Definitions

• Actual growth - economic growth but measured by changes in real GDP
• AD - total level of demand in an economy at any given price over a period of time
• AS - total amount of output in the economy at any givein price over a given period of time
• balance of payments. record of all financial transactions between countries. it states how much is spent on imports and the value of the country‘s exports
• boom - peak of business cycle. when economic growth is fast
• budget deficit - when the government spends more money than it receives
• budget surplus - when the government receives more money than it spends
• circular flow of income - a model of the economy which shows the flow of goods and services, the factors of production and money around the economy
• claimant count - measure of unemployment, the number of people who receive benefits for being unemployed
• Consumer Price Index - a measure used to calculate the rate of inflation using a weighted basket of goods
• direct tax - taxes paid straight to the government by the taxpayer
• deflation - negative inflation
• disinflation - a reduction in the rate of inflation
• disposable income is the money consumers have left to spendm after taxes have been taken away and benefits have been added
• Economic growth - an increase in the amount of goods and services that are produced within an economy, measured by an increase in real GDP
• fiscal policy - the use of borrowing, government spending and taxation to manipulate the level of AD
• GDP - the value of goods and services produced within a country’s BORDERS over a given period of time
• GDP per capita - total GDP divided by population
• GNI - the value of goods and services produced by a country over a period of time plus net interest payments and dividends from overseas
• GNP - the value of goods and services produced by citizens of a country, whether they live in the country or not
• inflation - a rise in the general price level. Erodes the purchasing power of money
• Injection - spending power that enters the circular flow of income as a result of investment, government spending and exports
• standard of living - the quality of life enjoyed by people in a country
• LRAS - the total output an economy can produce when operating at full output
• Long run trend growth rate - average sustainable rate of economic growth over a period of time
• Marginal propensity to consume - the proportion of an increase in income spent on consumption. change in consumption / change in income
• Marginal propensity to import - the proportion of an increase spent on imports
• Marginal propensity to save - the proportion of an increase in income that is saved
• Marginal propensity to tax - the proportion of an increase in income spent on tax
• marginal propensity to withdraw - the proportion of an increase in income that is withdrawn from the circular flow
• Monetary policy - policies set by the central bank to control the level of AD, like changing interest rates or the amount of money in an economy
• Multiplier - an increase in an injection will lead to an even greater increase of national income
• 1/1-MPC = 1/MPW
• National expenditure - the value of spending by households on goods and services
• National income - the value of income paid by firms to households in return for factors of production
• National output - the value of the flow of goods and services from firms to households
• Negative output gap - when GDP is lower than predicted, so the economy is producing below its full potential
• Net exports - exports-imports
• Net investment = gross investment - depreciation
• Nominal GDP - GDP which does not take inflation into account, it is the GDP at the current price