Theme 2 Economics

• Actual growth 


  Economic growth measured by changes in real GDP.
• Aggregate demand (AD)


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


  The total amount of output in the economy at any given price at a 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 another
• Base year


  A year chosen as a good comparison in 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 (CPI)


  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 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 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 in 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 of 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 or 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


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