Growth 2.3
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Created by:
suzkenbishop on November 13, 2010
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61 terms
Terms | Definitions |
|---|---|
 Circular flow model | Economic model of the economy illustrating the interdependent relationship between the sectors of the economy (households, firms, government, financial institutions & overseas) |
| Consumer goods | Goods used to satisfy needs and wants of households. |
| Consumer spending (C) | Spending by households on goods and services |
| Cost push inflation | Inflation caused by an increase in aggregate supply ie. inflation caused by rising production costs. |
| Creative destruction | Term coined by Joseph Schumpeter to describe the economic impact of technological change. goods and services being brought to market, and cost-saving. The creative aspect refers to the new and improved technologies being used in production. The destructive aspect refers to the displacement of obsolete goods, services and technologies |
| Demand-pull inflation | Inflation caused by an increase in aggregate demand eg. C due to household confidence. |
| Derived demand | The demand for resources is dependent on the level of demand for the final goods and service they will be used to produce. |
| Direct tax (DT) | Tax that is taken straight off income and paid to IRD e.g. PAYE income tax |
| Direct value added expenditure | Changes in real spending directly related to an eventeg demand for NZ dairy exports causes increased dairy export receipts |
| Disposable income (HDI) | The income of households that is available to spend |
| Economic growth | occurs when the total level of production and real income in an economy rises.This means that people living in that economy are able to satisfy more of their needs and want |
| Entrepreneurs | Someone who attempts to earn profit by taking risks and using initiative. |
| Equality (equal) | The same. If a primary school teacher and a secondary school teacher earn the same amount of money, then they have equality of income. |
| Equity (equitable) | Fairness. A doctor will be paid more than a labourer because that is as being fair due to the amount of training involved (and other issues). |
| Export Receipts (X) | Payment received for goods and services sold overseas |
| Factor costs | The cost of resources used to produce goods and services |
| Factors of production | Classical economics distinguishes between three factors of production which are used in the production of goods: |
| Finance sector | Financial institutions - banks and other organisations, that help channel money (as intermediaries) from savers to borrowers |
| Government sector | Includes Parliament and many organisations such as government departments, ministries, and state owned enterprises |
| Government spending (G) | Spending by the government sector on goods and services eg. Money spent on building roads |
| Gross Domestic Product Gross Domestic product( GDP) | Total market value of all final goods and services produced by an economy in a year |
| Household sector | The sector that provides resources for productions (factor inputs) and buys final goods and services (consumer g+s) |
| Human capital | The quality or skill level of human resources which can improved by better education or workplace training. |
| Import Payments (M) | Payment made for goods and services purchased from other countries |
| Income (Y) | A FLOW of money earned by the owners of resources |
| Indirect tax (IT) | Tax that is paid to the government via a third party, eg. GST goes from the consumer to the shop to the government. Or taxes on goods and services |
| Indirect value added expenditure | Flow on changes in spending to industries supplying resources (indirectly relate) to an industry affected by an eventeg increased demand for dairying will increase |
| Induced value added expenditure | Flow on changes in spending to industries unrelated relate to an industry affected by an event due to changes in income that eg. increased demand for dairying will increase dairy farmers income who will then buy proportionately more luxury products so for example firms supplying spa pools may have increased demand / spending on their products it causes in the economy |
| Inequality (unequal) | Not the same. If there are two lawyers and one gets paid more than the other, then they have unequal incomes |
| Inequitable | Unfair. An accountant with ten more years experience gets paid the same amount of money as another accountant even though she has more responsibility. |
| Inflation | Inflation occurs if there is a rise in the general level of prices . If products rise on average by 10%, then there is 10% inflation. |
| Injections | Occur if investment, government spending or spending on exports increases.If injections > withdrawals in a period income will increase and economic growth will occur |
| Investment / Capital formation | The production/purchase of capital goods / man-made resources to be used in the production process |
| Money flows | Payments for goods and services purchased eg. money payment for goods bought and wages for labour supplied |
| Net exports | The balance between receipts from exports and payments for imports. |
| Net social welfare | Refers to a countries overall well-being. It includes both economic (or material) as well as non-economic (quality of life) indicators of performance |
| nominal GDP | the total market (money)value of all final goods and services produced by an economy in a year |
| Opportunity cost | The cost of one good or service measured in terms of the cost of the next best alternative foregone.ie. it is the second ranked item you missed out on when you make a decision [obviously, the first ranked the one is the you choose] |
| Output gap | The difference between the economy's actual output and the level of production it can achieve with existing labour, capital, and technology without putting sustained upward pressure on inflation. |
| Overseas sector | The sector containing overseas buyers of exports and suppliers of imports |
| Physical capital / Productive investment | Purchasing capital resources to assist in the production of goods and services |
| Poverty cycle | The inability of poor to become better off by earning more income |
| Producer sector | The sector responsible for the production of goods and services |
| Production | The process of turning inputs into outputs.ie. it is the total output of a firm /country |
| Production possibility curve (frontier) | A line on the production possibility curve model showing the various output options that are possible is all resources and technology are fully utilised. |
| Productive capacity | the maximum possible output of an economy with current resources and technology ie. an economy's PPC |
| Productivity | The amount of output per unit of input (labour, equipment, and capital). |
| Real flows | Movements of actual goods and serviceseg. goods purchased by households and labour purchased by producers |
| real GDP per capita | Real GDP divided by the population of the country |
| Real income (real GDP) | nominal GDP divided by a price deflator and so a measure of output changes in an economy in a year |
| Nominal GDP = P x Q | Real GDP = nominal GDP / P= PxQ / P = Q |
| Resource endowments | These are the natural resources or 'gifts of nature' available to an individual / economy. |
| Saving | The portion of income that is not spent |
| Speculative investment | Buying and selling existing assets in order to make capital gains |
| Standard of living | The overall quality of life that people enjoy. Usually refers to a individuals / country's per capita income, but also account also of additional conditions that matter for a person's or household's well-being such as leisure or the quality of the environment. |
| Sunrise industries | A new industry that is expected to be a strong sector in the future. |
| Sunset industries | The sectors that sunrise industries replace are sometimes referred to as sunset industries. |
| Sustainable development | Development that ensures that the use of resources and the environment today does not damage prospects for use by future generations. |
| Trade (business) cycle | The trade cycle is the fluctuations in the rate of economic growth that take place in the economy . These fluctuations appear to occur around every three to five years |
| Transfers (Tr) | Payments by the government for which no exchange is required, including benefit payments |
| Withdrawals (from the circular flow) | Occur if savings, taxes or spending on imports increase. If withdrawals > injections in as period income will fall and economic growth decreases |
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