Theme 2 - macro

• Wealth

  A stock concept- the accumulation of assets, such as property
• Injections


  Where money flows into the circular flow in the form of investment, government spending and exports
• Withdrawals


  Where money flows out of the circular flow in the form of savings, taxation and imports
• Total factor productivity

  The average productivity of all factors, measured as the total output divided by the total amount of inputs used
• Sustainable development


  Development that meets the needs of the present without compromising future generations to meet their own needs
• Short-run aggregate supply


  A curve showing how much output firms would be prepared to supply in the short run at any given overall price level
• Recession


  Occurs when GDP falls for two or more consecutive quarters
• Productivity


  A measure of the efficiency of a factor of production
• Net investment

  Gross investment minus depreciation
• Natural rate of unemployment

  The unemployment rate that will exist when the economy is in long-run equilibrium
• Natural rate of output

  The long-run equilibrium level of output to which monetarists believe the macroeconomy will always tend
• Monetarist school


  A group of economists who believed that the macroeconomy always adjusts rapidly to the full employment level of output, and that monetary policy should be the prime instrument for stabilizing the economy
• Marginal propensity to withdraw

  The proportion of additional income that is withdrawn from the circular flow- the sum of the marginal propensities to save, import and tax
• Macroeconomics


  The study of the interrelationships between economic variables at an aggregate (macroeconomic) level
• Labour productivity


  A measure of output per worker, or output per hour worked
• Keynesian school


  A group of economists who believed that the macroeconomy could settle at an equilibrium that was below full employment
• Income


  A flow concept; the amount that is earned during a period
• In employment


  People who are either working for firms or other organisations, or self-employed
• Human Capital

  The stock of skills and expertise that contribute to a worker's productivity; it can be increased through education and training
• Monetary policy


  The decisions made by government regarding monetary variables such as the money supply of interest rate
• Marginal propensity to tax


  The proportion of additional income that is taxed
• Marginal propensity to save


  The proportion of an increase in disposable income that households would devote to saving.
• Marginal propensity to import


  The proportion of additional income that it spent on imports on goods and services
• Marginal propensity to consume


  The proportion of additional income devoted to consumption
• Investment


  Expenditure undertaken by firms to add to the capital stock
• Workforce


  People who are economically active- either in employment or unemployment
• Voluntary unemployment


  Where an individual chooses not to accept a job at the going wage rate
• Unemployed


  People who are economically active but are not in employment
• Underemployment


  Where an individual is employed in a second choice occupation or is not working as many hours as he or she would like
• Structural Unemployment


  Unemployment arising because of changes in the pattern of economic activity within an economy
• Seasonal Unemployment


  Unemployment that arises in seasons of the year when demand is relatively low
• Retail Price Index

  A measure of the average level of prices in the UK which includes housing costs
• Real value


  The value of an economic variable, taking account of changing prices through time
• Purchasing Power of Parity


  A measure of what can be bought with a currency which is both a currency convertor and a spatial price deflator
• Potential Economic Growth


  An expansion in the productive capital of the economy
• Per Capita


  Per person
• Output gap


  The difference between actual and potential growth
• Involuntary unemployment


  where an individual would like to accept a job at the going wage rate but is unable to find employment
• Investment income


  The reward for investments in other countries (interest, payments and dividends).
• Inflation


  The rate of increase in the average price level in an economy