Build chains of reasoning: point → because → which means → leading to → therefore. One well-developed chain beats five loose statements. For evaluation, use MICE:…
Key terms glossary
Spec: A–Z
| Term | Definition |
|---|---|
| Aggregate demand (AD) | Total planned spending on an economy's output: C + I + G + (X − M). |
| Aggregate supply (AS) | Total planned output of an economy at each price level. |
| Balance of payments | A record of all transactions between a country and the rest of the world. |
| Circular flow of income | The flow of income and spending between households and firms. |
| Consumer Price Index (CPI) | A weighted index of the prices of a representative basket of goods, used to measure inflation. |
| Cost-push inflation | Inflation caused by rising production costs (SRAS shifts left). |
| Crowding out | Government borrowing raising interest rates and reducing private investment. |
| Current account | The part of the balance of payments covering trade in goods and services plus income flows. |
| Deflation | A sustained fall in the general price level. |
| Demand-pull inflation | Inflation caused by AD rising faster than AS (AD shifts right). |
| Disinflation | A fall in the rate of inflation — prices still rising, but more slowly. |
| Economic growth | The rate of change of real GDP. |
| Fiscal policy | Use of government spending and taxation to influence AD. |
| GDP | Gross Domestic Product — the total value of output produced in an economy. |
| GNI | Gross National Income — GDP plus net income from abroad. |
| Injection | Spending added to the circular flow: investment, government spending, exports. |
| LRAS | Long-run aggregate supply — the economy's productive potential. |
| Monetary policy | Use of interest rates and the money supply (e.g. QE) to influence AD. |
| Multiplier | The factor by which a change in injections changes national income: 1/(1−MPC) = 1/MPW. |
| Output gap | The difference between actual and trend (potential) output. |
| Phillips curve | The short-run trade-off between inflation and unemployment. |
| PPP | Purchasing Power Parity — adjusts incomes for cost-of-living differences in comparisons. |
| Productivity | Output per unit of input (e.g. per worker) — the key driver of long-run growth. |
| Quantitative easing (QE) | A central bank creating money to buy assets and increase the money supply. |
| Recession | Two consecutive quarters of negative economic growth. |
| Structural unemployment | Unemployment from a mismatch of skills/location as industries change. |
| Supply-side policy | Policies that raise productive potential by shifting LRAS right. |
| Withdrawal (leakage) | Income leaving the circular flow: savings, taxation, imports. |
Command words — what each one wants
Spec: Marks
| Command word | What it expects |
|---|---|
| Define / State | A precise meaning — no development needed. |
| Calculate | Work out a figure; show your method and units. |
| Explain | Give reasons — a short chain of cause and effect. |
| Analyse | Build a developed chain of reasoning, usually with a diagram. |
| Discuss / Assess / Evaluate / Examine | Analyse and weigh both sides to reach a justified judgement (AO4). |
Build chains of reasoning: point → because → which means → leading to → therefore. One well-developed chain beats five loose statements. For evaluation, use MICE: Magnitude, It depends, Counter-argument, Economic context (short vs long run, spare capacity, Keynesian vs Classical).
Viewing only
This content is free to read on superexams.com and cannot be printed or downloaded.
Read the full note, free
Create a free account to read this note in full. Every free account gets 2 complete revision notes, no card needed.