1
A situation in which conventional monetary policies have become impotent, because nominal interest rates are at or near zero
What is a liquidity trap?
A tax passed off by the government on goods and services
What is indirect tax?
Market-based and interventionist
What are the types of supply-side policies?
A behavioural economic theory suggesting that people spend more as the value of their assets rise
What is the wealth effect?
A government's decisions regarding taxation and spending to influence the economy
What is fiscal policy?
A type of short-term unemployment that occurs when individuals are transitioning between jobs or entering the workforce for the first time
What is frictional unemployment?
The portion of a government's budget deficit that persists even when the economy is performing at its full potentia
What is a structural deficit?
An international transaction which does not involve tangible goods, but services
What is invisible trade?
The delay between an action and its observed effect
What is a time lag?
A measure of a household's or individual's purchasing power, taking into account inflation
What is real disposable income?
A hypothesis which states that the general price level of goods and services is directly proportional to the amount of money in circulation
What is the quantity theory of money?
A measure of inflation that excludes volatile items like food and energy price
What is core inflation?
Payments made between countries when no goods or service change hands
What are net current transfers/secondary income?
A unofficial UK measure of inflation, specifically tracking changes in the prices of goods and services purchased by most households
What is the retail price index?
Equity, certainty, convenience, economy
What are Adam Smiths' four canons of taxation?
When a government agency operates in favour of producers rather than consumers
What is regulatory capture?
An imbalance that occurs when one party in a transaction possesses more or better information than the other
What is asymmetric information?
This means workers can quickly adjust to changing economic conditions, and there's no cost associated with searching for new employment or relocating
What is perfect labour mobility?
The deflationary effect of a progressive taxation system on a country's economy
What is fiscal drag?
The expenses a business incurs when changing its prices
What are menu costs?
A theory suggesting that policies benefiting the wealthy and businesses will ultimately benefit the entire economy
What is trickle-down economics?
The economic policy promoted in the 1980s, emphasizing tax cuts, reduced government spending, deregulation, and a free-market approach to stimulate economic growth
What is Reaganomics?
When an increase in government spending/investment leads to an expansion of economic activity (real GDP) which in turn incentivises private sector firms
What is the crowding in effect?
Central bank public communication about its likely future course of action
What is forward guidance?
The flow of funds (or capital) from one country to another in order to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts
What are hot money flows?