List of the Most Important Definitions for Chapter 5: Theory and Measurement in the Macroeconomy (CIE-AS)

Keywords for Chapter 5 (AS):

1. Aggregate demand (AD): Total demand for all goods and services produced within the economy over a period of time by the households, firms, government and foreigners

2. Aggregate supply (AS): Total supply of goods and services by all firms within the economy over a period of time

3. Base year: A year chosen so that comparisons can be made over a period of time and it is represented by an index of 100

4. Claimant count: A measure of unemployment which considers the number of people who officially register themselves as unemployed 

5. Consumption (C): Household expenditures onto all goods and services

6. Consumer Price Index (CPI): A way of measuring changes in the prices of a number of goods and services in an economy over a period of time

7. Cost-push inflation: An increase the general price level which is due to rise costs and this can be represented by a leftward shift of AS

8. Economically active: Refers to people who are currently employed or actively seeking for employment

9. Economically inactive: Refers to working age adults (16 and above) who are neither employed nor seeking employment   

10. Demand-pull inflation: An increase in the general price level which is due to rise in total spending into an economy and this can be represented by a rightward shift of the AD curve

11. Dependency ratio: The ratio of dependent people (0-15 and above 65 years old) to those who are economically active

12. Government expenditure (G): Public sector spending onto all goods and services, investment in the form of capital asset and also transfers

13. Investment: An increase in the capital stock such as new plant, building and machines

14. Imported inflation: A sustained increase in the general price level due to increase in the price of imports and this may be due to inflation in other countries or weakness of home currency itself

15. Labour force/ workforce/ working population: Refers to people in a country who are either currently employed or actively seeking for employment

16. Labour Force Survey (LFS): A measure of unemployment which considers a person as unemployed if he/ she has been looking for jobs since the past 4 weeks and are able to start work in the next 2 weeks

17. Labour Force Participation Rate (LFPR): Percentage of the people who are of working age (16 and above) that are economically active (currently employed or actively seeking for employment)

18. Monetary inflation: A sustained increase in the general price level due to rise in money supply which eventually causes total spending to increase at a rate faster than what the whole economy can actually supply

19. Nominal value/ money value: Value of money without taking into account the effect of inflation

20. Net exports (X-M): The difference between the total value of exports and the total value of imports

21. Productivity: Output per worker per period of time

22. Real value: Value of money after netting off the impact of inflation

23. Retail Price Index (RPI): A measure of changes in the prices of a number of goods and services in an economy over a period of time which also includes items that are not included in the CPI such as housing related costs

24. Unemployment: Refers to people of working age (16-60 women and 16-65 men), able and willing to work but are unable to secure a job at the going wage rate

25. Weights: A percentage which is attached to all goods and services in the basket and they are all different to reflect their importance to an average consumer

List of the Most Important Definitions for Chapter 4: International Trade (CIE-AS only)

Another one:

1. Absolute advantage: It is when a country is able to produce a particular good or service using fewer resources than another country/ able to produce more of an output using the same amount of resources as another country

2. Balance of payments: An account that summarises all the financial transactions between one country and the rests of the world

3. Bilateral trade: Refers to trade that takes place between two countries

4. Capital account/ financial account (already merged into one): One of the two accounts under the balance of payments which records all the inflows and outflows of money related to portfolio investment and direct investment

5. Common Market: A group of countries which decide to bring their economies closer by allowing free movement of goods, services, labours and capital, imposing common external tariffs and also a more harmonised microeconomic policies (such as EU)

6. Comparative advantage: It is when a country is able to produce a good or service at a lower opportunity cost than another country

7. Common external tariff: It is where all countries within the same trading bloc impose the same level of tariffs against all products that come from non-member countries

8. Current account: One of the two accounts under the balance of payments which is made up of trade in goods, trade in services, investment income and current transfers

9. Current transfers: Payments and receipts of money which are do not involve the transaction for goods and services

10. Custom unions: A group of countries which decide to improve their trade relationships by agreeing to reduce or eliminate tariffs among themselves while at the same time impose a unified tariffs against non-members

11. Deficit: A negative balance when expenditure exceeds income

12. Dumping: The practice of selling a good in another country at a price which is lower than the domestic or sometimes even at below cost

13. Economic/ Monetary Union: A group of countries who decide to bring their economies closer together through the adoption of single currency (such as the Eurozone)

14. Embargo: Ban on imports from particular countries usually upon political and military reasons

15. Exports: Goods and services that are produced domestically in one country and sold to other countries

16. Free trade: Cross border transactions that are not restricted or limited by import control measures

17. Free Trade Area (FTA): A group of countries which promote free trade among themselves but which retain a separate set of trade barriers against other countries

18. Foreign reserves: Monetary assets that are controlled by the central bank which can be used to finance payment imbalances and also stabilise the exchange rate

19. Globalisation: It is the integration of world economies into a single market place where goods and services, labours and capital have greater mobility

20. Imports: Goods and services that are produced in foreign countries and consumed by people in the domestic economy

21. Infant industry argument: The idea that a newly set-up industry should be given time to establish itself until it is more able to compete

22. Invisible balance: Difference between the value of export and import of services

23. Multilateral trade: Refers to trade that takes place between a number of countries

24. Net errors and omissions: Transactions in the balance of payments that go unrecorded

25. Net investment income: Difference between the inflows and outflows of money related to income such as interests, profits and dividends

26. Political union: It is the final stage of an economic integration where member countries no longer have any individual control over monetary and fiscal policy as well as the near-harmonisation of all legal issues (such as the USA, UNITED states)

27. Preferential Trade Area (PTA): It is where a group of countries decide to improve their trade relationships by agreeing to cut tariffs onto some of the products traded among themselves

28. Quota: A physical constraint onto the amount of foreign goods that can be imported into the country

29. Strategic industry: Industries that the government considers to be very important for the country’s economy or safety

30. Sunrise industry/ infant industry: Industries that are new, fast growing and are believed to be very important in the future

31. Sunset industry/ declining industry: Industries that have passed their peak and are now in decline with no realistic hope of recovery

32. Surplus: A positive balance when income exceeds expenditure

33. Tariff: A tax which is levied onto imported products to make them appear artificially more expensive

34. Terms of trade: The ratio of export prices to import prices

35. Trade creation: Creation of new trade as a result of reduction or elimination of trade barriers

36. Trade diversion: It is where a certain amount of trade is lost as a result of the imposition of trade barriers

37. Visible balance: Difference between the value of export and import of goods

38. Voluntary Export Restraints (VER): A decision taken by the exporting country to voluntarily reduce its exports to another country

39. World Trade Organisation (WTO): An organisation set up in 1995 to promote free trade in the world through the reduction of trade barriers