Unemployment that is due to negative economic growth/ recession/ lack of aggregate demand for goods and services
Transitional unemployment when people are moving in between jobs/ short term joblessness whilst involved in job search
An unemployment that is caused by seasonal variation of the jobs offered
Percentage of the total labour force that is unemployed BUT actively seeking employment and willing to work
Labour Force survey
The official measure of unemployment used in the UK through face to face interviews followed by telephone surveys of 60000 households.
The number of people recorded caliming unemployment related benefits.
CPI (Consumer price Index)
The change in price of the 650 most commonly used goods and services in a variety of outlets.
The same as CPI but includes house prices and other housing related costs
The increase in prices. Can be on AD/AS diagrams or with CPI.
The decrease in price level. Can be from a decrease in CPI.
The rapid increase in the price level.
When inflation is taking place but growth is declining.
Demand pull inflation
The increase in price level due to increasing demand
Cost push inflation
The increase in price level due to a decrease in supply.
When price level rises because of increase in prices of imports.
Shoe leather costs
The cost in terms of time and effort that people spend to counter the effect of inflation e.g. making more trips to banks to withdraw money or looking for the cheapest prices.
Costs by firms when they need to update their prices on a more regular basis e.g. printing new menues, updating price catalogues
Balance of Payments
An account that summarises all the transactions between one country and the rest of the world.
One of the two components of balance of payments made up of net trade in goods and services.
Money that flows regularly between financial markets as investors attempt to ensure they get the highest short-term interest rates possible.
Current account deficit
When the total imports of goods and services outweigh the country's total exports of goods and services.
Balance of trade
Difference between a country's imports and exports
Rate of interest
The interest rate that is set by the Monetary Policy Committee which influence the return on savings and the costs of borrowing.
The ratio of personal savings to disposable income/percentage of disposable income that is saved
Marginal propensity to consume
An increase in consumption that is due to an increase in £1 of disposable income.
Marginal propensity to save
An increase in saving that is due to an increase in £1 of disposable income
Marginal propensity to import
An increase in import expenditure that is due to an increase in £1 of disposable income
An increase in spending when people feel richer associated with an increase in value of assets like stocks and properties.
Spending by businesses. Part of AD
Total amount of goods and services demanded at any given price level. Composed of Consumption + Investment + Government Spending + (Exports - Imports)
Total supply of goods and services produced within an economy at any given price level.
An initial increase in spending (consumption, investment, government spending and net exports) which will eventually lead to a larger secondary increase in AD.
When all economic resources like land, labour and capital are fully utilised.
When economic resources aren't fully utilised.
Demand side policies
Fiscal and monetary policies. These are the policies that influence AD.
The manipulation of government spending and level of taxation to influence the movement of AD and the overall level of economic activities.
When Government spends more than they are earning.
Total amount of money that the British government owes to private sector and other purchasers of UK.
Crowding out effect
When an increase in government spending causes the interest rates in the money market to increase thus fall a fall in private spending.
Loose fiscal policy
The lowering of tax or/and increase in government expenditure to stimulate the economy/revive the economy from recession
Tightening fiscal policy
The increase of tax or/and slash in government expenditure to slow down the economy/prevent overheating
The manipulation of interest rates in order to influence the movement of AD and overall level of economic activities
Loose monetary policy
The lowering down of interest rates in order to stimulate economic activities/to prevent deflation/ensure that the price level does not fall too far from the targeted level.
Tight monetary policy
The rise in interest rates to cool down an overheating economy/prevent the price level from increasing too far above the targeted price level.
The increase in money supply through banks buying up financial assets and injects a predetermined amount of money into the economy.
A situation which prevailing interest rates are low and savings rate is high making monetary policy ineffective.
Supply side policies
Policies mean to influence the movement of AS by increasing the potential/prdouctive capacity of an economy.
A situation where people on low incomes are discouraged from working extra hours or getting a better paid job since any extra income they earn will be taken away in the form of higher tax or loss benefits.
A situation where people have no incentive to take up a job knowing that the net increase in their income is insignificant due to income tax and withdrawal of some benefits.
A situation where if unemployment is high, it will remain high for a considerable period of time since some people become less motivated or lose their skills making it difficult for them to re-enter the labour market.
The value of a currency express in terms of another
When £1 gets to purchase more foreign currency.
When £1 gets to purchase less foreign currency
Short term, speculative flows of money across foreign exchanges in order to make a profit on the difference between the buying and selling price of the currency.
The transfer of assets from state ownership to private sector ownership
The process of removing government controls over the market.
When income tax is lowered, people earn a higher disposable income and in case if that is the targeted monthly income, then they wouldn't be bothered to increase productivity.
When an increase in wages creates incentive to work longer hours as the financial reward from working has increased.
A graph that shows the inverse relation between Inflation
and Unemployment. In the 1980s, it became useless.