| A | B |
|---|
| Situation where banks across the economy reduce lending to each other due to falling confidence that loans will be repaid. This restricts the flow of money around the economy and can result in less credit being available for consumers and businesses | resulting in an increase in the cost of obtaining credit. |
| The overall balance of credits minus debits for trade in goods | trade in services |
| Deliberate attempts to affect aggregate demand using changes in government spending | direct and indirect taxation and borrowing. |
| Unpredictable events such as volatile prices for oil | gas and foodstuffs. |
| When the main indicators such as growth | prices and unemployment do not change much from one year to another. |
| A policy by monetary authorities to expand money supply and boost economic activity | mainly by keeping interest rates low to encourage borrowing by companies |
| How we expect the future to unfold – this can have powerful effects on the spending decisions of households | businesses and the government |
| Government measures | normally involving increased public spending and lower taxation |
| The Gini coefficient is a measure of the overall extent to which groups of households | from the bottom of the income distribution upwards |
| The value of assets owned by households – including property | shares |
| The Government sets the Bank of England a CPI inflation target | which is currently 2 per cent. When inflation rises or falls more than 1% above or below the target |
| The transport links | communications networks |
| These consist of materials and supplies which are stored for use in production | work-in progress |
| Interest | profits and dividends from assets owned and located overseas. |
| The effect of currency depreciation on the trade deficit depends on price elasticity of demand for exports and imports. In the short term | demand is often inelastic and the J Curve effect says a trade deficit can actually worsen after depreciation |
| The number of people able | available and willing to work at prevailing wage rates |
| The overall performance of an economy in terms of output | prices |
| The entire quantity of a country's commercial bills | coins |
| The act of bringing a privately owned asset | such as a company or property |
| Assets such as businesses | shares |
| The basic concept is that if people save more in a recession | it will reduce consumption and thus aggregate demand will fall |
| Central banks flood the economy with money by printing new notes | in order to increase the supply of money. The idea is to add more money into the system to avert deflation and encourage banks/people to borrow and spend. |
| Income after taxes and benefits | adjusted for the effects of inflation |
| The RPI is broadly similar to the CPI but includes mortgage repayments and some taxes | and excludes the top 4 per cent of earners. It is used to calculate increases in wages |
| When a business is not making full use of its available capacity – there are spare factors of production including land | labour and capital. When an economy has plenty of spare capacity |
| Growth which meets the needs of the present without compromising the ability of future generations to meet their own needs. Economic growth that can continue over the long-term without damage to the environment | or the exhaustion of non-renewable resources. |
