Economic Concepts Flashcards

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Balance of payments

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A record of all financial transactions between an economy and the rest of the world.

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Current account

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Measures the difference between money and credit going in and out of an economy through exports, imports, and income paid on assets both home and abroad.

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Economic cycle

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Variations in the annual rate of growth of real national output (GDP) over time.

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Economic development

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Long-run improvements in broad measures of income per capita, education, and health outcomes, and reductions in extreme poverty, hardship, and inequality.

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Economic growth

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An increase in the real value of goods and services produced as measured by the annual % change in real GDP. Also, a long-run increase in a country’s productive capacity.

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Economic shocks

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Unpredictable events such as volatile global prices for oil, gas, and foodstuffs.

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Economic stability

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When growth, prices, and unemployment do not change much from one year to another.

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Price stability

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Occurs when there is a low positive inflation rate of between 1-3% and price changes that do occur have little impact on day-to-day decisions of people and businesses.

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Trade-off

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A trade-off implies that choices have to be made between different objectives of policy, for example, a trade-off between economic growth and inflation.

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Unemployment rate

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The proportion of the economically active population who are unemployed.