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| Question | Answer |
| What is aggregate demand? What is aggregate supply? | Aggregate Demand: total demand in the economy its components are C+I+G+(X-M) Aggregate Supply: total value of goods and services supplied in the economy |
| What is Economic Growth? What is GDP? | Economic Growth: the capacity of t he economy to produce more goods and services overtime GDP: the total value of goods and services produced in the economy |
| What is a negative output gap? What is a positive output gap? | Negative output gap: where the economy is producing less than its trend output Positive output gap: when actual GDP exceeds trend GDP increasing inflationary pressure |
| What is a Trade-off? | Trade-off: where one macroeconomic objective has to be curtailed in favor of another objective |
| What are Imports? What are Exports? | Imports: goods or services purchased from abroad Exports: goods or services sold abroad |
| What is meant by employment? What is meant by unemployment? | Employment: where labour is actively engaged in a productive activity usually in exchange of payments Unemployment: those without a job but who are currently seeking work at current wage rates |
| Name the five types of unemployment? | Cyclical unemployment Demand deficient unemployment Frictional unemployment Structural unemployment Voluntary unemployment |
| Cyclical unemployment: demand deficient unemployment that occurs as a result of the economic cycle Demand deficient unemployment: insufficient AD in the economy to employ labour | Frictional unemployment: people between jobs Structural unemployment: unemployment caused by change in the demand side or supply side of the economy Voluntary unemployment: workers who are not prepared to take jobs at current wage levels |
| What are economic indicators? | Economic indicators: economic statistics that provide information about the expansion and contraction of business cycles |
| What is the pattern that the economic cycle goes through? | Boom, Recession, Slump and Recovery |
| What is a recession? What is balance of payments? | Recession: when an economy is growing at less than its long-term trend rate of growth Balance of payments: exports minus imports- a deficit means more is imported than exported |
| What are injections? What are withdrawals? Name a type of withdrawal and a type of injection | Injections: money that originates outside the circular flow and is added to it Withdrawals: any money not passed on in the circular flow and is taken out of it investment and Saving |
| Savings are income induced, what does this mean? What is a multiplier effect? | Income induced: will increase as income increases and vice versa Multiplier effect: where and increase or decrease in spending leads to a larger than proportionate change in the national income |
| What is the accelerator effect? | Accelerator effect: the relation between the change in new investment and the rate of change of national income |
| What is privatisation? What is a supply-side shock? | Privatisation: sale of government owned assets to the private sector Supply-side shock: something that will increase or reduce the costs hence supply-side of all firms in the economy |
| What are the macroeconomic policy objectives? | Full employment Economic growth Control of inflation Balance of payments |
| What are the macroeconomic policy instruments? | Monetary policy Fiscal policy Supply-side policy |
| What is a boom/bust policy? What does total factor productivity mean? | Boom/bust policy: the government using macroeconomic tools to stimulate then contract the economy Total factor productivity: the overall productivity of inputs used by a firm in producing a particular level of output |
| What is inflation? What is deflation? What is a credit crunch? | Inflation: A persistent increase in the price level Deflation: A persistent decrease in the price level Credit crunch: where borrowing becomes more expensive or unavailable |
| What is the trend rate of growth in the UK? What is participation rate? | UK trend rate : 2.5% Participation rate: proportion of the country's labour force |
| What is demand pull inflation? What is cost push inflation? | Demand pull inflation: where AD exceeds AS leading to and increase in the price level Cost push inflation: where increased cost of production result in firms increasing their prices leading to a rise in the price level |
| What is meant by "Tight labour market"? | Tight labour market: where firms have to increase wages to attract the labour they need |
| The current account is divided into 4 parts what are they? | Trade in goods Trade in services Investment income Current transfers |
| What does Visibles and Invisibles mean in economics? | Visibles: exports or imports that you can see and touch as they cross international boundaries Invisibles: intangibles such as the provision of insurance or banking services |
| What is deindustrialisation? What is globalization? | Deindustrialisation: a fall in the proportion of N.O. accounted for by the manufacturing sector of the economy Globalization: the ability to produce goods anywhere in the world and sell them in any country |
| What happens when the current account is in equilibrium? | When the current account is in equilibrium it does not affect the macroeconomy of the country |
| What is monetary policy? | Monetary policy: controlling the macroeconomy via changes in monetary variables such as the money supply or interest rates |
| What is interest rate What is the transmission mechanism of monetary policy? | Interest rate: the cost of borrowing the reward for saving Transmission mechanism of monetary policy: how changes in the base interest rate influence the components of AD |
| What do changes in interest rates impact? | Housing market,Mortgage payers,Demand for credit,Consumer and Business confidence,Business investment, Exchange rate |
| What is meant by money supply? What are exchange rates? | Money supply: the total amount of money in an economy Exchange rate: the price at which one currency exchanges for another |
| What is meant by Narrow money, Broad money and Hot money | Narrow money:balances available for normal transactions Broad money:money that is not immediately accessible Hot money: money that is liable to rapid transfer from one country to another |
| What is fiscal policy? | Fiscal policy: the policy of the government regarding taxation and government expenditure |
| What is current spending? What is capital spending? | Current spending: government spending on a day to day basis Capital spending: government spending to improve productive capcity |
| What is a balanced budget, a budget deficit and a budget surplus? | Balanced budget: receipts equal expenditure Budget deficit: expenditure exceed receipts Budget surplus: receipts exceed expenditure |
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