PMT Theme 2

• What is actual growth in economics?

  Economic growth measured by changes in real GDP
• What does aggregate demand represent?

  The total level of demand in an economy at any given price level
• What does aggregate supply refer to?

  The total amount of output in an economy at any given price
• What are animal spirits in economics?

  The level of confidence of business owners
• What is the balance of payments?

  A record of all financial dealings over a period of time between economic agents of one country and all other countries
• What is a base year in economic data?

  A year chosen as a good comparison in a series of data, given an index figure of 100
• What is a boom in the business cycle?

  The peak of the business cycle, when growth is high
• What is a budget in economic terms?

  Where the government lays out their spending and taxation plans
• What is a budget deficit?

  When the government spends more money than it receives
• What is a budget surplus?

  When the government receives more money than it spends
• What does the circular flow model represent?

  A model of the economy showing the flow of goods, services, factors of production, and money
• What is the claimant count?

  A measure of unemployment; the number of people receiving benefits for being unemployed
• What is the Consumer Price Index (CPI)?

  An official measure used to calculate the rate of inflation using a weighted basket of goods
• What does consumption refer to in economics?

  Consumer spending on goods and services
• What is cost push inflation?

  Inflation caused by a decrease in aggregate supply
• What is the current account?

  A record of payments for the purchase and sale of goods and services, as well as income and transfers
• What is a current account deficit?

  When more money leaves the country than enters, resulting in a negative current account
• What is a current account surplus?

  When more money enters the country than leaves, resulting in a positive current account
• What is cyclical unemployment?

  Unemployment caused by a lack of aggregate demand
• What is deflation?

  A persistent fall in prices of goods and services
• What is deflationary/contractionary policy?

  Fiscal or monetary policy aimed at reducing aggregate demand
• What is demand pull inflation?

  Inflation caused by an increase in aggregate demand
• What is depreciation in economic terms?

  The reduction in the value of machinery over time
• What is a direct tax?

  Taxes paid straight to the government by the individual taxpayer
• What is disinflation?

  A reduction in the rate of inflation
• What is disposable income?

  The money consumers have left to spend after taxes and benefits
• What is economic growth?

  An increase in the long-term productive potential of the economy, measured by an increase in real GDP
• Who is considered employed according to the ILO definition?

  Someone who does more than 1 hour of paid work a week or is temporarily away from work
• What is expansionary policy?

  Fiscal or monetary policy aimed at increasing aggregate demand
• What are exports?

  Goods and services sold to foreigners that bring income into the country
• What is export-led growth?

  Economic growth arising from an increase in exports
• What is fiscal policy?

  The use of borrowing, government spending, and taxation to manipulate aggregate demand
• What is frictional unemployment?

  Unemployment caused when people move between jobs
• What is Gross Domestic Product (GDP)?

  The value of goods and services produced in a country over a given period of time
• What is GDP per capita?

  Total GDP divided by the population
• What is gross investment?

  Investment to replace old machinery and to create/buy new ones
• What is Gross National Income (GNI)?

  The value of goods and services produced by a country plus net overseas interest payments and dividends
• What is Gross National Product (GNP)?

  The value of goods and services produced by citizens of a country, whether they live in the country or not
• What is government spending?

  Spending by the government on the provision of goods and services
• What are imports?

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