B1 Definitions

Question 1

Unemployment

Answer 1

the amount of people who have no sustainable income

Question 2

interest rates

Answer 2

the % of a loan that is charged as interest to the borrower

Question 3

Macroeconomic policy objectives

Answer 3

sustainable economic growth 
low and stable inflation 
full employment 
balance of trade 
economic stability

Question 4

production

Answer 4

any economic activity which lets to the flow of goods and services for which people are willing and able to pay

Question 5

GDP

Answer 5

gross domestic product
is a measure of the final output of goods and service produced by factors of production in an economy
total, in the UK, output/ finished goods

Question 6

GNP

Answer 6

gross national product

is GDP plus net income from investment abroad

Question 7

Nominal GDP

Answer 7

measures the total value of the final output of goods and services using current account prices
NOT ADJUSTED FOR INFLATION

Question 8

Real GDP

Answer 8

measures the total value of the final output of goods and services using constant prices. prices that exist during base year
ADJUSTED FOR INFLATION

Question 9

economic growth

How is it measured

Answer 9

is an increase in the actual and potential output of goods and services produced by an economy

measured by the percentage increase in real GDP pa.

Question 10

inflation

How is it measured

Answer 10

is an increase in the general price level that is sustained over a period of time

measured by the percentage increase in CPI

Question 11

RPI measure

Answer 11

is the weighted average of the prices in a representative basket of goods and services- 650 items. based on spending habits of households

Question 12

RPIX measure

Answer 12

is the RPI minus mortgage interest payments

Question 13

CPI measure

Answer 13

is the weighted average price of a basket of goods and services as bought by a representative household excluding household costs, council tax

Question 14

Unemployment

Answer 14

is those people who are officially registered as seeking employment and are ‘able, available and willing to work at the going rate in any job’

Question 15

Claimant count measure

Answer 15

is those who register as unemployed and are eligible to receive benefits

Question 16

LFS/ILO measure

Answer 16

a survey of those who are without a paid job, are available to start work within the next two weeks and have been looking for work at some time in the previous 4 weeks

Question 17

full employment

Answer 17

exists when there is a suitable job available for anyone who is seeking employment and is ‘able, available and willing to work at the going wage rate’

Question 18

International trade

Answer 18

buying and selling of goods and services across national frontiers, between residents of different countries

Question 19

Free trade

Answer 19

exists where international trade takes place unimpeded by any restrictions, i.e. market forces operate to achieve the most efficient allocation of resources

Question 20

The balance of payments

Answer 20

is a record of all financial transactions that take place between residents of the UK and residents of the rest of the world over a given time period

Question 21

The balance of payments on current account

Answer 21

records the financial transactions which relate to the trade in goods and in services, to investment income and to current transfers

measures the extent at which our economy is paying its way with the rest of the world

Question 22

the balance of trade

Answer 22

is exports of goods and services minus imports of goods and services

Question 23

A balance of payments deficit

Answer 23

occurs where on current account the credit items are less than the debit items.

i.e. exports of goods and services are less then imports of goods and services

Question 24

A balance of payments surplus

Answer 24

occurs where on current account the credit items are more than the debit items

i.e. exports of goods and services are more than imports of goods and services

Question 25

Economic stability

Answer 25

is a situation in which the rates of economic growth and of inflation are stable and predicable