Definitions

GDP: The monetary value of all the goods and services produced within an
economy.
Unemployment: Occurs when someone is actively seeking for employment is unable
to find a job.
Structural unemployment: When the demand for labour is less than the supply for
labour in a particular industry.
Cyclical Unemployment: Involuntary unemployment due to a lack of demand for
goods and services.
Frictional Unemployment: Is the time period between jobs when a worker is
searching for or transitioning between jobs.
Seasonal Unemployment: Occurs when people are unemployed at certain times of
the year.
Balance of Payments: A statement that summarises an economys transaction with
the rest of the world for a specified period of time.
Economic Cycle: Natural periods in fluctuation in an economy between periods of
expansion and contraction.
Inflation: The rate at which the general level of prices for goods and services is
changing.
Cost Push inflation: An increase in the price level due to an increase in the average
costs of production for firms.
Demand Pull inflation: An increase in price level due to aggregate demand being
greater than aggregate supply.
Investment: Is the spending on capital goods such as machinery, buildings and
human capital such as training and education
Capital Goods: Are tangible assets that firms use to produce goods and services.
Output Gap: An economic measure of the difference between actual output of an
economy, and the output they could achieve when most efficient and at full
capacity.
Inflationary Pressure: Refers to the demand and supply side factors that can cause a
change in price level.
Deflation: A general decline in prices due to a reduction in money supply or credit.

AD: Total expenditure on all goods and services with a domestic economy during a
given time period.
AS: Total amount of goods and services produced within an economy at a given
overall price level in a given time period.
Supply-side policies: Are policies which are designed to improve the productive
capacity of an economy.
Economic Growth: An increase in the productive capacity/ an increase in RGDP.
Accelerator effect: An increase in the rate of economic growth which leads to a rise
in the level of investment.
Multiplier effect: When an increase/decrease in spending leads to a larger than
proportionate change in national incomes
Consumption: The purchasing of goods and services by individuals.
Savings: Disposable income which is not spent.
Disposable Income: The income of a household available to spend after it is taxed.
Real Income: The wages of an individual after it is deducted by inflation.
Exports: Goods and services sold to foreigners by firms.
Imports: Goods and services bought by households from foreign firms.
Fiscal Policy: Is the means in which the government adjusts its spending rates and
taxation to effect the overall economy.
Monetary Policy: Is a method to control the money supply in an economy.

Consumer price index: A measure that examines the weighted average of prices
of a basket of consumer goods and service. The CPI is calculated by taking price
changes for each item in the predetermined basket of goods and averaging
them; the goods are weighted according to their importance