Intro To Macro Definitions

Involves the study of the whole economy at the aggregate level

A target or goal that policy-makers aim to ‘’hit’

Growth of real output resulting from using idle resources, including labour, thereby taking up the slack in the economy

An increase in the economy's potential level of real output, and an outward shift of the economy's production possibility frontier

The sum of all goods and services, or level of output, produced in the economy over a period of time, e.g one year

GDP measured at the current market prices, ie, without removing the effects of inflation

GDP adjusted for inflation

A fall in real GDP for 6 months or more (or 2 consecutive quarters)

Beveridge Definition 3% or less of the labour force unemployed

The method of measuring unemployment according to those people who are claiming unemployment-related benefits

A quarterly sample survey of households in the UK. Its purpose is to provide information on the UK labour market. The survey seeks information on respondents personal circumstances and their labour market status during a period of 1-4 weeks

A persistent or continuing rise in the average price level

A persistent or continuing fall in the average price level

When the rate of inflation is falling, but still positive

An index number showing the extent to which a price or a ‘basket’ of prices, has changed over a month, quarter or year, in comparison with the price(s) in a base year

The official measure used to calculate the rate of consumer price inflation in the UK. The CPI calculates the average price increase of a basket of 700 different consumer goods and services. The UK Govt uses the CPI for the indexation of state benefits and for setting a monetary policy target

An older measure used to calculate the rate of consumer price inflation in the UK. The Govt uses the RPI for uprating each year the cost of TV and motor vehicle licences together with taxes on goods and such as alcoholic drinks

The automatic adjustment of items such as pensions and welfare benefits to change the price level through the use of a price index

A record of currency flows into and out of the country in a particular time period

Measures all the currency flows into and out of a country in a particular time period in payment for exports and imports together with income and transfer flows

Domestically produced goods and services sold to residents of other countries

Goods and services produced in other countries and sold to residents of the UK

The difference between the money value of a country’s imports and its exports. Balance of Trade is the largest component of a country’s BoP on Current Account

When the money value of a country’s imports exceeds the money value of its exports

When the money value of a country’s exports exceeds the money value of its imports

When Govt spending equals Govt revenue

When Govt spending is greater than Govt revenue

When 2 policy objective cannot be achieved at the same time: The better the performance in achieving one objective, the worse the performance on achieving the other

Although it may be possible to achieve 2 desirable objectives at the same time, eg, zero inflation and full employment, policy makers may be able to choose an acceptable combination between the 2 extremes, eg, 2% inflation and 4% unemployment

Followers of the Economist John Maynard Keynes, who generally believe that Govts should manage the economy, particularly thought the use of fiscal policy

Opponents of Keynesian economists, who dislike Govt intervention I the economy and who much prefer the operation of free markets

The use by the Govt and its agent, the BoE, of interest rates and other monetary instruments to try to achieve the Govts policy objectives

The use by the Govt of Govt spending and taxation to try to achieve the Govts policy objectives

Provides information for judging the success or failure of a particular type of Govt policy such as fiscal or monetary policy

A number used in an index, such as the CPI, to enable accurate comparisons over time to be made. The base year index number is typically 100. In subsequent years percentage increases cause the index number to rise above the index number recorded the previous year, and percentage decreases cause the index number to fall below the index number reordered for the previous year