DEFINITIONS YOU NEED kind of
1. Labour force- people in work and those actively seeking work
2. Production possibility curve- a curve that shows the maximum output of two types
of products and a combination of those products that can be produced with existing
resources and technology
3. Market- an arrangement that brings buyers into contact with sellers
4. Planned economic system- an economic system where the government makes the
crucial decisions, land and capital are state-owned and directives allocate resources
5. Elastic demand - when the quantity demanded changes by a greater percentage than
the change in price
6. Inelastic demand - when the quantity demanded changes by a smaller percentage
than the change in price
7. Perfectly elastic demand- when a change in price causes a complete change in the
quantity demanded
8. Perfectly inelastic demand - when a change in price has no effect on the quantity
demanded
9. Free rider - someone who consumes a good or service without paying for it
10. Liquidity - being able to turn an asset into cash quickly without a loss
11. Disposable income- income left after income tax has been deducted and state
benefits received
12. Trade blocs- a regional group of countries that remove trade restrictions between
them
13. Progressive tax- one which takes a larger percentage of the income or wealth of the
rich
14. Proportional tax- one which takes the same percentage of income or wealth of all
taxpayers
15. Regressive tax- one which takes a larger percentage of the income or wealth of the
poor
16. Automatic stabilisers- forms of government expenditure and taxations that reduce
fluctuations in economic activity, without any change in government policy
17. Fiscal policy- decisions on government spending and taxation designed to influence
aggregate demand
18. Expansionary fiscal policy- rises in government expenditure and/or cuts in taxation
designed to increase aggregate demand
19. Contractionary fiscal policy - cuts in government expenditure and/or rises in taxation
designed to reduce aggregate demand
20. Monetary policy- decisions on the money supply, the rate of interest and the
exchange rate taken to influence aggregate demand
21. Expansionary monetary policy- increases in the money supply and/or the reduction
in the rate of interest designed to increase aggregate demand
22. 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
23. Claimant count- a measure of unemployment which counts as unemployed these in
receipt of unemployment benefits
24. Frictional unemployment- temporary unemployment arising from workers being in
between jobs
25. Structural unemployment - unemployment caused by long-term changes in the
pattern of demand and methods of production
26. Cyclical unemployment - unemployment caused by a lack of aggregate demand
27. Search unemployment - unemployment arising from workers who have lost their
jobs, looking for a job they are willing to accept
28. Casual unemployment- unemployment arising from workers regularly being
between periods of employment
29. Seasonal unemployment- unemployment caused by a fall in demand at particular
times of the year
30. Regional unemployment- unemployment caused by a decline in job opportunities in
a particular area of the country
31. Technological unemployment- unemployment caused by workers being replaced by
capital equipment
32. Cost-push inflation- rises in the price level caused by higher costs of production
33. Demand-pull inflation- rises in the price level caused by excess demand
34. Wage-price spiral- wage rises leading to higher prices, in turn, lead to further wage
claims and price rises
35. Human development index (HDI) - a measure of living standards which takes into
account income, education and life expectancy
36. Absolute poverty- a condition where people's income is too low to enable them to
meet their basic needs
37. Relative poverty - a condition where people are poor in comparison to others in the
country. Their income is too low to enable them to enjoy the average standard of
living in their country
38. Vicious circle of poverty - a situation where people become trapped in poverty
39. Emigration- the act of leaving the country to live in another country
When there is a budget surplus, the government employs an expansionary fiscal policy
where
government spending is increased and tax rates are cut
○ It helps stimulate growth, and employment and helps increase prices
● When there is a budget deficit, the government employs contractionary fiscal policy where
government spending is cut and tax rates are increased
○ It helps control inflation resulting from too much growth
