government intervention. Competition between different suppliers affects supply & demand, resulting in determining prices in a free market |
| Free Trade | International trade without any restrictions from things such as trade barriers |
| Frictional Unemployment | The unemployment experienced by workers between leaving one job and starting another |
| Government Failure | Occurs when government intervention into a market causes a misallocation of resources |
| Gross Domestic Product (GDP) | The total value of all the goods and services produced in a country in a year |
| Imperfect Information | A situation where buyers &/or sellers don't have full knowledge regarding price, costs, benefits & availability of a good/service |
| Income Elasticity of Demand (YED) | A measure of how the demand for a good/service responds to a change in real income |
| Inferior Good | A good for which demand decreases as income rises e.g. low quality food |
| Inflation | The sustained rise in the average price of goods & services over a period of time |
| Interest | Money paid to the lender by someone who borrows capital. Often be a fixed %rate-known as interest rate |
| Investment | The purchase of capital (e.g. new machinery) in the hope that this will help generate an increased level of output. Can also mean buying shares from the stock market- done in hope of making a future profit/receiving dividend payments |
| Joint Demand | When two complementary goods are consumed together |
| Joint Supply | When the production of one good involves the production of another |
| Long Run | A time period in which all factors of production are variable so a firm can expand its capacity |
| Long Run Aggregate Supply (LRAS) | In the long run it's assumed that, because factors & costs of production can change, an economy will run at full capacity-so LRAS is the productive potential of an economy |
| Macroeconomics | This is the part of economics that looks at the economy as a whole e.g. trends in unemployment & economic growth |
| Marginal Propensity to Consume | The proportion of an increase in income that people will spend (¬ save) |
| Market | Where buyers & sellers exchange goods/services |
| Market Failure | Where the price mechanism fails to allocate resources efficiently |
| Merit Good | A good/service which provides greater social benefits when it's consumed than private benefits. Merit goods tend to be underconsumed |
| Microeconomics | The part of economics concerned with individual people, individual firms & individual markets e.g. covers things like how changes in demand affects the price of a good in a market |
| Monetary Policy | Government policy that involves controlling the total amount of 'money' in an economy (the money supply), & how expensive it is to borrow that money. It involves manipulating interest rates, exchange rates & restrictions on the supply of money |
| Monopoly | A pure monopoly is a market with only one supplier. Some markets will be reffered to as a monopoly if there's more than one supplier, but one supplier dominates the market |
| Monopoly Power | The ability of a firm to be a 'price maker' & influence the price of a particular good in a market |
| Mortgage | A loan taken out to contribute to the cost of buying a house/other property |
| Multiplier Effect | The process by which an injection into the circular flow of income creates a change in the size of national income that's greater than the injection's size |
| National Output | All the goods & services produced in a country in a year |
| Normal Good | A good for which demand increases as income rises e.g. clothing |
| Normative Statement | A subjective statement which contains some kind of value judgement (opinion) |
| Opportunity Cost | The benefit that's given up in order to do something else-it's the cost of the choice that's made |
| Output Gap | The gap between the trend rate of economic growth & actual economic growth. Output gaps can be positive or negative |
| Perfect Information | When buyers & sellers have full knowledge of prices, costs & availability of products |
| Positive Statement | An objective statement that can be tested by reffering to the available evidence |
| Price Elasticity of Demand (PED) | A measure of how quantitiy demanded of a good/service responds to a change in its price |
| Price Elasticity of Supply (PES) | A measure of how the quantity supplied of a good/service responds to a change in its price |
| Price Instability | When a small increase/decrease in the quantity supplied of a good/service can have a large impact on the price. Price instability us a feature of many markets for agricultural products |
| Price Mechanism | When the changes in demand/supply of a good/service lead to changes in its price & the quantity bought/sold |
| Privitisation | When a firm/whole industry changes from being run by the public sector to the private sector. It's an example of a supply-side policy |
| Producer Surplus | When a producer receives more for a good than they were prepared to accept, this amount of money is the producer surplus |
| Production Possibility Frontier (PPF) | A curve which shows all the maximum possible outputs of two goods/services using a fixed amount of inputs |
| Productive Efficiency | Outputting the desired amounnt of good/services for the lowest average cost of production (this occurs on the PPF) |
| Productivity | A measure of how efficiently a company/economy is producing its outputs |
| Protectionism | When a government uses policies to control the level of international trade & protect its own economy, industries & firms |
| Public Good | A good which people cannot be stopped from consuming, even if they've not paid for it, and the consumption of which doesn't prevent others from benefiting from it (e.g. national defence) |
| Purchasing Power Parity (PPP) | An adjustment of an exchange rate to reflect the real purchasing power of the two currencies |
| Real Income | A measure of the amount of goods/services that a consumer can afford to purchase with their income-adjusted for inflation |
| Recession | A period where economic growth becomes negative. Typically there are falling demand, low levels of investment & rising unemployment during a recession |
| Revenue | The total value of sales within a time period. It can be calculated using: price per unit x quantity sold |
| Seasonal Unemployment | Unemployment due to uneven economic activity during the year |
| Shareholders | Individuals (or firms) that owns shares in a company |
| Share | A share represents a portion of a company's value-giving the share's owner a right to a portion of the company's profits |
| Short Run | A time period in which a firm's capacity is fixed & at least one factor of production is fixed |
| Short Run Aggregate Supply (SRAS) | This is aggregate supply when the factors of production are fixed |
| Speculation | When things are bought (e.g. shares) in the hope that they will increase in value and can be sold for a profit at a later date |
| Structural Unemployment | Unemployment usually caused by the decline of major industry, which is made worse by labour immobility (geographical/occupational) |
| Subsidy | An amount of money paid by a government to the producer of a good/service to lower the price & increase demand for the good/service |
| Substitute Good | A good that can be used as an alternative to another good e.g. soya milk & cow's milk |
| Supply-Side Policy | Government policy that aims to increase AS in an economy e.g. a policy to increase the productive capacity of the economy |
| Trade Union | An organisation of workers that acts to represent their interests e.g. to improve their pay |
| Tax | An amount of money paid to a government. It's paid directly e.g. income tax, or indirectly e.g. excise duty |
| Unemployment | The level of unemployment is the number of people who are looking for a job but cannot find one The rate of unemployment is the number of people out of work as a % of the labour force |
| Wage Rate | The price of labour, i.e. the rate of pay to employ a worker |
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