IB Economics definitions- Macro
Terms in this set (56)
The essential facilities that allow economic activities to take place. It is normally provided by the government.
This is the total amount of goods and services that will be produced in an economy at a given price level.
The period of time in which the price of factors of production does not change. More specifically the price of labour (wages) is fixed.
This is where aggregate demand in the economy is not sufficient to buy up the potential output of the economy. It is the distance between actual output and potential output (Y and Yf).
This is where aggregate demand is more than sufficient to buy up the potential output of the economy. It is measured between P1 and P2.
Demand side policies
These are policies that manipulate aggregate demand in the economy to achieve macroeconomic objectives.
The official set of government policies relating to taxation, government spending [and government borrowing].
Expansionary fiscal policy
This is where the government uses policies to increase the levels of aggregate demand in the economy.
This states that any injection onto the circular flow of income will lead to an increase in AD that is greater than the value of the injection.
Reduce tax for a very specific geographical area
New classical theory to argue against government spending. LOOK UP
The difference between the period of time of you deciding to do something and actually doing it.
The official set of policies relating to interest rates and the supply of money
The cost/interest rate that banks when they borrow money from the central bank.
Supply side policies
Policies that attempt to increase LRAS. There are 2 main types: interventionist and market-orientated.
Interventionist supply side policies
The idea that the free market does not do what we want it to so we intervene to get the results we want
Market-orientated supply side policies
These involve reducing the amount of government intervention in a market to provide incentives to firms and households to improve the quality and/or quality of their factors of production.
Someone is unemployed if they are of working age, willing and able to work, without work, and actively seeking employment.
The proportion of the labour force that is currently unemployed. Typically expressed as a percentage of the total labour force.
The total number of workers who are willing and able to work at every given wage rate.
Where somebody is employed in a capacity that is less than the capacity for which they wish to be employed.
Where there is equilibrium in the labour market but there are still unemployed workers in the economy.
Aggregate supply of labour
The total number of workers who are willing and able to take available jobs within the economy at every given average wage rate.
Unemployment caused by a permanent fall in the demand for a particular type of labour i.e. when there is a change in the structure of the economy.
Where workers do not possess the skills to take jobs that are currently available in the economy.
Where the available jobs are in a different geographical area to the unemployed workers and they are unwilling to move to take the job.
Unemployment caused due to changes in the demand for different types of labour caused by changes in the demand for different products due to changes in season.
Where workers are between jobs but don't have a job due to leaving their previous job to look for a new one, been fired and are yet to find a new job or have left education and are yet to find employment.
This is caused when there is something preventing the labour market from clearing i.e. there is a disequilibrium in the market.
The persistent increase in the average price levels in the economy.
The persistent decrease in the average price levels in the economy.
An increase in a country's economic activity as measured by an increase in real GDP.
Two or more consecutive quarters (6 months) of negative economic growth/of contraction
As somebody's income increase, the proportion of their income paid in tax stays the same.
As somebody's income increase, the proportion of the income paid in tax increases.
As somebody's income increases, the proportion of income paid in tax decreases.
Where money is moved from one group in society to another without any increase in economic activity.
Where somebody's income is below the level that is necessary to meet their basic consumption needs.
Where someone's income falls below a pre-determined amount, considered the minimum needs to meet a basic quality of life.
Where someone's income is below a pre-determined % of the mean income in that country.
Living on less than $1.25 a day.
Living on less than $2 a day.
These exist when buyers and seller come together to carry out an economic transaction.
The total spending by all sectors of the economy at every given price level at a given period of time. It is composed of consumption, government spending, investment and net exports.
The income method
This method totals the sum of all incomes earned within an economy during a period of time.
The output method
This method totals the sum of all output produced by an economy during a period of time. This is our goods and services.
The expenditure method
This method measures the total spending by all sectors of the economy in a given time period (C+G+I+(X-M)).
This is the total spending by households on domestically produced goods and services during a period of time.
This is the total spending by the government in a given period of time. This includes capital and current spending. The government supplies goods and services.
This is the total spending by firms in an economy on capital stock OR addition of capital stock to the economy.
This is total sum of money coming into the country (X-M).
Gross domestic product
This measures the total economic activity in a country in a given period of time regardless of who owns the productive assets.
Gross national income
This is the total economic activity from the productive assets of a country regardless of where they are located in a given period of time.
This measures the cost of obtaining a good or service in terms of the quantity of the next best alternative foregone.
The spending on capital stock to maintain levels of productivity.
The spending on capital stock to increase levels of productivity.
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