Local government
a government organisation with the authority to administer a range of policies within an area of the country
Natural monopoly
an industry where a single firm can produce at a lower average cost than two or more firms because of the existence of significant economies of scale
Strategic industries
industries are important for the economic development and safety of the country
National champions
industries that are, or have the potential to be, world leaders
Trade blocs
a regional group of countries that remove trade restrictions between them
Free international trade
the exchange of goods and services between countries without restriction
Economic growth
an increase in the output of an economy in the long run, an increase in the economy's productive potential
Actual economic growth
an increase in the output of an economy
Potential economic growth
an increase in an economy's productive capacity
Aggregate demand
the total demand for a country's product at a given price level. It consists of consumer expenditure, investment, government spending and net exports (exports-imports)
Aggregate supply
the total amount of goods and services that domestic firms are willing to supply at a given price level
Full employment
the lowest level of unemployment possible
Economically active
being a member of the labour force
Unemployment rate
the percentage of the labour force who are willing and able to work but are without jobs
Price stability
the price level in the economy not changing significantly over time
Inflation rate
the percentage rise in the price level of goods and services over time
Balance of payments
the record of a country's economic transactions with other countries
Budget
the relationship between government revenue and government spending
Budget deficit
government spending is higher than government revenue
Budget surplus
government revenue is higher than government spending
National debt
the total amount the government has borrowed over time
Multiplier effect
the final impact on aggregate demand being greater than initial change
Direct taxes
taxes on income and wealth
Indirect taxes
taxes on expenditure
Progressive tax
one which takes a larger percentage of the income or wealth of the rich
Proportional tax
one which takes the same percentage of income or wealth of all taxpayers
Regressive tax
one which takes a larger percentage of the income or wealth of the poor
Automatic stabilisers
forms of government expenditure and taxations that reduce fluctuations in economic activity, without any change in government policy
Inflation
the rise in the price level of goods and services over time
Informal economy
that part of the economy that is not regulated, protected or taxed by the government
Flat taxes
taxes with a single rate
Fiscal policy
decisions on government spending and taxation designed to influence aggregate demand
Expansionary fiscal policy
rises in government expenditure and/or cuts in taxation designed to increase aggregate demand
Contractionary fiscal policy
cuts in government expenditure and/or rises in taxation designed to reduce aggregate demand
Monetary policy
decisions on the money supply, the rate of interest and the exchange rate taken to influence aggregate demand
Foreign exchange rate
the price of one currency in terms of anther currency or currencies
Expansionary monetary policy
increases in the money supply and/or the reduction in the rate of interest designed to increase aggregate demand
Contractionary monetary policy
cuts in the money supply or growth of money supply and/or rises in the rate of interest designed to reduce aggregate demand
Supply-side policy
measures designed to increase aggregate supply
Deregulation
the removal of rules and regulations
Gross domestic product (GDP)
the total output of a country
Circular flow of income
the movement of expenditure, income and output around the economy
Value added
the difference between the sales revenue received and the cost of raw materials used.
Transfer payments
transfers of income from one group to another not in return for providing a good or service
Nominal GDP
GDP at current market prices and so not adjusted for inflation
Real GDP
GDP at constant prices and so, adjusted for inflation
Subsistence agriculture
the output agricultural goods for farmers' personal use
Recession
a reduction in real GDP over a period of six months or more
Sustainable economic growth
economic growth that does not endanger the country's ability to grow in the future
Employment
being involved in a productive activity for which a payment is received
Unemployment
being without a job while willing and able to work
Claimant count
a measure of unemployment which counts as unemployed these in receipt of unemployment benefits
Labour force survey (ILO) Measure
a measure of unemployment which counts as unemployed people who identify as such in a survey
Frictional unemployment
temporary unemployment arising from workers being in between jobs
Structural unemployment
unemployment caused by long-term changes in the pattern of demand and methods of production
Cyclical unemployment
unemployment caused by a lack of aggregate demand
Search unemployment
unemployment arising from workers who have lost their jobs, looking for a job they are willing to accept
Casual unemployment
unemployment arising from workers regularly being between periods of employment
Seasonal unemployment
unemployment caused by a fall in demand at particular times of the year
Regional unemployment
unemployment caused by a decline in job opportunities in a particular area of the country
Technological unemployment
unemployment caused by workers being replaced by capital equipment
Deflation
a sustained fall in the prices of goods and services
Disinflation
a fall in the rate of inflation
Cost-push inflation
rises in the price level caused by higher costs of production
Demand-pull inflation
rises in the price level caused by excess demand
Wage-price spiral
wage rises leading to higher prices, in turn, lead to further wage claims and price rises
Monetary inflation
rises in the price level caused by an excessive growth of the money supply
Hyperinflation
a very rapid and large rise in the price level
Index-linking
changing payments in line with changes in the inflation rate
Menu costs
costs involved in having to change prices as a result of inflation
Shoe-leather costs
costs involved in moving money around to gain higher interest rates