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Question 1

What is the meaning of economic growth?

Answer 1

The increase in the production of goods and services in an economy over a period of time.

Question 2

What does unemployment refer to?

Answer 2

The situation where individuals who are capable of working are unable to find a job.

Question 3

What is inflation?

Answer 3

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Question 4

List key macroeconomic issues.

Answer 4

• Economic growth
• Unemployment
• Inflation
• Foreign trade and global relationships
• Balance of payments
• Financial well-being

Question 5

What is the Circular Flow of Income?

Answer 5

An economic model that illustrates the flow of income between households and firms.

Question 6

What are the components of aggregate demand (AD)?

Answer 6

• Consumption (C)
• Investment (I)
• Government expenditure (G)
• Exports (X)
• Imports (M)

Question 7

What characterizes the business cycle?

Answer 7

Fluctuations in economic activity over time, including phases like expansion, peak, contraction, and trough.

Question 8

What is real GDP?

Answer 8

Gross Domestic Product adjusted for inflation, reflecting the value of all goods and services produced in an economy.

Question 9

Fill in the blank: The annual economic growth rate is expressed as a _______.

Answer 9

[percentage]

Question 10

What is frictional unemployment?

Answer 10

Unemployment that occurs when people are temporarily out of work while transitioning from one job to another.

Question 11

What is structural unemployment?

Answer 11

Unemployment resulting from industrial reorganization, typically due to technological change or shifts in consumer demand.

Question 12

What is the definition of cost-push inflation?

Answer 12

Inflation caused by an increase in the costs of production, leading to decreased supply.

Question 13

What is demand-pull inflation?

Answer 13

Inflation that occurs when demand for goods and services exceeds their supply.

Question 14

What are the three methods of measuring GDP?

Answer 14

• The product method
• The income method
• The expenditure method

Question 15

What is the output gap?

Answer 15

The difference between actual output and potential output in an economy.

Question 16

What is the unemployment rate if there are 3 million unemployed and 24 million employed?

Answer 16

11.1%

Question 17

True or False: Economic growth can lead to a reduction in unemployment.

Answer 17

True

Question 18

What does financialisation refer to?

Answer 18

The increasing dominance of financial motives, financial markets, financial actors, and financial institutions in the operation of domestic and international economies.

Question 19

What are the macroeconomic policy objectives?

Answer 19

• High and stable economic growth
• Low unemployment
• Low rates of inflation
• Avoidance of balance of payments deficits

Question 20

What is the significance of the balance of payments?

Answer 20

It records all economic transactions between residents of a country and the rest of the world.

Question 21

What is the role of injections in the Circular Flow of Income?

Answer 21

Injections are additions to the economy’s circular flow, including investment, government spending, and exports.

Question 22

What are withdrawals in the context of the Circular Flow of Income?

Answer 22

Withdrawals are elements that remove money from the economy, such as savings, taxes, and imports.

Question 23

What is the impact of high inflation on money as a store of value?

Answer 23

Money loses value in real terms, making it a less desirable store of wealth during inflation.

Question 24

What is the relationship between aggregate demand and the price level?

Answer 24

The aggregate demand curve slopes downwards, indicating that as the price level decreases, the quantity of goods and services demanded increases.

Question 25

What is a recession?

Answer 25

A significant decline in economic activity across the economy lasting longer than a few months.

Question 26

Fill in the blank: The costs of unemployment include costs to the unemployed and wider costs to _______.

Answer 26

[family and friends, the economy]

Question 27

List types of unemployment.

Answer 27

* Frictional * Structural * Cyclical * Seasonal * Regional

Question 28

What is the significance of measuring national income?

Answer 28

It provides an indication of the economic health of a country and informs policy decisions.

Question 29

What is the formula for calculating the annual rate of inflation using CPI?

Answer 29

[(New CPI - Old CPI) / Old CPI] * 100

Question 30

What is the relationship between injections and withdrawals in the Circular Flow of Income?

Answer 30

Planned injections may not equal planned withdrawals, influencing equilibrium in the economy.

Question 31

What is a key challenge in achieving macroeconomic objectives?

Answer 31

Conflicts may arise between objectives such as high growth and low inflation.

Question 32

What is the effect of changes in aggregate supply on the economy?

Answer 32

Changes in aggregate supply can cause inflation or deflation, impacting overall economic performance.

Question 33

What are the main causes of growth in potential output?

Answer 33

* Increases in the quantity of factors * Increases in productivity * Technical progress * Human capital and education and training ## Footnote These factors contribute to overall economic growth.

Question 34

What are the three ways of measuring GDP?

Answer 34

* The product method * The income method * The expenditure method ## Footnote Each method provides a different perspective on the economy's performance.

Question 35

What does the product method measure?

Answer 35

Measuring value added: GVA at basic prices ## Footnote This method assesses the value added at each stage of production.

Question 36

What is a major issue with the product method?

Answer 36

The problem of double counting ## Footnote This occurs when the same output is counted multiple times in the production process.

Question 37

What is GDP at market prices?

Answer 37

GDP at market prices = GVA + taxes on products − subsidies on products ## Footnote This calculation adjusts for taxes and subsidies to reflect market value.

Question 38

What does the income method involve?

Answer 38

Adding factor earnings ## Footnote This method totals the incomes earned by factors of production.

Question 39

What are some qualifications related to the income method?

Answer 39

* Stock appreciation * Transfer payments * Direct taxes; taxes and subsidies on products ## Footnote These factors can affect the accuracy of income measurement.

Question 40

What is the formula for the expenditure method?

Answer 40

Y = C + I + G + (X - M) ## Footnote This formula calculates national income based on consumption, investment, government spending, and net exports.

Question 41

In the expenditure method formula, what does C represent?

Answer 41

Consumption ## Footnote This is the spending by households.

Question 42

How is national income calculated using the expenditure method with the given data?

Answer 42

Y = 350 + 130 + 140 + (200 - 250) = 570 ## Footnote This calculation incorporates all components of the expenditure method.

Question 43

What does Y = C + S + T represent in national income accounting?

Answer 43

Y = Consumption + Savings + Taxes ## Footnote This equation shows how national income is distributed among these three categories.

Question 44

What is the value of savings (S) in the provided data?

Answer 44

100 ## Footnote This indicates the amount of income that is not spent but saved.

Question 45

What is the value of net tax revenue (T) in the provided data?

Answer 45

120 ## Footnote This is the portion of income collected by the government as taxes.

Question 46

What is the total national income calculated from consumption, savings, and taxes?

Answer 46

570 ## Footnote This confirms the calculation using the alternative approach.