Macro 1

Question 1

Boom

Answer 1

Rapid gdp growth ahead of trend

Question 2

Slowdown

Answer 2

Deceleration of growth

Question 3

Recession

Answer 3

Negative growth over two quarters caused by animal spirits, policy decision, collapse of housing market

Question 4

Depression

Answer 4

Fall in GDP by 10% over 2 years

Question 5

GDP

Answer 5

Total value of national output (goods/services)

Question 6

Economically inactive

Answer 6

Of working age, not actively looking for work

Question 7

Productivity

Answer 7

Measure of efficiency of factors of production

Land, Labour, Capital

Question 8

Basic circular flow

Answer 8

Flow of income and spending between households and firms

Question 9

Disposable income

Answer 9

Yd

Consumption - savings

Question 10

average propensity to save

Answer 10

Savings / disposable income

Question 11

Marginal propensity to save

Answer 11

Change in spending/ change in disposable income

Question 12

Real investment

Answer 12

Spending on capital goods

Question 13

Index

Answer 13

(Value/ base value) x 100

Scaled number to represent a larger value

Question 14

Consumer price index

Answer 14

Cost of living.

Total (Weight X Price index) total weights added

Question 15

Real GDP

Answer 15

Nominal GDP X 100/CPI

Question 16

GNI

Answer 16

GDP + Net investment income from overseas assets

E.g. Burberry profits back to U.K.

Question 17

Multiplier effect

Answer 17

Final change in GDP/ initial change in AD

1/marginal rate of leakage

Question 18

Recovery

Answer 18

Economy starts to expand again

Question 19

Stagnation

Answer 19

Little to no economic growth. 2% or lower

High unemployment and involuntary part time employment

Question 20

Stagflation ?

Answer 20

Stagnation with inflation

Question 21

Characteristics of a boom?

Answer 21

High employment 
Wage inflation
Consumer confidence strong
Low interest rates
Positive output gaps

Question 22

Characteristics of a recession?

Answer 22

Higher unemployment
Contraction of GDP 
Low consumer sentiment
High interest rates
Lower output gaps

Question 23

Output gap? Yes

Answer 23

Difference between actual and potential GDP.

Check where real GDP is compared to where it should be according to LRAS