Economic Terms

Often called narrow money which includes sterling notes and coins in circulation plus central bank reserves. All the items included are typically associated with being the most liquid assets in the economy at that particular point in time.

Notes and coins in circulation plus non-interest bearing sight deposits held by the non-bank private sector.

Notes and coins in circulation plus all retail deposits (including retail time deposits) held by the non-bank private sector.

Notes and coins in circulation plus all sight and time deposits held with banks (excluding building societies) by the non-bank private sector.

Often called broad money and includes notes and coins in circulation, deposits, repos and securities with a maturity of less than five years held by the non-bank private sector. All the assets included in this monetary aggregate are characterised by being illiquid assets. M4 is a key statistic because it can illustrate the underlying strength of economic activity within a country i.e. during a recession the M4 growth rate usually declines quite rapidly as economic activity diminishes during these periods.

When real output and the price level are stable because AD = AS.

This equilibrium is highlighted below due to the lack of an output gap and therefore in this instance the economy is at the full employment level.

Is when regulation of banks is carried out an industry-wide basis rather than individually scouring their balance sheets for risk which is entailed in micro prudential regulation. More specifically it involves identifying, monitoring and dealing to remove risks that threaten the stability of the financial system. This type of regulation in the UK is carried out by the FSA and PRA, mainly to ensure the systemic stability of the industry holds.

Considers the economy at a national level and the impact of a range of domestic and international variables on economic performance.

Policy goals set by the government which represent a strong and stable economy. The objectives are:

• Sustainable economic growth
• Low and stable inflation rate (Consumer Price Index target of 2%)
• Low unemployment (Close to full employment)
• Sustainable current account on the balance of payments

 

The high level study of the whole economy with particular interest in understanding and explaining economic growth, inflation, employment, international trade, government finances and the distribution of income.