|Current account deficit
|When more money is leaving the country than entering it, as a result of sales of its exports, income and current transfers from abroad being less than imports and income and current transfers going abroad
|Output measured in current prices and so not adjusted for inflation GDP figure x base year price index current year price index
|Output per worker hour
|The percentage of the labour force who are out of work unemployed x 100% labour force
|A measure of unemployment that includes those receiving unemployment related benefits
|Average propensity to consume (APC)
|The proportion of disposable income that is spent. Consumer expenditure divided by disposable income
|A sustained rise in the price level
|Consumer price index
|A measure of changes in the price of a representative basket of consumer goods and services. Differs from the retail prices index (RPI) in methodology and coverage.
|A tax on firms profits
|Retail prices index (RPI)
|Measures of inflation that is used for adjusting pensions and other benefits to take account of changes in inflation and frequently used in wage negotiations.
|The country's output measured in constant prices and measured for inflation
|The total demand for a country's goods and services at a given price level and in a given time period
|Unemployment arising from a lack of AD
|Gross Domestic Product
|The total output of goods and services produced in a country
|The average of each of the prices of all the products produced in an economy
|The price of one one currency in terms of another
|Spending by households on consumer products
|Unemployment caused by the decline of certain industries and occupations due to changes in demand and supply.
|Spending on capital goods
|Tax on imports
|Spending by the central government and local government on goods and services
|Short term unemployment occurring when workers are in between jobs.
|Products sold abroad
|A financial asset issued by central or local government as a means of borrowing money
|Products bought from abroad
|The value of exports minus the value of imports (X - M)
|Money transferred from one person or group to another not in return for any good or service
|Job seekers allowance
|A benefit paid by the government to those unemployed and trying to find a job
|Demand pull inflation
|Increases in the price level caused by increases in aggregate demand
|Trade surplus Trade deficit
|Value of exports > value of imports Value of exports < value of imports
|Cost push inflation
|Increases in the price level caused by increases in the costs of production.
|Rate of interest
|The charge for borrowing money and the amount paid for lending money
|Unemployment causing unemployment
|The costs of changing prices due to inflation
|Shoe leather costs
|Costs in terms of the extra time and effort involved in reducing money holdings.
|The distortion of price signals caused by inflation
|Real interest rate
|The nominal interest rate - the inflation rate
|People's income being dragged into higher tax bands as a result of tax brackets not being adjusted in line with inflation
|Monetary Policy Committee (MPC)
|A committee of the Bank of England with responsibility for setting the interest rate in order to meet the governments inflation target.
|The taxation and spending decisions of a government
|Central bank and or government decisions on the rate of interest, money supply and the exchange rate
|The total amount that producers in an economy are able and willing to supply at a given price level in a given time period
|Transfer of assets from the public to the private sector
|A situation where aggregate demand equals aggregate supply and real GDP is not changing
|Supply side policies
|Policies designed to increase aggregate supply by improving the efficiency of labour and product markets
|Of policy measures designed to increase Aggregate Demand Of policy measures designed to reduce Aggregate Demand
|Circular flow of income Leakages Injections
|The movement of spending and income throughout the economy Withdrawals of possible spending from circular flow of income(taxes, saving, imports) Additions of extra spending into the circular flow of income (investment, exports, government spending)
|Discretionary fiscal policy
|Deliberate changes in government spending and taxation designed to influence aggregate demand
|Forms of government spending and taxation that change automatically to offset fluctuations in economic activity
|The process by which any change in a component of aggregate demand results in a greater final change in real GDP.
|The growth in AD outstripping the growth in AS, resulting in inflation
|Progressive tax Regressive tax
|A tax that takes a higher percentage from the income of the rich A tax that takes a greater percentage from the income of the poor
|The difference between an economy's actual and potential real GDP
|A tax on imports A limit on imports
|In the short run, an increase in real GDP and in the long run an increase in productive capacity that is in the maximum output that the economy can produce
|Occupational immobility of labour
|Difficulty in moving from one type of job to another
|A situation where people are out of work but are able and willing to work
|The protection of domestic industries from foreign competition
|The people who are employed and unemployed, that is, those who are economically active.
|A sustained fall in the general price level.
|Voluntary export restraint
|A limit placed on imports from a country with the agreement of that country's government
|Balance of payments
|A record of money flows coming in and going out of a country
|The percentage increase in the price level over a period of time
|Sustainable economic growth
|Economic growth that can continue over time and does not endanger future generations ability to expand productive capacity
|A situation where those wanting and able to work can find employment at the going wage rate.