week 13

Question 1

what are the 6 major macroeconomic issues

Answer 1

economic growth and living standards
productivity
recessions and expansions
unemployment
inflation
international trade

Question 2

what is standard of living

Answer 2

the degree to which people have access to goods and services that make their lives easier, healthier, safer and more enjoyable

Question 3

what is economic growth

Answer 3

a process of steady increase in the quantity and quality of the goods and services the economy can produce
determines the behaviour of the economy in the long run

Question 4

what is the long term goal of macroeconomics

Answer 4

economic growth: determinants of increases in national income like development, inequality, productivity and education

Question 5

what is the short term goal of macroeconomics

Answer 5

business cycles: causes and consequences of economic fluctuations like crises, unemployment, stabilisation and monetary and fiscal policy

Question 6

how do you find average labour productivity

Answer 6

total output/number people employed = output per employed worker

Question 7

what are business cycles

Answer 7

short term fluctuations in GDP and other variables

Question 8

what is an expansion

Answer 8

a period in which the economy is growing above normal

Question 9

what is a recession

Answer 9

a period in which the economy is growing at a rate below normal, even if it is not negative

Question 10

what is a depression

Answer 10

an extreme recession

Question 11

draw a graph for short and long term growth

Answer 11

Question 12

what is unemployment rate

Answer 12

percent of the labour force who wish to be employed but cannot find work
key indicator of the labour market
rises in recessions and falls in expansions

Question 13

what is inflation rate

Answer 13

the annual percentage change in the general level of prices
imposes costs on people with fixed income eg pensions
loss of purchasing power

Question 14

why has inflation been high recently

Answer 14

surge in consumer demand due to pandemic/Ukraine war
increase in supply of services falls behind demand, shortage
surge on spending on goods puts upwards pressure on prices as suppliers cannot keep up with demand

Question 15

what are exports

Answer 15

goods and services sold to other countries

Question 16

what are imports

Answer 16

goods and services purchased from other countries

Question 17

what is a trade deficit

Answer 17

when exports are less than imports

Question 18

what is a trade surplus

Answer 18

when exports are greater than imports

Question 19

what is monetary policy

Answer 19

determination of countries money supply and interest rates by a central bank

Question 20

what is fiscal policy

Answer 20

decisions that determine the governments budget, including the amount and composition of gov expenditure and revenue

Question 21

how does fiscal policy effect decisions

Answer 21

influences balance between gov spending and taxes
deficit - gov spending greater than taxes
surplus - gov spending less than taxes

Question 22

how are fiscal and monetary policies used

Answer 22

used as short term stabilisation tools

Question 23

what is structural policy

Answer 23

gov policy to change the underlying structure of the economy

Question 24

how is structural policy used

Answer 24

aimed to target long term goals rather than short term business cycles

Question 25

what are examples of structural policies

Answer 25

tax reforms, deregulations, sound financial sector, privitisation, social saftety net, minimum wage

Question 26

what are examples of structural policies

Answer 26

tax reforms, deregulations, sound financial sector, privatisation, social safety net, minimum wage

Question 27

how may structural policies help

Answer 27

enhance effectiveness of stabilisation measures, promoting competition, can lead to lower prices and lower inflation

Question 28

what is positive analysis

Answer 28

addresses economic consequences of a particular event or policy, not if those consequences are desirable
can be tested to be correct or incorrect

Question 29

what is normative analysis

Answer 29

addresses the question of whether a policy should be used
normative analysis just involves values, opinions and ethics of person analysing
value judgements

Question 30

what is aggregation

Answer 30

adding up of individual economic variables to obtain economy wide totals
can be used to gain a birds eye view of the economy
allows comparison of broad categories like imports and exports

Question 31

what are the disadvantages of aggregation

Answer 31

obscures fine details of an economic situation

Question 32

what caused the great depression

Answer 32

1920s was a period of consumerism, citizens invested heavily in stocks
by late 20s there was significant overproduction of goods and uneven distribution of wealth causing a recession
also a great increase in credit purchases, built up debt that needed to be paid back

Question 33

what policies caused the great depression to be prolonged

Answer 33

contraction in money supply
increases in tariffs
huge tax increases to balance budget
price controls

Question 34

what were the results of the great depression

Answer 34

worldwide economic collapse
illness
homelessness and unemployment
savings wiped due to bankruptcy

Question 35

what lessons were learnt from the great depression

Answer 35

importance of gov in the economy
raising taxes increases pressures
policy makers should carefully study economy to avoid economic downturn