UPDATED 2024/2025 MACROECONOMICS DEFINITIONS AQA A LEVEL ECONOMICS

UPDATED 2024/2025 MACROECONOMICS DEFINITIONS AQA A LEVEL ECONOMICS Absolute advantage - RIGHT ANSWER -The producer with the ability to make largest amount particular product using factors of production accelerator - RIGHT ANSWER -principle of investment theory whereby investment spending by firms responds to change in demand AD - RIGHT ANSWER -C + I + G + (X-M) Aggregate demand - RIGHT ANSWER -Sum of all planned spending on domestic output at a given general price level per period Aggregate supply - RIGHT ANSWER -The sum of all planned domestic production at a given general price level per period Automatic stabiliser - RIGHT ANSWER -A feature of government's fiscal approach which helps to minimise fluctuations in aggregate demand without deliberate action. Budget deficit - RIGHT ANSWER -Government spending exceed revenue Budget surplus - RIGHT ANSWER -where government spending is less than government revenue Circular flow of income - RIGHT ANSWER -Model which explains what determines the equilibrium level of national income common external tariff - RIGHT ANSWER -A tax on a product imported into a customers union common market - RIGHT ANSWER -the stage of economic integration between states when barriers to capital and labor ability are removed comparative advantage - RIGHT ANSWER -the producer with the lowest opportunity cost of production for a particular product competitiveness - RIGHT ANSWER -the ability fo domestic firms to sell output in the global market consumer price index - RIGHT ANSWER -An index number measuring a weighted average for price of consumer goods and services at a point in point Consumption - RIGHT ANSWER -Spending by domestic households on consumer goods and services Consumption - RIGHT ANSWER -Thee act of buying and using goods and services to satisfy wants Cost push inflation - RIGHT ANSWER -Inflation. caused by rising cost pressures customers union - RIGHT ANSWER -A group if countries with reduced trade barriers between members but common external tariff against imports from outside deflation - RIGHT ANSWER -situation of persistent negative inflation deflationary policy - RIGHT ANSWER -Government policies to reduce aggregate demand - increase interest rates, cut government spending Demand pull inflation - RIGHT ANSWER -inflation caused by an increase in aggregate demand Demand-deficient unemployment - RIGHT ANSWER -Unemployment that arises because of a deficiency of aggregate demand in the economy, so that the equilibrium level of output is below full employment Deregulation - RIGHT ANSWER -Removal government regulation to allow entry of private sector firms to compete in a market Direct tax - RIGHT ANSWER -Tax levied on an individual or company on their income and wealth Discretionary fiscal policy - RIGHT ANSWER -Alteration to fiscal policy delivaartley made by government to modify aggregate demand in pursuit of macroeconomic policy aims Disinflation - RIGHT ANSWER -Falling but still positive inflation economic and monetary union - RIGHT ANSWER -when a group of countries in a common market abolish national currencies to share single currency Economic cycle - RIGHT ANSWER -Tendency for market economies to grow in a cyclical pattern typically over a period of 5 to 10 years Economic growth - RIGHT ANSWER -Rate of increase in national output per year Economically active - RIGHT ANSWER -Those looking for work or in work Economically inactive - RIGHT ANSWER -Those of working age who have chose not to do work or look for paid work exchange rate system - RIGHT ANSWER -rule which determines how countrys exchange rate is set export subsidies - RIGHT ANSWER -policy where govern, n et meets some costs for export of goods thereby encouraging exports Exports - RIGHT ANSWER -Goods and Services sold to other countries Fiscal policy - RIGHT ANSWER -Manipulation of government spending and taxation to achieve macro economic goals fixed exchange rate system - RIGHT ANSWER -exchange rate is mainatained at a target level by govern,net interventions in a currency market floating exchange rate system, - RIGHT ANSWER -exchange rate is freely determined by market forces without govt intervention Foreign direct investment - RIGHT ANSWER -Spending by firms on productive capacity in other countries free trade area - RIGHT ANSWER -a group of counties which co ordinate a reduction in. trade barriers between themselves but no erect a common external tariff frictional unemployment - RIGHT ANSWER -Workers moving between jobs who are unable to fill job vacancies between contracts due to imperfect information labour market Globalisation - RIGHT ANSWER -The growing integration and interdependence of the world's economies, causing consumers around the globe to have increasingly similar habits and tastes. Government spending - RIGHT ANSWER -Central and local government on goods and services investment Gross domestic product - RIGHT ANSWER -The value of output produced by domestic based resources per year Imports - RIGHT ANSWER -goods produced abroad and sold domestically Indirect tax - RIGHT ANSWER -Tax levied on expenditure Infant industry argument - RIGHT ANSWER -rationale for protecting domestic firms from foreign competition until they have grown large enough to achieve the economies of scale to match rival foreign firms inflation - RIGHT ANSWER -a general increase in average price level injection - RIGHT ANSWER -Spending on domestic output which comes from outside simply circular flow of income Investment - RIGHT ANSWER -spending by domestic firms on capital goods Laffer curve - RIGHT ANSWER -the relationship between the tax rate and the amount of tax revenue collected - low rates - rising tax rates. will increase. revenue but after point revenue falls - workers lose incentive to work Long-Run Phillips Curve (LRPC) - RIGHT ANSWER -Relationship between rate of wage inflation and unemployment in macro economy, occur over long run following a change in AD and. consequent adjustments in labour market Macroeconomics - RIGHT ANSWER -The study of behaviour of an economy as a whole Marginal Propensity to Consume (MPC) - RIGHT ANSWER -The proportion of an increase in income which is spent on domestically produced consumer goods and services Marginal propensity to withdraw - RIGHT ANSWER -The proportion of an increase in income which is not spent on domestically produced consumer goods and services Multinational companies - RIGHT ANSWER -Large company with production based in several different countries Muultiplier effect - RIGHT ANSWER -Knock on effects of an initial change in injections or withdrawals on national income - cause national income to change more Ethan initial change Muultiplier formula - RIGHT ANSWER -1/ 1- MPC = 1/ MPW National debt - RIGHT ANSWER -Outstanding debt of national givers,net at a point in time Natural rate of unemployment - RIGHT ANSWER -Rate at which demand for labour matches supply of labour in macro economy Negative output gap - RIGHT ANSWER -The level of actual real output in the economy is lower than the trend output level net exports - RIGHT ANSWER -exports minus imports Nominal Growth - RIGHT ANSWER -Growth of GDP before inflation was been accounted for Non tariff barriers - RIGHT ANSWER -Methods to prevent the sale of imports apart from tariffs or quotas Office for Budget Responsibility (OBR) - RIGHT ANSWER -Independent body created to evaluate how UK government manages the public finances output gap - RIGHT ANSWER -Actual GDP - sustainable GDP population of working age - RIGHT ANSWER -The total number of people aged between the statutory school leaving age and the state retirement age. Positive output gap - RIGHT ANSWER -The level of actual real output in the economy is greater than the trend output level progressive tax - RIGHT ANSWER -A tax which takes a higher proportion of income as income rises proportional tax - RIGHT ANSWER -a tax for which the percentage of income paid in taxes remains the same for all income levels protectionism - RIGHT ANSWER -The raising of trade barriers against imports Purchasing power parity - RIGHT ANSWER -the nominal exchange rate which ensures home produced goods cost the same if brought abroad Quality of life - RIGHT ANSWER -A measure of overall well being of a person quantity theory of money - RIGHT ANSWER -Classical. theory explaining inflation as a result of excessive monetary growth Quantity Theory of Money Equation - RIGHT ANSWER -Money Supply (M) x Velocity (V) = Price (P) x Real output (Y) quota - RIGHT ANSWER -a limit on number of imported goods allowed into a country over a period Real Growth - RIGHT ANSWER -Growth of GDP after inflation has been accounted for Real wage unemployment (classical) - RIGHT ANSWER -unemployment due to real wages above market clearing level Recession - RIGHT ANSWER -declining GDP for two successive quarters regressive tax - RIGHT ANSWER -A tax which takes a lower proportion if income as income rises Retail price index - RIGHT ANSWER -Weighted average of retail price level at a point in time seasonal unemployment - RIGHT ANSWER -Unemployment due to downturn in demand for certain types of labour at certain times of year shadow economy - RIGHT ANSWER -Payments for production which go unreported to the tax authorities Short-Run Phillips Curve (SRPC) - RIGHT ANSWER -Inverse relationship between wage inflation and unemployment in the macro economy - occur in the short run following change in AD Standard of living - RIGHT ANSWER -A measure of material well being of a person Structural geographical unemployment - RIGHT ANSWER -Unemployment dude to geographical mismatch between job vacancy. and unemployed with those skills Structural occupational unemployment - RIGHT ANSWER -Unemployment due to mismatch of skills demanded and skills supplied by unemployed within a region Supply-side policies - RIGHT ANSWER -Government attempts to increase aggregate supply. eg. cut tax rate, encourage greater participation in rate of labour, reduce monopoly power, privatisation, boost education and training - shift AS curve reduce inflation and increase employment and REAL GDP trade creation - RIGHT ANSWER -the welfare gains gffrom joining a customs union trade diversion - RIGHT ANSWER -the welfare losses to a country from joining a customs union trading bloc - RIGHT ANSWER -A group of countries who form a free trade area, reduce trade barriers between them and raise barriers for non members Underlying inflation - RIGHT ANSWER -RPI excluding mortgage repayment costs unemployment - RIGHT ANSWER -the number of people who are actively looking for work but aren't currently employed unit labour costs - RIGHT ANSWER -labour costs per unit of output voluntary unemployment - RIGHT ANSWER -workers who are able to fill vacancies but choose not to do so at wage rate offered wealth effect - RIGHT ANSWER -A rise in personal welt will encourage consumers to spend more and save less withdrawal - RIGHT ANSWER -Income which is not spent on domestic output workforce - RIGHT ANSWER -All people of working age either in paid jobs or seeking them World Trade Organization - RIGHT ANSWER -organisation to promote free trade and co ordinate reduction in. barriers to trade