Economics Theme 2 - Edexcel A

Economic growth measured by changes in real GDP.

The total level of demand in an economy at any given price level at any given moment in time. Consumer Spending + Investment + Government Spending + (Exports Value - Imports Value).

The total amount of output in an economy at any given price at any given moment in time.

The level of confidence of business owners.

A record of all financial dealings over a period of time between economic agents of one country and all other countries.

A year chosen as a good comparison in a series of data when building an index; it is automatically given an index figure of 100.

The peak of the business cycle, when growth is high.

Where the government lays out their spending and taxation plans.

When the government spends more money than it receives.

When the government receives more money than it spends.

A model of the economy which shows the flow of goods and services, the factors of production and money around the economy.

A measure of unemployment; the number of people receiving benefits for being unemployed.

Official measure used to calculate rate of inflation, using a weighted basket of goods.

Consumer spending on goods and services.

Inflation caused by a decrease in AS.

A record of the payments for the purchase and sale of goods and services as well as income and transfers.

When more money leaves the country than enters, so the current account is negative.

When more money enters the country than leaves, so the current account is positive.

Unemployment caused by a lack of AD.

A persistent fall in prices of goods and services. Inflation is negative.

Fiscal or monetary policy which is aimed at reducing AD.

Inflation caused by an increase in AD.

The reduction in the value of machinery over time.

Taxes paid straight to the government by the individual taxpayer.

A reduction in the rate of inflation.

The money consumers have left to spend, after taxes have been taken away and benefits added.

An increase in the long term productive potential of the economy; an increase in the amount of goods and services which are produced, measured by an increase in real GDP.

Someone who does more than 1 hour of paid work a week or is temporarily away from work, on a government supported training scheme or does a minimum of 15 hours unpaid work for the family business. (International Labour Organisation (ILO) Definition).

Fiscal or monetary policy which is aimed at increasing AD.

Goods and services sold to foreigners that bring income into the country.

Economic growth arising from an increase in exports.

The use of borrowing, government spending and taxation to manipulate the level of AD and improve macroeconomic performance.

Unemployment caused when people move between jobs and enter the job market.

The value of goods and services produced in a country over a given period of time.

Total GDP divided by the population.

Investment both to replace old machinery that has depreciated and to create/buy new ones.

The value of goods and services produced by a country over a period of time plus net overseas interest payments and dividends.

The value of goods and services produced by citizens of a country, whether the live in the country or not.

Spending by the government on the provision of goods and services.

Goods and services bought from foreigners that takes income out of the country.

Those neither employed nor unemployed; those not participating in the job market.

A flow of assets

Numbers allowing accurate comparisons to be made over time. The base year value is typically 100.

Tax where the person charged with paying the money to the government is able to pass the cost onto someone else.

The general rise in prices of goods and services that erodes the purchasing power of money.

Spending power entering the circular flow of income resulting from investment, government spending and exports.

Policies designed to correct market failure, where the government intervenes in the market.

Spending by businesses on capital goods, which leads to the creation of real goods.

A measure of unemployment which surveys people to class them as unemployed, employed or inactive under the ILO definitions.

The quality of life enjoyed by people in a country.

When all factors of production are variable.

The total output an economy can produce when operating at full output

The average sustainable rate of economic growth over a period of time.

The proportion of an increase in income spent on consumption. Change in Consumption/Change in Income.

The proportion of an increase in income spent on imports. Change in Imports/Change in Income.

The proportion of an increase in income that is saved. Change in Savings/Change in Income.

The proportion of an increase in income that is taken away in tax. Change in Taxation/Change in Income.

`The proportion of an increase in income that is withdrawn from the circular flow. MPW = MPS+MPT+MPM

Policies which are designed to remove anything which prevents the free market system working efficiently.

The attempts of the central bank/regulatory authority to control the level of AD by altering base interest rates or the amount of money in the economy (QE).

9 Economists who meet monthly to set the Bank rate as well as other monetary instruments.

Stock of money in the economy.

An increase in an injection will lead to an even greater increase in national income. 1/(1-MPC).

The value of spending by households on goods and services.

The value of money paid by firms to households in return for land, labour, capital and enterprise.

The value of the flow of goods and services from firms to households.

When GDP is lower than predicted; the economy is producing below full output.

Exports - Imports

Investment adjusted for depreciation; gross investment minus depreciation.

GDP which does not take inflation into account; GDP at current prices.

The difference between the long term trend rate of growth and actual growth.

When GDP is higher than predicted; the economy is producing above full output.

A change in the productive potential of the economy.

Exchange rate of one currency to another that compares the cost of living in different countries through comparing a typical basket of goods.

When the central bank buys assets (bonds) from banks in exchange form money in an attempt to increase the money supply. The banks loan the money out.

GDP which strips out the effect of inflation.

Unemployment caused when wages are set above the equilibrium wage rate.

The trough of the business cycle, when growth is low.

The government defines it as where real GDP falls in at least two successive quarters.

An old measure of inflation which has lost its national statistic status. Includes housing costs and council tax.

The decision by consumers to postpone consumption.

Unemployment caused when an industry only operates during certain times of the year.

When at least one factor of production is fixed.

Aggregate supply when at least one factor of production is fixed.

Shows the relationship between unemployment and inflation: higher levels of unemployment lead to lower levels of inflation.

Unemployment caused by the long term decline of an industry.

Government policies aimed at increasing the productive potential of the economy and shifting LRAS to the right.

The GDP of the whole country.

The tendency of economic growth to rise and fall above the trend rate of economic growth, causing booms and busts.

Those who are working part time, on zero hour contracts or on government training schemes but would prefer to be fill time or those employed in areas below their skill level.

Those who are without work, able to start work in the next 2 weeks and have actively sought work for the last 4 weeks (ILO definition).

Nominal values of GDP; GDP at current prices.

Real values of GDP; the size of the basket of goods.

A stock of assets.

Spending power leaving the circular flow of income resulting from savings, taxation and imports.