Economic Terms

Is the amount of capital a bank needs to hold to back against a loan. The higher this ratio the smaler the maximum value of loans a bank can make and therefore the smaller the credit multiplier.

Factors of production are privately rather than state owned.

These are price fixing agreements where individual firms are given production quotas for the given market.

Below is a diagram showing how a cartel gets formed in an industry and how it affects each of the individual firms involved. If each of the firms involved charge a price of P at their given quota they will make a high level of supernormal profits (shown by the red box) whilst more importantly maximising industry profits (MR=MC). The idea is that if firms stick to this production quota, profits across the industry will be maximised.

But the issue with a cartel is that firms have an incentive to 'cheat' - by producing more than their subscribed quota to ensure they can increase their level of abnormal profits. The diagram below shows how a cheating firm can charge at a lesser price and produce above their quantity to increase individual profits (shaded orange box).

 

Is a non-interest earning deposit from financial institutions placed into the central bank of the country of origin, to provide finance for the central bank and cash reserves for future liquidity problems. Currently in the UK financial institutions have to hold 0.5% of their asset values in the Bank of England.

The institution responsible for maintaining a stable banking system by managing the currency, money supply and interest rates and to supervise commercial banks and provide finance in times of crisis (lender of last resort).

Below is a summary of the main policy initiatives that the Bank of England is responsible for, to enable the UK economy to function properly.

Assuming that all other things remain the same. This is an important assumption in economics as it allows analysis to consider the impact of individual variables.

Is the design of different ways in which choices can be presented to consumers, and the impact of that presentation on consumer decision-making. There are three different varities of this: default choice, restricted choice and mandated choice. These are all more specific forms of framing.

An economic model that explains how production and exchange of goods and services stimulate money flows within an economy.

Below is a diagram to illustrate how the money flows move within the economy, as well as external leakages and injections.

The number of people claiming Job Seekers Allowance (unemployment benefit). It does not necessarily represent the total number of unemployed people as many are excluded from claiming the benefit even though they do not have a job.

Below is a diagram to show the positional change in the claimant count in the UK from 1971-2014.

Believe in a laissez faire approach and that markets perform efficiently if individuals are left to their own devices and make decisions based on their own self interest with minimal government intervention.

In macroeconomics they distinguish short (upward sloping +) and long run (vertical) supply curve.