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Hint
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Answer
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Money that flows freely around the world looking to earn the best available rate of return. |
Hot Money
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The rate of interest market investors demand when purchasing government bonds.
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Bond Yield
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When government spending is being cut and/or taxation is being raised.
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Fiscal Austerity
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The reserves of gold or foreign currencies typically held by central banks on behalf of their national government
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Foreign Exchange Reserves
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The process of transferring ownership of a public asset or service from the government to the private sector.
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Privatisation
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When people take actions that increase social costs because they are insured against private loss. |
Moral Hazard
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A boundary that shows the maximum combinations of two or more goods and services that can be produced when all resources are used efficiently. |
PPF
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The consumption of a good by one person does not reduce the amount available for others.
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Non-Rivalrous
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The responsiveness of demand for a product following a change in its own price.
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Price Elasticity Of Demand
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Made when total revenue is greater than total costs.
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Profits
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The cost to the parties directly involved in an economic transaction.
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Private Cost
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This measures the extent to which the distribution of income among individuals or households within an economy deviates from a perfectly equal distribution.
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Gini Coefficient
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When a country imports a greater value of goods and services than it exports.
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Trade Deficit
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A merger of two firms that have completely unrelated business activities (not within the same industry).
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Conglomerate Merger
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The total of all the money coming into a country from abroad minus all of the money going out of the country during the same period. |
Balance Of Payments
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A period of at least six months (two quarters) when an economy suffers a fall in output.
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Recession
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Transitional unemployment as people move between jobs or are in active job search.
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Frictional Unemployment
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The sum of gross value added by all resident producers divided by the population.
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GDP Per Capita
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A decline in the share of national income from manufacturing industries.
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De-Industrialisation
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The number of people claiming unemployment-related benefits.
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Claimant Count
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This is the monetary value of all goods and services expressed at current prices.
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Nominal GDP
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Quantity of a good or service that a producer is willing and able to provide to the market at a given price in a given time period.
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Supply
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Jobs for all that want them but not zero unemployment because some people are always between jobs. |
Full Employment
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A method of production where a business or area focuses on the production of a limited scope of products or services to gain greater productive efficiency. |
Specialisation
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The number of people able, available and willing to work at prevailing wage rates.
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Labour Supply
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The difference between potential and actual real national income in an economy.
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Output Gap
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The barriers preventing people from moving from one area to another to find work.
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Geographical Immobility
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When a business reaches the lowest point of its average cost curve.
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Productive Efficiency
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The breaking down of a production process in smaller, specific tasks, intended to increase productivity.
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Division Of Labour
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Objective statements that can be tested or rejected by referring to the available evidence.
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Positive Statements
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Similar to GDP except that it adds what a country earns from overseas investments and subtracts what foreigners earn in a country and send back home. |
GNI
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Different stages of making, distributing and selling a good or service from the production of parts, through to distribution and sale of the product. |
Supply Chain
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If there is an initial injection into the economy then the final increase in AD and Real GDP will be greater.
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Multiplier Effect
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When supply equals demand.
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Market Equilibrium
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The process by which changes in interest rates and/or the supply of money work to affect demand, output and prices. |
Transmission Mechanism
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The amount of debt that a business or country has expressed as a share of GDP.
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Debt Burden
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Subjective statements, containing a value judgement which cannot be tested.
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Normative Statements
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A fall in the rate of inflation. This means a slower increase in prices but not a fall in prices. |
Disinflation
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A tax on imported products which may be ad valorem or a specific tax.
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Tariff
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Effects on a third party outside the price mechanism arising from the production or consumption of goods and services.
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Externalities
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A market where no single firm has a dominant position and where the consumer has plenty of choice when buying goods or services. There are few barriers to the entry of new firms. |
Competitive Market
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When the market mechanism fails to allocate resources efficiently.
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Market Failure
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The exchange rate that equates the price of a basket of identical traded goods and services in two countries. |
Purchasing Power Parity
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A formal agreement among firms that agree to reduce competition in an attempt to increase profits. Usually occurs in oligopolistic markets.
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Cartel
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When government spending is greater than tax revenues.
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Budget Deficit
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A market dominated by a few large suppliers.
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Oligopoly
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The reduction of risk achieved by replacing a single risk with a larger number of smaller unrelated risks. |
Diversification
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A legally-imposed price in a market that suppliers cannot exceed.
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Maximum Price
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Where a firm or economy can produce more with existing resources.
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Spare Capacity
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Occurs when third parties benefit from the spill-over effects of production/consumption.
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Positive Externality
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Responsiveness of demand for good X following a change in the price of good Y (a related good). |
Cross Price Elasticity Of Demand
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A measure of efficiency = output per unit of input or output per person employed.
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Productivity
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A system similar to the CPI but includes mortgage repayments and some taxes, and excludes the top 4 per cent of earners. |
RPI
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A monopoly limited to a specific geographical area.
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Local Monopoly
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When income increases, quantity demanded increases.
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Normal Goods
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Spending on capital goods including plant & machinery and infrastructure.
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Investment
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Measures the relationship between a change in quantity demanded and a change in real income. |
Income Elasticity Of Demand
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A function of the price mechanism which occurs when prices adjust to show where resources need to be allocated and where they are not needed.
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Signalling
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A measure of money's value in terms of what it can buy.
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Purchasing Power
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Goods in competitive demand and act as replacements for another product.
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Substitute Goods
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