Level 29
Level 30

National & International


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Sustainable Economic Growth
Macroeconomic Policy Objectives (5)
Production
Is any economic activity which leads to a flow of goods and services for which people are willing and able to pay for
Primary
Name 3 Production Categories
Gross Domestic Product
Is a measure of the final output of goods and services produced by factors of production- domestically and foreign owned- located within an economy
Nominal Gross Domestic Product
Is Gross Domestic Product plus Net Income from Investment abroad
Real Gross Domestic Product
Measures the total value of the final output of goods and services using a constant price: i.e. the price that existed during some given or 'base' year. It is a measure that has been adjusted for inflation
Economic Growth
Is an increase in the actual and potential output of goods and services produced by an economy. The rate of economic growth is measured by the percentage increase in Real Gross Domestic Product
Short Run Economic Growth
Is an increase in the actual output of goods and services
Long Run Economic Growth
Is an increase in the actual and potential output of goods and services
Trend Economic Growth
Is the average rate over a given period of time, usually the length of a cyle
Inflation
Is an increase in the General Price that is sustainable over a given period of time. The rate of Inflation is measured by the increase in the Consumer Price Index pa
Retail Price Index
Is the weighted average of the price in a representative baskets of goods and services-650 items- at a point in time, expressed as an index number. It is based on the spending habits of househ…
Retail Price Index X
Is the Retail Price Index minus mortgage interest payments. It measures underlying inflation
Consumer Price Index
Is the weighted average price of a basket of goods and services as bought by a representative households, excluding housing costs, especially mortgage interest payments and council tax
Inflation Target
Is an inflation rate, as measured by the Consumer Price Index, of 2% +/- 1% pa. The Bank of England must attempt to achieve this target each month
Unemployment
Is those people who are officially registered as seeking employment and are 'able, available and willing to work at a suitable job.' The Unemployment rate is measured as a percentage of the Labour Force.
Claimant Court Measure
Is those who are register as unemployed and are eligible to receive benefits
Labour Force Survey/ International Labour Organization
Is a survey of those who are willing to work at some time during the next four weeks
Full Employment
Exists where there is a suitable job available for anyone who is seeking employment and is 'able, available, and willing to work at the going wage.' This occurs where the number of unemployed equals the number of vacancies (U=V).
International trade
__________ is the exchange of resources between the peoples of different nations.
free trade
: takes place between countries when there are no barriers to trade put in place by governments or international organizations. Goods and services are allowed to move freely between countries.
The Balance of Payments
Is a record of all financial transactions that take place between residents of the rest of the world over a given time period, usually one year- although data is published each month
The Balance of Payments on Current Account
Records the financial transactions which relates to the trade in goods and services, to investment income and to current transfers. It measures the extent to which our economy is paying its way with the rest of the world
The Balance of Trade
Is exports of goods and services minus imports of goods and services
A Balance of Payments Deficit
Occurs where on current account the credit items are less than the debit items
A Balance of Payments Surplus
Occurs where on current account the credit items are more than the debit items.
Aggregate Demand
Is the total of all planned expenditure in the economy
Consumption
Is household expenditure on goods and services
Saving
Is the part of household disposable income that is not spent on goods and services
investment
Expenditures on capital goods or on inventories of goods or raw materials that are used to produce other goods and services, causing future production and income to rise.
Government Expenditure
Is expenditure by the public sector- central and local government and public corporations- on goods and services
Net Exports
Is exports of goods and services minus imports of goods and services i.e. balance of trades
The Circular Flow of Income
Is a model of the economy in which the flow of income and expenditure between households and firms
Injections
Are an autonomous addiction to the circular flow of income. They lead to an increase in aggregate demand.
Leakages
Are a withdrawal from the circular flow of income. They lead to a decrease in aggregate demand
Savings
Name 3 Leakages
The Multiplier
Is the number used to multiply a change in injections, so to give the final change in real output
Multiple Effect
Occurs where an increase in investment or any other autonomous expenditure will lead to a greater increase in real output
Aggregate Supply
Is the total of all planned output in the economy- primary, secondary, tertiary, over a given period of time. It is measured in real terms.
Short-Run Aggregate Supply
Is the total amount of planned output in the economy, assuming that wages rates and other costs are constant
Long-Run Aggregate Supply
Is the total amount of planned output in the economy, assuming that wages rates and other assets are fully flexiable
Keynesian Aggregate Supply
Is the total amount of planned output in the economy, assuming that prices and wage rates are 'sticky downwards'
Macro-Economic Equilibrium
Is where aggregate demand equals aggregate supply ( not necessarily fully employment)
Output Gap
Is the difference between potential output and actual output
A Recession
A phase in the trade cycle during the grow of Real Gross Domestic Product is below the trend rate
A Recovery
Is a phase in the trade cycle during which the growth rate of Real Gross Domestic Product is above the trend rate
Demand-Pull Inflation
Occurs where there is an increase in aggregate demand with the economy with the economy at or near to accommodate the increase in aggregate demand
Cost-Push Inflation
Occurs where there is an autonomously determined increase in the cost of production.
Aggregate Demand Management
Is the use of fiscal and monetary policy. It can be expansionary- increasing aggregate demand- or contradictory- decreasing aggregate demand and it is used to achieve government's macro-economic objectives
Fiscal Policy
Is the use of changes in public expenditure and taxation so as to manage aggregate demand
Public Expenditure
Is an expenditure by the government on goods and services
Taxation
Is a compulsory levy charged on incomes, profits and expenditure on goods and services
Direct Taxation
Is a compulsory charge imposed by the government on income and profit earned by individuals
Indirect Taxation
Is a compulsory charge imposed by the government on the sales of goods and services
Budget Balance
Is the difference between the levels of Tax Revenue and Public Expenditure
Money Supply
Is the stock of cash and bank deposits in circulation in the economy
Rate of Interest
Is the price of money. Measured as a percentage per annual
An Appreciation
In the rate of exchange means that its value against other currencies in the FOREX market has gone up. This will lead to a strong currency
A Depreciation
Is the rate of exchange means that the value against other countries in the FOREX market has gone down. This will lead to a weak currency
Supply-Side Polices
Aim to increase potential output by making the economy more efficient
Tax Incentives
Examples of Supply-Side Polices
Protectionism
A government policy during the second half of the 1800s and into the early 1900s that involved the control of people's lives and removal of indigenous people from their traditional lands into reserves or missions
tariffs
a tax imposed on imports
Quotas
Are limits on the quantity of imports allowed in a country
Level 31