1. Active balances: Refers to demand
for money held under transactions and precautionary motives
2. Accelerator principle: An economic
concept which relates the rate of change in aggregate demand (AD) to the rate
of change in investment
3. Autonomous consumption: Level of
consumption which does not depend on the level of income
4. Autonomous investment: Level of
investment which does not depend on the level of income
5. APC (Average propensity to consume):
Proportion of income that is being spent
6. APS (Average propensity to save):
Proportion of income that is being saved
7. AD (Aggregate demand)/ AE (Aggregate
expenditure): total demand or total expenditure into the economy which comes
from households (C), firms (I), government (G) and foreigners (X-M)
8. AS (Aggregate supply): total value
of all output produced by all firms in an economy at different price levels
9. Balanced budget: It is where
government expenditure equals to tax revenue
10. Bond: A type of monetary instrument
which can be sold by the private firms or government with the intention to
raise more money at certain interest rates
11. Budget deficit: It is where
government expenditure exceeds tax revenue
12. Budget surplus: It is where
government expenditure is less than the tax revenue
13. Broad money supply: A measure of the
stock of money which reflects the total potential purchasing power in an
economy
14. Central bank: The main bank of a
country which acts as a banker to the government, provides financial services
to all financial institutions, is responsible for money supply, alters the
interest rate and ensures stability of the exchange rate
15. Circular flow of income: A theory
which describes how money flows within the economy, taking into account all
injections and withdrawals/ leakages
16. Consumption: Spending by consumers
in an economy over a period of time
17. Credit creation: A situation in
which banks make more loans to consumers and businesses with the result that
the amount of money in circulation increases
18. Credit/ money multiplier: The ratio
of total money supply to the monetary base
19. Closed economy: An economy which
does not trade with the rest of the world
20. Constant prices: Data which has been
adjusted to take into account the impact of inflation
21. Current prices: Data which is
expressed in terms of the most up-to-date prices
22. Depreciation: When the value of a
currency falls against another
23. Deflationary gap/ negative output
gap: It is when the aggregate demand (AD) falls below the aggregate supply
(AS)/ actual output is less than the potential output
24. Dissaving: It is when consumption
exceeds income and so people have to rely on savings that have been accumulated
in the past
25. Economic growth: It is when the real
GDP increases
26. GDP (Gross Domestic Product): Total
value of all final goods and services produced within the country over a period
of time
27. GDP deflator: A ratio of price
indices that is being used in the measurement of national income statistics to
take away the impact of inflation so that the final figure is more reliable
28. GNP (Gross National Product): GDP
plus income earned by its citizens abroad minus income earned by non-residents
located in that country
29. Human Development Index (HDI): A
measurement of development which takes into account real GDP per capita
(adjusted for PPP), life expectancy at birth and number of years spent in
education
30. Idle balances: Refers to demand for
money held under speculative purposes
31. Induced investment: Level of investment
which depends on the level of income
32. Inflationary gap/ positive output
gap: It is when the aggregate demand (AD) exceeds the aggregate supply (AS)/
actual output exceeds potential output
33. Injection: Money which flows into
the circular flow of income that does not come from consumption
34. Keynesian: An approach that is based
on the views of the economist John Maynard Keynes (1883-1946)
35. Leakage/ withdrawal: Money which
flows out from the circular flow of income
36. Liquidity trap: A situation
described in Keynesian economics in which injections of cash into the private
banking system by the central bank fails to decrease interest rates and hence
make the monetary policy ineffective.
37. Loanable funds theory: An economic
concept developed by the Monetarists to describe how market demand and market
supply of loans interact to determine the rate of interest
38. MPC (marginal propensity to consume):
Additional increase in consumption due to a dollar increase in disposable
income
39. MPM (marginal propensity to import):
Additional increase in imports due to a dollar increase in disposable income
40. MPS (marginal propensity to save):
Additional increase in savings due to a dollar increase in disposable income
41. MPT (marginal propensity to tax):
Additional increase in tax paid due to a dollar increase in disposable income
42. MPW (marginal propensity to
withdraw): Additional amount of money which leaks out from the circular flow of
income due to a dollar increase in disposable income
43. MEW (Measurable Economic Welfare)/
NEW (Net Economic Welfare): A measurement of development which adjusts the
value of GDP by adding the value of leisure and DIY activities and deducting
expenditures on national defence, police force and negative externalities
44. Multiplier: A measure of how much
the national income increases due to an initial injection into the economy
45. Monetarist: An approach that is
based on the views of a number of economists of which the most well-known is
Milton Friedman (1912-2006)
46. MPI (Multidimensional Poverty Index):
A measurement of development which uses three dimensions just like HDI but
further breaking them down into more categories
47. Money supply: Amount of money
available to the general public and the banking system in an economy
48. Narrow money supply: A measure of
the stock of money in an economy which is mainly cash
49. National debt: Total amount of debts
accumulated by the government
50. Net domestic product: The GDP of a
country minus depreciation (wear and tear of capital equipment over the time,
leading to a fall in its value)
51. Net national product: The GNP of a
country minus depreciation (wear and tear of capital equipment over the time,
leading to a fall in its value)
52. Open economy: An economy which
trades with the rest of the world
53. Paradox of thrift: A theory which
holds the view that it may be bad if people try to save money collectively
during an economic recession because that would eventually lead to lower growth
and more job losses
54. Precautionary demand for money:
Money held to cover unexpected expenditures
55. Quantity theory of money: An economic theory which states that money supply has a direct and proportional relationship with the price level
56. Real GDP: Total value of all final
goods and services produced within the country over a period of time adjusted
for inflation
57. Savings: Amount of disposable income
that is not spent on consumption
58. Speculative demand for money: Money
held with the intention to buy bonds
59. Transaction demand for money: Money
held to pay for the purchase of goods and services
60. Underground/ hidden/ black/ informal
economy: Market in which goods and services are traded illegally
61. Yield: Percentage of return from the holding of an asset such as bond
