Paper 2

• Actual growth is economic growth measured by changes in real GDP
• Aggregate demand (AD)


  The total level of demand in an economy at any given price level at any given moment in time
• Aggregate supply (AS)


  The total amount of output in an economy at any given price at any given moment in time
• Animal spirits


  The level of confidence of business owners
• Balance of payments


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


  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
• Boom


  The peak of the business cycle, when growth is high
• Budget


  Where the government lays out their spending and taxation plans
• Budget deficit


  When the government spends more money than it receives
• Budget surplus


  When the government receives more money than it spends
• Circular flow


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


  A measure of unemployment; the number of people receiving benefits for being unemployed
• Consumer Price Index


  Official measure used to calculate the rate of inflation, using a weighted basket of goods
• Consumption


  Consumer spending on goods and services
• Cost push inflation


  Inflation caused by a decrease in AS
• Current account


  A record of the payments for the purchase and sale of goods and services as well as income and transfers
• Current account deficit


  When more money leaves the country than enters, so the current account is negative
• Current account surplus


  When more money enters the country than leaves, so the current account is positive
• Cyclical unemployment


  Unemployment caused by a lack of AD
• Deflation


  A persistent fall in prices of goods and services
• Deflationary/contractionary policy


  Fiscal or monetary policy which is aimed at reducing AD
• Demand pull inflation


  Inflation caused by an increase in AD
• Depreciation


  The reduction in the value of machinery overtime
• Direct tax


  Taxes paid straight to the government by the individual taxpayer
• Disinflation


  A reduction in the rate of inflation
• Disposable income


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


  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
• Employed


  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 their family business (ILO definition)
• Expansionary policy


  Fiscal or monetary policy which is aimed at increasing AD
• Exports


  Goods and services sold to foreigners that bring income into the country
• Export-led growth


  Economic growth arising from an increase in exports
• Fiscal policy


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


  Unemployment caused when people move between jobs and enter the job market
• Gross Domestic Product (GDP)


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


  Total GDP divided by the population
• Gross investment


  The total amount spent on capital goods in an economy
• Gross investment


  Investment both to replace old machinery that has depreciated and to create/buy new ones
• Gross National Income (GNI)


  The value of goods and services produced by a country over a period of time plus net overseas interest payments and dividends
• Gross National Product (GNP)


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


  Spending by the government on the provision of goods and services