Key Terms to Revise

Animal spirits: State of confidence or pessimism held by consumers and businesses

Budget deficit: When government spending exceeds the value of tax revenues in a given period

Deflation: A decline in the general price level in an economy, signified by a negative inflation rate

Economic cycle: Short-run fluctuations of real GDP around a long-term trend

Exchange rate: The external value of one currency in terms of a second currency.

Exports: Goods or services sold to agents in other countries

Full employment: When everyone willing and able to work at the current wage rate is in work

GDP: The total value of goods and services produced..

Government (National) Debt: The total stock of unpaid debt issued by a government

Gross National Income (GNI): GDP plus net income from abroad.

Human Development Index: Measure of development progress including income, education and health attainment

Imports: Purchases of foreign goods and services

Inflation: Annual % change in consumer prices

Lagging indicators: Indicators which tend to follow economic cycles such as unemployment.

Leading indicators: Indicators which predict future economic trends such as consumer and business confidence

Monetary policy: Policy to affect the supply or cost of money (rate of interest).

National happiness: Societal and personal well-being looking beyond what an economy produces

Net trade: Value of exports minus the value of imports

Nominal GDP: Monetary value of all goods and services produced expressed at current prices

Output gap: A measure of spare capacity, the difference between actual and potential GDP

Per capita incomes: Income per head of the population - a measure of average living standards

Productivity: Key measure of efficiency - GDP per worker employed or GDP per hour worked

Purchasing power: The buying power of a unit of currency. It is inversely related to the rate of inflation.

Real disposable income: Income after taxes and welfare benefits, adjusted for the effects of inflation

Savings ratio: Ratio of personal saving to disposable income.

Supply-side policies: Policies that increase a country's productive capacity and competitiveness

Unemployment: % of the labour force out of work and actively seeking a job

Wealth: The value of a stock of assets such as housing, personal pensions and savings