| A | B |
|---|
| Economic Growth | An increase in the country's national income arising from the increased production of goods and services. |
| Economic Cycle | The regular fluctuations in the level of economic activity around the productive potential of the economy. |
| Negative Output Gap | A situation in which the economy is producing less than its trend output. |
| Positive Output Gap | A situation in which the economy is producing more than its trend output. |
| Real income | A measure of the quantity of goods and services which an individual can buy with his or her money income. |
| Recession | A period of general economic decline; specifically |
| Gross Domestic Product | The total value of all goods and services produced within the nation's borders. It includes export earnings |
| Gross National Product | The total value produced by all British owned factors of production at home and abroad. This is therefore GDP |
| Index Number | A weighted average of a group of items compared to a given base value. |
| Employment | A situation in which labour is actively engaged in productive activity in exchange for payments such as wages. |
| Participation Rate | The proportion of the country's population that makes up the country's labour force. |
| Demand Deficiency Unemployment | Unemployment that is caused by a low level of aggregate demand which is less than the value of full capacity output. In terms of AS/AD analysis it results from a leftward shift of AD. |
| Structural Unemployment | Unemployment that is caused by changes in demand for particular products or by changes in production methods which reduce the demand for labour. |
| Frictional Unemployment | This occurs as people leave one job and may be temporarily unemployed whilst they look for another job. |
| Voluntary Unemployment | A situation in which workers who are not prepared to take a job at current wage levels. |
| Involuntary Unemployment | A situation in which workers who are prepared to take a job at current wage levels |
| Discouraged workers | Workers who leave the labour market because despite numerous attempts they are unable to find a job. |
| Geographic immobility | A situation in which unemployed people are unable to move to areas where jobs are available. |
| Occupational immobility | A situation in which an unemployed person is unable to find employment because they lack the required skills.Balance of Payments |
| Balance of Payments | The record of all financial dealings over a period of time between economic agents of one country and all other countries. |
| Current Account of the Balance of Payments | That part of the balance of payments where trade in goods and services |
| Balance of Trade | This is the value of exports of goods minus the imports of goods. It is also known as 'trade gap'. |
| Hot Money | Money that is internationally mobile and liable to rapid transfer from one country to another. |
| Appreciation | A situation in which the currency rises in value against another currency(s). |
| Depreciation | A situation in which the currency falls in value against another currency(s). |
| Aggregate Demand | The total demand in the economy made up of consumption |
| Aggregate Supply | The total value of the goods and services supplied in the economy. |
| Circular Flow of Income | The model which shows the flow of goods |
| Leakage | Money that originates inside the circular flow of income |
| Injection | Money that originates outside the circular flow of income |
| Multiplier | A situation in which a change in spending gives rise to a larger than proportionate change in national income. |
| Informal Economy | Economic activity where trade and exchange take place but it goes unreported to the tax authorities. |
| Consumption | Spending on consumer goods and services over a period of time. Such consumption may be sub-divided into non-durable and durable goods. |
| Saving | The part of disposable income that is not spent. |
| Disposable Income | Income after tax and NI contributions |
| Autonmous Consumption | The part of total consumption which is unaffected by the level of income. |
| Income-induced Consumption | That part of consumption that varies with the level of income. |
| Marginal Propensity to Consume | The proportion of a change in income which is spent. |
| Average Propensity to Consume | The proportion of total income spent. |
| Durable Goods | Goods which are consumed over a long period of time. |
| Investment | The addition to the capital stock of the economy - factories |
| Depreciation | The rate at which the capital stock loses value over time as it wears out and is used up. |
| Net Investment | Gross Investment minus depreciation. |
| Fiscal Policy | The term used to describe the use of taxation and government spending as an instrument to achieve macroeconomic objectives. |
| National Debt | The accumulated borrowing of government. |
| Marginal Rate of Tax | The tax rate applied to any additional income generated. |
| Transfer Payment | A form of State expenditure which individuals receive payment for which no service is given. |
| Automatic Stabiliser | A concept which refers to the fact that the governments fiscal stance will alter in a counter-cyclical way without any conscious decision by government as tax receipts and benefit payments change. |
| Discretionary Fiscal Policy | The deliberate use of Fiscal Policy as a mechanism by which to fine-tune the economy. |
| Budget Deficit | A situation in which government spending exceeds government receipts in a financial year. |
| Budget Surplus | A situation in which government receipts exceeds government spending in a financial year. |
| Monetary Policy | The use of monetary variables |
| Monetary Policy Committee | A committee of the Bank of England consisting of members of the bank and independent economists who meet on a monthly basis to decide interest rates. |
| Inflation | A sustained rise in the general level of prices. |
| Deflation | A sustained fall in the general level of prices. |
| Costs Push Inflation | The type of inflation that arises from firms passing on in the form of higher consumer prices any increases in their costs of production. |
| Demand Pull Inflation | The type of inflation that arises from an increase in aggregate demand in a situation where the economy is at or near full capacity. |
| Supply-Side | Government policies designed to increase the productive potential of the economy and push the aggregate supply curve to the right. |
| Laffer Curve | A model showing the relationship between tax rate and tax revenue. |
| Privatisation | The sale of government owned assets to the private sector. |
| Replacement Ratio | The ratio of income out of work (benefits) to income in work (pay). |
| Unemployment Trap | A situation in which a worker finds he is no better off in work than he was out of work. |
| Poverty Trap | A situation in which a low paid worker gains little (or perhaps is worse off) in earning more |
| Policy objective | A target or goal that policy makers aim to achieve. |
| Policy instrument | A 'tool' used to try to achieve a policy objective. |
| Transmission mechanism | This is the process by which a policy instrument gives rise to a change in a particular policy objective as measured by a particular policy indicator. |
| Exchange Rate | The rate at which the currency of one country can be exchanged for another currency |
