Unit 2 - How the economy works
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- Created by: a is for aran
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Macroeconomic objective - L U
Low unemployment
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Macroeconomic objective - S E G
Sustainable economic growth
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Macroeconomic objective - L, S I
Low, stable inflation
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Macroeconomic objective - H C A B
Healthy current account balance
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Macroeconomic objective - R I
Reducing Inequality
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Macro-economic policy - The use of government spending and taxation to change the level of aggregate demand in the economny - *blank* policy
Fiscal
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Macro-economic policy - The use of changes in the interest rate to change the level of aggregate demand in the economy - *blank* policy
Monetary
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Macro-economic policy -Policies that look to increase aggregate supply through improving the quantity and/or quality of factors of production - *blank* policy
Supply-side
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Growth in the output of an economy (measured by real GDP) over a period of time
Economic Growth
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The total value of goods and services produced by a country in one year
GDP
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The total value of goods and services divided by the population
GDP per capita
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When a worker is willing and able and actively seeking work (at the current wage rate) but cannot find a job
Unemployment
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When all those able and willing to work are in paid employment at the current wage rate
Fill employment
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A measure of unemployment based on the number of people claiming unemployment benefit
Claimant count
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A measure of unemployment based on a survey of households, asking whether people are actively seeking work but do not have a job
Labour force survey
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Type of unemployment - due to a lack of aggregate demand
Cyclical
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Type of unemployment - due to unemployed people not having the right skills for the jobs that are available
Structural
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Type of unemployment that is short-term due to people switching jobs
Frictional
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Type of unemployment - due to certain firms only demanding workers at certain times of the year e.g. a ski instructor
Seasonal
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A type of structural unemployment where workers who had the skills to do a job have been replaced by automated machienary
Technological
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Type of unemployment - due to people choosing not to work
Voluntary
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A sustained rise in the general price level over time
Inflation
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The general price level grows at a low, steady rate over time
Price Stability
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The percentage change in general price level over a period of time
Inflation rate
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A rate of inflation so high that the value of money becomes nearly worthless
Hyperinflation
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Inflation due to aggregate demand rising more quickly than the rise in supply of goods and services
Demand-pull inflation
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Inflation due to a rise in the costs of production faced by firms in the economy
Cost-push inflation
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A compulsoary payment to the governmet
Tax
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A tax on income or wealth
Direct tax
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A tax on spending on goods/services
Indirect tax
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How incomes are shared out among the people of a country
Distribution of income
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Policies that distribute income more evenly and reduce inequality
Redistribution of income
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When incomes/wealth are distributed unevenly
Inequality
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Benefits to citizens paid from tax revenue normally on basis of need
Transfer payment
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A tax which takes a greater proportion of income as income rises
Progressive Tax
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A tax which takes the same proportion of income as income rises
Proportional tax
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A tax which takes a lower proportion of income as income rises
Regressive tax
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When the market forces of supply and demand fail to allocate resources efficiently (in the best interest of society as a whole)
Market Failure
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When the market forces of supply and demand fail to allocate resources efficiently (in the best interest of society as a whole)
Market Failure
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The spill-over effects of production or consumption on third parties
Externalities
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The positive effects of consumption and production felt by those who are not a part of it
Positive Externalities
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The negative effects of consumption and production felt by people who are not part of it
Negative Externalities
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A beneficial good that has positive externalities and so is underconsumed
Merit good
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A harmful good that has negative externalities and so is overconsumed
Demerit good
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A policy that changes the total supply of money in the economy
Monetary policy
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The use of interest rates to achieve the governments economic objectives
Interest Rate Policy
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The interest rate set by the Bank of England which influences all other interest rates in the economy
Base Rate
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Other cards in this set
Card 2
Front
Macroeconomic objective - S E G
Back
Sustainable economic growth
Card 3
Front
Macroeconomic objective - L, S I
Back
Card 4
Front
Macroeconomic objective - H C A B
Back
Card 5
Front
Macroeconomic objective - R I
Back
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