IB Economics 3. Macroeconomics Key Definitions

The inability to afford the basic goods and services required to meet essential needs, when measured in relation to a fixed poverty line that indicates the minimum income required to cover basic necessities.

The total quantity of real output that all buyers in an economy (consumers, businesses, the government, and foreigners) are willing to purchase over a specific time period, at all possible price levels, ceteris paribus.

The total output produced in an economy at all possible price levels, over a specific time period, ceteris paribus.

Factors without government interaction which automatically reduce the short-term business cycle fluctuations.

The average total proportion of income paid as tax.

Fluctuations in the growth of real output, characterised by alternating phases of expansion (rising real output) and contraction (falling real output).

The institution responsible for a country's monetary system. It issues currency, regulates and supervises commercial banks, acts as banker to the government, and conducts monetary policy.

An income flow in an economy where the value of the output produced is equivalent the total income earned from its production, which is also equivalent to the expenditures spent on purchasing that output.

A measure of the cost of living carried out by comparing the value of a basket of goods and services in a given year to a base year.

All spending made by households on final goods and services during a particular time period.

Fiscal policy aimed at reducing aggregate demand by decreasing government spending or increasing taxes.

A type of inflation caused by rising production costs, such as higher wages or input prices, which reduce aggregate supply and push the price level up.

The process by which commercial banks expand the money supply by making loans, since each new loan creates a new deposit.

The current account is the sum of the balance of trade in goods and services, income and current transfers.

Cyclical unemployment occurs during economic downturns when demand for goods and services falls, leading to job losses.

A sustained decrease in the general price level of goods and services in an economy over time, typically indicated by a negative inflation rate.

A type of inflation caused by an increase in aggregate demand that exceeds aggregate supply at the full employment level.

Factors that shift the aggregate demand curve by affecting its components: consumption (C), investment (I), government spending (G), and net exports (X - M).

Factors that shift the SRAS curve.

Tax paid to the government directly by the taxpayer (individual).

A slowdown in the rate of inflation, meaning prices are still rising but at a slower pace compared to previous periods.

An increase in a country's real output (real GDP) over a period time.

The degree of differences between an economy's individuals in their ability to satisfy their needs and wants due to monetary constraints.

The level of prosperity, economic satisfaction, and standard of living experienced by members of an economy.