Economics Jargon list
- Feb 18
- 3 min read
Here is a useful list of words for Economics exams
Aggregate Demand (AD) is the same as Gross Domestic Product (GDP).
GDP/AD= C + I + G + (X-M)
C= Consumer spending
I= Capital Investment- this is spending on capital goods (capital goods are machines)
G= Government spending
X=Exports (these are items that your country is selling to other countries e.g. Britain sells Jaguars, Range Rovers to other countries)
M=Imports (these are items coming into your country e.g. furniture coming in from China)
Accelerator effect
it occurs when an increase in National income (GDP) results in a proportionately larger increase in capital investment/private fixed investment.
When the economy is booming, demand rises so firms respond by increasing production and making fuller use of existing production capacity (running down stock of finished production).
In the lesson we cover the Negative Accelerator effect, criticism, advantages and evaluation.
You can also watch a video on Accelerator effect on our Youtube channel
Multiplier Effect
A change in one of the components of Aggregate Demand (GDP) can lead to a multiplied change in the equilibrium level of GDP.
Injections of new demand for good and services into the circular flow of income stimulate further rounds of spending because "one person's spending is another's income".
Therefore GDP and employment both increase.
In the lesson we cover the multiplier equation, Positive and Negative multiplier as well as graphs.
Deficits- Current Account deficit, Fiscal deficit and Budget deficit.
Budget deficit -
Indicator of financial health, where expenditure exceeds revenue.
Budget surplus +
It is the opposite of Budget deficit, therefore where Revenue exceeds expenditure.
Trade Deficit -
When a country's imports exceed its exports for a given period of time.
Trade Surplus +
It is the opposite of Trade deficit, therefore when a country's exports exceed imports.
Current Account deficit-
Broader measure of Trade deficit, Factor income and Financial transfers.
Fiscal deficit-
occurs when Government spending exceeds Government revenue.
Government finances deficit by issuing bonds.
Balance of payments (BOP)
Also known as Balance of International payments. There are 3 accounts under it, they are Current Account, Capital account, and Financial account.
Current Account
Exchange of finished good and services including tourism.
Capital Account
Movement of capital in and out of a country.
Financial Account
Change of financial assets and liabilities.
Phillips Curve
shows the inverse relationship between inflation and unemployment. As unemployment decreases inflation increases,
Stagflation
Inflation accompanied by stagnant growth, unemployment or recession.
Supply side policies
focus on improving the structural long-term performance of an economy.
Pro-market policies
extend the role of market forces to allocate resources.
Monetary policy
it is to do with money, central bank normally controls the supply of money, often targeting inflation rate or interest rate.
Expansionary
increases the money supply to lower unemployment, boost private sector borrowing, boost consumer spending and stimulate economic growth.
Contractionary
slows the rate of growth in money supply or decreases the money supply to control inflation. This can slow down economic growth, increase unemployment, and depress borrowing and spending. So it could hurt the country, big time.
Fiscal policy
government policy regarding taxation and public spending. The government attempts to improve unemployment rates, control inflation and stabalise business cycles. It can be loose or tight; similar to the above Monetary policy.
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