# Introduction to Macroeconomics Economic Growth the expansion or annyal percentage increase in an economys level of output or real Gross Domestic

c Product (GDP) over time. Actual Growth change in actual output produced by the economy over a given period of time. Potential Growth change in maximum output that the economy is capable of producing. Negative Growth a reduction or contraction in actual ourput over a period of time. Slow Economic Growth (Economic Slowdown) The actual output or real GDP continues to expand but at a slower pace. Inflationary Economic Growth Actual growth is faster than potential growth. Happens when the sentiments in the economy are very positive, but potential capacity of the economy is expanding in tandem. Hard Landing sudden sharp or severe contraction in output, especially when an economy has been preforming relatively well prior to the contraction. Full employment a situation when everyone in the labour force is able to find a job. It is a situation when there are enough jobs for everyone who is able and willing to work. Labour Force those in the working population (who are of legal working age) and are willing and able to work or find employment. Unemployment the percentage of those in the labour force (of legal working age) who are without work but they are willing and able to take up employment. Cyclical Unemployment Employment associated with a recession or economoic downturn, when business suffers poor sales due to pessimism and resort to retrenching and laying-off redundant staff. Structural Unemployment Unemployment that arises when there is a mismatch of skills (i.e. job seekers are unable to find jobs because they have skills which do not match those required by employers in the economy. Frictional Unemployment Unemployment that arises due to lack of perfect information concerning job availability in the economy. This form unemployment is also known as search unemployment is regarded as temporary Unemployment rate = Number unemployed in the labour force/size x100%

GPL average price of a particular basket of good snad services in the economy. Inflation sustained increase in the general price level in an economy. Demand Pull Inflation Inflation arising from excessive aggregate demand or total spending in the economy. Cost-Push Inflation: Inflation driven my soaring production or business cost (eg fuel costs and rising costs of imported goods) Costumer Price Index Indicator to measure the changes in general price level over time. Balance of Payment a set of official accounts kept by the government to record and track all international monetary transactions between the residents of the country and the rest of the world during a specified time period, usually one year. BOP Equilibrium the amount of foreign exchange earned by the country is exactly equals to the amount of foreign exchange spent by the country, BOP is in equilibrium. BOP Surplus The total credit (inflow of foreign exchange) exceeds the total debit (outflow of foreign exchange) of all transactions for a country with the rest of the world over a specificed period of time. (Export revenue > Import expenditure) BOP Deficit The total debit (outflow of foreign exchange) exceeds the total credit (inflow of foreign exchange) of all transactions for a country with the rest of the world over a specified period of time. (Import expenditure > Export revenue)

# National Income Accounting & Standard of Living Gross Domestic Product the market value of all final goods and services newly produced within geographical boundaries of an economy, in a given period of time (usually one year). It is about the location, where the output is produced. Gross National Product the market value of all final goods and services newly produced anywhere in the world from resources belonging to residents or nationals of a country in a given period of time (usually one year). It is about the ownership i.e. who OWNS the output. Real GNP GNP measured at constant prices or base year prices. It is GNP with effects of inflation being removed. Any increase indicates that output has risen in terms of physical quantity with pricse held constant.

Nominal GNP GNP measured at current or prevailing market prices. An increase in nominal GNP does not necessarily indicate an increase in physical output. This increase could be partly or entirely due to an increase in price levels or inflation. Standard of Living level of well-being or welfare enjoyed by an average person or resident of a country. The overall standard of living measure the material plus non material well-being of the economy. Material quantity and quality of goods and services available ot the residents for consumption. The Real GDP Per Capita is the most commonly used date to measure material well being. Non Material includes working hours, stress level, pollution level in the country, or what is generally referred to as intangibles or quality of life. Gini coefficient measure of the inequality of a distribution, with a value of 0 expressing total equality and a value of 1 representing maximal inequality. Purchasing Power Parity referes to the number of currency units required to purchase an amount of goods and services equivalent to what can be bought with one unit of currency of the base country. The Multiplier the number of times the national income changes as a result of a change in autonomous expenditure into the circular income flow. Aggregate Deamand total level of expenditure on domestically produced goods and services by households, firms, government and foreigners at each GPL for a period of time. Aggregate Supplly total output of goods and services that domestic firms would like to produce and sell at each GPL for a given period of time. # Unemployment Consequences, Causes & Cures Fiscal Policy the use of government spending and/or taxation to influence the level of economic activity through aggregate demand. Monetary Policy the deliberate attempt by the Central Bank to regulate the money supply or manipulate the interest rate or exchange rate to influence the level of economic activity through aggregate demand.

# Microeconomics Theory of Firm & Market Structure Firm organization that brings together different factors of production. Inputs such as labour, land and capital are combined by the entrepreneur to produce an output which could be a product or service. Variable Factor factor of production whose quantities can be changed within the time period to change output. Example include labour & raw materials Fixed Factor - factor of production whose quantities cannot be changed within the time period to change output. Example is buildings and heavy-duty machines Short Run production period during which there is at least one fixed factor. Long Run - production period which all factors of production are variable (no fixed factor in the LR) Explicit Costs costs incurred when an actual monetary payment is made. For example, salaries paid to workers, cost of raw materials etc. Note that these are direct payment to factors of production that are not owned by the firm. Implicit Costs costs that do not involve a direct payment of money to a third party, but which nevertheless involve a sacrifice of some alternative which means opp cost is incurred. They usually refer to costs of factors of production which are already owned by the firm itself. Accounting costs of production of a given commodity are the monetary value of the explicit costs of production. Economic costs monetary value of the explicit and implicit costs of production. It is a measure of the total opportunity cost of using scarce resources to produce a particular commodity in terms of the next best alternative foregone. It consists of both explicit and implicit cost of production.