Macroeconomics AS 3 (8)

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Economic Performance
Success or failure in achieving economic policy objectives
Economic Recovery
When short-run economic growth takes place after a recession
Trend Growth Rate
The rate at which output can grow, on a sustained basis, without putting upward or downward pressure on inflation. It reflects the annual average percentage increase in the productivity capacity of the economy
Seasonal Fluctuation
Variation of economic activity resulting from seasonal changes in the economy
Economic Cycle (or business cycle or trade cycle)
Upswing and downside in the aggregate economic activity taking place over 4 to 12 years.
Actual Output
Level of real output produced in the economy in a particular year.
Trend Level of Output
What the economy is capable of producing when working at full capacity
Output Gap
The level of actual real output in the economy is greater or lower than the trend output level
Positive Output Gap
The level of actual real output in the economy is greater than the trend output level
Negative Output Gap
The level of actual real output in the economy is lower than the trend output level
Frictional Unemployment (transitional unemployment)
Unemployment that is usually short term and occurs when a worker switches between jobs
Seasonal Unemployment
Unemployment arising in different seasons of the year, caused by factors such as the weather and the end of the Christmas shopping period
Real Wage
The purchasing power of the nominal wage, e.g. real wages fall when inflation is higher than the rise in the nominal wage rate and real wages rise when the nominal wage rate increases more rapidly than inflation
Real-Wage Unemployment
Unemployment caused by the real wages being stuck above the equilibrium real wage
Voluntary Unemployment
Occurs when workers chose to remain unemployed and refuse job offers at current market wage rates
Involuntary Unemployment
When workers are willing to work at current market wage rates but there are no jobs available
Equilibrium Unemployment
Exists when the economy’s aggregate labour market is in equilibrium. It is the same as the natural level of unemployment
Natural Rate of Unemployment
The rate of unemployment when the aggregate labour market is in equilibrium
Demand(-Pull) Inflation
A rising price level caused by an increase in aggregate demand, shown by a shift of the aggregate demand curve to the right
Cost(-Push) Inflation
A rising price level caused by an increase in the costs of production, shown by a shift of the SRAS curve to the left
Wage-Cost Inflation
A rising price level caused by an increase in wages and salaries, SRAS to left
Import-Cost Inflation
A rising price level caused by an increase in the cost of imported goods, SRAS to left
Emerging-Market Country
A country that is progressing towards becoming more economically advanced, by means of rapid growth and industrialisation
Monetarists
Economist who argue that a prior increase in the money supply is the cause of inflation
Quantity Theory of Money
Oldest theory of inflation, inflation is caused by a persistent increase in the supply of money
Equation of Exchange
The stock of money in the economy multiplied by the velocity of circulation of money equals the price level multiplied by the quantity of real output in the economy
Balance of Trade in Goods (Balance of Visual Trade)
The part of the current account measuring payments for exports and imports of goods. The difference between the total value of exported and imported goods
Net Investment Income
The difference between inward and outward flows of investment income. When net investment income is positive, the UK is earning more income generated by the direct and portfolio investments held abroad than it is paying to overseas owners of capital assets in the UK.
Transfers
Payments flowing between countries in forms such as foreign aid They are payments that are made without anything of economic value being received in return.
Export-Led Growth
Short run, results from the increase in exports as a component of aggregate demand. Long run, economic growth and increased international competitiveness of exporting industries
Reindustrialise
Growth of manufacturing industries to replace industries which have disappeared or declined significantly in size
Short Run Phillips Curve
Based on evidence from the economy, showing the apparent relationship between the rate of inflation and the rate of unemployment
Long Run Phillips Curve
A vertical curve located at the natural rate of unemployment (NRU).
Categories: Macroeconomics