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the total demand for a country's goods and services at a given price level and in a given time period
the total amount that producers in an economy are willing and able to supply at a given price level in a given time period
Where consumer satisfaction is maximised
the sum of the items divided by the number of items
information not equally shared between two parties
forms of government spending and taxation that change automatically to offset fluctuations in economic activity
the sum of the items divided by the number of items
Average propensity to save
the proportion of disposable income saved.
Average propensity to consume
the proportion of disposable income spent.
Balance of payments
a record of money flows coming in and going out of a country.
a diagram where the lengths of the bars show the different values of the items
the extent to which firms are using their capital goods
Man-made aids to production
Circular flow of income
the movement of spending and income throughout the economy
a measure of unemployment that includes those receiving unemployment-related benefits
the price where demand and supply are equal
All other thing being equal assuming other variables remain unchanged
Change in demand
this is where a change in a non-price factor leads to an increase or decrease in demand for a product
the selection of appropriate alternatives
an economic system in which resources are state owned and also allocated centrally
Goods for which there is a joint demand
how optimistic consumers are about future economic prospects
spending by households on consumer products
Consumer Price Index
a measure of changes in the price of a representative basket of consumer goods and services.
The extra amount that a consumer is willing to pay for a product above the price that is actually paid.
a tax on firms' profits
Increases in the price level caused by increases in the costs of production
Cross Elasticity of Demand
The responsiveness of demand for one product in relation to a change in the price of another.
current account deficit
when more money is leaving the country than entering it, as a result of sales of its exports, income and current transfers from abroad being less than imports, income and current transfers going abroad
unemployment arising from a lack of aggregate demand
a sustained fall in the general price level
Deflationary Fiscal Policy
Designed to reduce aggregate demand.
the quantity of a product that consumers are able and willing to purchase at various prices over a period of time
this shows the relationship between the quantity demanded and the price of a product
increases in the price level caused by increases in aggregate demand
the data that is used to draw the demand curve for a product
Their consumption is more harmful than is actually realised
an economy with a high level of income per head
an economy with a low level of income per head
one that taxes the income of people and firms and that cannot be avoided
Discretionary fiscal policy
deliberate changes in government spending and taxation designed to influence aggregate demand
any position in the market where supply and demand are not equal
income after taxes on income have been deducted and state benefits have been added
spending more than disposable income
distribution of income
how income is shared out between households in a country
division of labour
the specialisation of labour where the production process is broken down into separate tasks
the tendency for economic activity to fluctuate outside its trend growth rate, moving from a high level of economic activity (boom) to negative economic growth (recession)
where both allocative and productive efficiency are achieved
in the short run, an increase in real GDP, and in the long run, an increase in productive capacity, that is, in the maximum output that the economy can produce
people of working age who are neither employed nor unemployed
how to allocate scarce resources among alternative uses
the study of how to allocate scarce resources in the most efficient way
the way in which production is organised in a country or group of countries
the willingness and ability to buy a product
Where the best use of resources is made for the benefit of consumers.
responsiveness to a change in market conditions
the extent to which buyers and sellers respond to a change in market conditions
someone who bears the risks of the business and who organises production
the willingness of an entrepreneur to take risks and organise production
the price where demand and supply are equal
the quantity that is demanded and supplied at the equilibrium price
the process by which goods and services are traded
the price of one currency in terms of another currency or currencies
products sold abroad
the benefits that accrue as a consequence of externalities to third parties
the costs that are the consequence of externalities to third parties
an effect whereby those not directly involved in taking a decisions are affected by the actions of others
The stock of factors of production
Factors of production
The resource inputs that are available in an economy for the production of goods and services
The services provided by the factors of production
People's income being dragged into higher tax bands as a result of tax brackets not being adjusted in line with inflation
The taxation and spending decisions of a government
Free market mechanism
The system by which the market forces of demand and supply determine prices and the decisions made by consumers and firms
Someone who directly benefits from the consumption of a public good but who does not contribute towards its provision
Short-term unemployment occurring when workers are in-between jobs
A situation where those willing and able to work can find employment at the going wage rate.
Tangible products, i.e products that can be seen and touched, such as cars, food and washing machines.
A financial asset issued by the central or local government
Spending by the central bank and local government on goods and services
Gross domestic product
The total output of goods and services produced in a country
Group of people whose spending decisions are connected
Education, training and experience that a worker, or group of workers possesses
An inflation rate above 50 per cent
Unemployment causing unemployment
Products bought from abroad
Goods for which a change income products a greater proportionate change in demand
Income elasticity of demand
The responsiveness of demand to a change in income
Goods for which a change in income produces a less than proportionate change in demand
A number showing the variation in, for example, wages or prices, as compared with a chosen base period or date
Is a tax levied on goods or services.
Any situation where economic efficiency is not achieved
Goods for which an increase in income leads to a fall in demand
A sustained rise in the price level.
The distortion of price list alas caused by inflation
Economic activity that is not recorded or registered with the authorities in order to avoid paying tax or complying with regulations, or because the activity is illegal
A lack of information resulting in consumers and producers making decisions that do not maximise welfare.
Additions of extra spending into the circular flow of income
International Labour Organisation
A member organisation of the United Nations that collects statistics on labour market conditions and seeks to improve working conditions.
Spending on capital goods
The quantity and quality of human resources.
The people who are employed and unemployed, that is, those who are economically active.
Labour force survey
A measure of unemployment based on a survey using the ILO definition of unemployment
Output of a good or service per worker in a given time period
Natural resources in an economy.
Withdrawals of possible spending from the circular flow of income
Unemployment lasting for more than a year
A situation where aggregate demand equals aggregate supply and real GDP is not changing
Where or when buyers and sellers meet to trade or exchange goods and services.
An economic system whereby resources are allocated through the markets forces of demand and supply.
Where the free market mechanism fails to achieve economic efficiency
The costs of changing prices due to inflation
These have more private benefits than their consumers actually realise.
Looks at the economy as a whole
Deals with the economic behaviour or individuals or groups within the economy.
An economy system in which resources are allocated through a mixture of the market and direct public sector involvement.
Central bank and /or government decisions on the rate of interest, the money supply and the exchange rate
Monetary Policy Committee
A Committee of the Bank of England with responsibility for setting the interest rate in order to meet the government's inflation target
Movement along the demand curve
This is in response to a change in the price of a product
The process by which any change in a component of aggregate demand results in a greater final change in real GDP
This exists where the social cost of an activity is greater than the private cost
The value of exports minus the value of imports
People who save more than hey borrow
Output measured in current prices and so not adjusted for inflation
Situation existing where individual consumers cannot be excluded from consumption
Situation existing where consumption by one person does not affect the consumption of all others
Goods for which an increase in income leads to an increase in demand.
The desire for a product
Occupational immobility of labour
Difficulty of moving from one type of job to another
The difference between an economy 's actual and potential ready GDP
The cost of next best alternative which is foregone when a choice is made
The growth in aggregate demand outstripping the growth in aggregate supply, resulting in inflation
Where it is impossible to make anyone better off without making someone else worse-off.
Polluter pays principle
Any measure, such as a green tax, whereby the polluter pays explicitly for the pollution caused
This exists where the social benefit of an activity exceeds private benefit
The amount of money that is paid for a given amount of a particular good or service
Where the percentage change in the quantity demand is sensitive to a change in price
Price Elasticity of Supply
The responsiveness of the quantity supplied to a change in the price of the product
Price Elasticity of Demand
The responsiveness of the quantity demanded to a change in the price of the product
Where the percentage change in the quantity demanded insensitive to a change in price
The average of the prices of all the products produced in an economy
A method of allocating resources by the free movement of prices
The benefits directly incurred by those taking a particular action
Transfer of assets from the public to the private sector
The difference between the price a producer is willing to accept and what it is actually paid.
The output of goods and services
Production Possibility Curve
This shows the maximum quantities of different combinations of output of two products, given current resources and the state of technology
The maximum output that an economy is capable of producing
Where production takes place using the least amount of scarce resources.
Output, or production , of a good or service per worker
The difference between the total revenue (sales revenue)of a producer and total cost
A tax that takes a higher percentage from the income of the rich
The protection of domestic industries from foreign competition
Goods that are collectively consumed and have the characteristics of non-excludability and non-rivalry
A good that has some but not all of the characteristics of a public good
A limit on imports
Rate of interest
The charge for borrowing money and the amount paid for lending money
Real disposable income
income after taxes on income have been deducted and state benefits have been added and the result has been adjusted to take into account changes in the price level
The country's output measured in constant prices and so adjusted for inflation
Real interest rate
The nominal interest rate minus the inflation rate
A fall in real GDP over a period of six months or more
A tax that takes a greater percentage from the income of the poor
Retail prices index
Measure of inflation that is used for adjusting pensions and other benefits to take account of changes in inflation and frequently used in wage negotiations.
Profit kept by firms to finance investment.
Real disposable income minus spending
Savings as a proportion of disposable income
A situation where there are insufficient resources to meet all wants
Intangible products , i.e. products that cannot be seen or touched, such as banking, beauty therapy and insurance
Shoe leather costs
Costs in terms of the extra time and effort involved in reducing money holdings.
An excess of demand over supply
The total benefits of a particular action
The total costs of a particular action
The concentration by a worker or workers,firms, region or whole economy on a narrow range of goods and services
Unemployment caused by the decline of certain industries and occupations due to changes in demand and supply
A recognised or distinguishable part of a market. Also known as a market segment
A payment, usually from government, to encourage production or consumption of a product
The quantity of a product that producers are willing and able to provide at different market prices over a period of time
This shows the relationship between the quantity supplied and the price of a product
The data used to draw up the supply curve of a product
policies designed to increase aggregate supply by improving the efficiency of labour and product markets
An excess of supply over demand
Sustainable economic growth
economic growth that can continue over time and does not endanger future generations' ability to expand productive capacity
people who save with a target figure in mind
a tax on imports
those not directly involved in making a decision
information shown at successive points or intervals of time
a permit that allows the owner to emit a certain amount of pollution and that, if unused or only partially used , can be sold to another polluter
the calculation involved in deciding on whether to give up one good for another
the value of imports exceeding the value of exports
the value of exports exceeding the value of imports
the expecting increasing potential output over time. it is a measure of how fast the economy can grow without generating inflation
a situation where people are out of work but are willing and able to work
average cost per unit of output
voluntary export restraint
a limit placed on imports from a country with the agreement of that country's government
Anything you would like irrespective of whether you have the resources to purchase it.
a stock of assets e.g property, shares, and money held in a savings account
an average that takes into account the relative importance of the different items
World Trade Organisation
an international organisation that promotes free international trade and rules on international trade disputes