Chapter 6 - The measurement of macroeconomic performance

Question 1

What is MACROECONOMICS

Answer 1

The study of the whole economy at the aggregate level

Question 2

What is a POLICY OBJECTIVE

Answer 2

A target or goal that policy-makers aim to ‘hit’

Question 3

What is SHORT-RUN ECONOMIC GROWTH

Answer 3

Growth of real output resulting from using idle resources

Question 4

What is LONG-RUN ECONOMIC GROWTH

Answer 4

Increase in the economy’s potential level of output, outward shift in PPF

Question 5

What is GROSS DOMESTIC PRODUCT (GDP)

Answer 5

Sum of all goods and services produced in a period of time

Question 6

What is REAL GDP

Answer 6

Measure of goods and services produced in an economy adjusted for inflation

Question 7

What is NOMINAL GDP

Answer 7

GDP measured at current market prices

Question 8

What is a RECESSION

Answer 8

A fall in real GDP for 6 months or more

Question 9

What is FULL EMPLOYMENT

Answer 9

Beveridge definition- 3% of the labour force unemployed

Free market definition - where the number of workers who are wanted to employ equals the number wanting to work

Question 10

What is the CLAIMANT COUNT

Answer 10

Method of measuring unemployment based on how many people are claiming unemployment benefits

Question 11

What is the LABOUR FORCE SURVEY

Answer 11

Quarterly sample survey measuring labour status during a period of 1-4 weeks

Question 12

What is INFLATION

Answer 12

Continuing rise in the average price level

Question 13

What is DEFLATION

Answer 13

Continuing fall in the average price level

Question 14

What is DISINFLATION

Answer 14

When the rate of inflation is falling but still positive

Question 15

What is the PRICE INDEX

Answer 15

index number showing how price has changed in relation to the base year

Question 16

What is the CONSUMER PRICES INDEX (CPI)

Answer 16

official measure of inflation in the uk from a basket of 700 consumer goods and services

Question 17

What is the RETAIL PRICES INDEX (RPI)

Answer 17

older measure of inflation

Question 18

What is INDEXATION

Answer 18

automatic adjustment of items to changes in the price level using a price index

Question 19

What is the BALANCE OF PAYMENTS

Answer 19

record of all currency that flows in and out of a country in a particular time period

Question 20

What is the CURRENT ACCOUNT OF THE BALANCE OF PAYMENTS

Answer 20

currency flows in and out of a country in a time period in payment for imports and exports, together with income and transfer flows

Question 21

What are EXPORTS

Answer 21

goods and services sold to other countries

Question 22

What are IMPORTS

Answer 22

goods or services purchased from other countries

Question 23

What is the BALANCE OF TRADE

Answer 23

difference between imports and exports

Question 24

BALANCE OF TRADE DEFICIT

Answer 24

imports exceed exports

Question 25

BALANCE OF TRADE SURPLUS

Answer 25

exports exceed imports

Question 26

BALANCED BUDGET

Answer 26

government spending equals government revenue (mostly tax revenue)

Question 27

BUDGET DEFICIT

Answer 27

government spending is greater than government revenue

Question 28

POLICY CONFLICT

Answer 28

when two policy objectives cannot be achieved at the same time; the better one does, the worse the other does

Question 29

TRADE OFF BETWEEN POLICY OBJECTIVES

Answer 29

making the best out of the two extremes of policy conflict

Question 30

KEYNSIAN ECONOMISTS

Answer 30

followers of keynes, who believe that governments should control the economy through fiscal policy

Question 31

PRO-FREE MARKET ECONOMISTS

Answer 31

dislike government intervention and promote free markets

Question 32

MONETARY POLICY

Answer 32

the use of interest rates and other monetary instruments to achieve policy objectives

Question 33

FISCAL POLICY

Answer 33

the use of government spending and taxation to achieve government objectives

Question 34

PERFORMANCE INDICATOR

Answer 34

provides information for judging the success or failure of a particular type of government policy

Question 35

INDEX NUMBER

Answer 35

a number used to accurately compare two values. the base years value is set to 100 and the percentage increases are then added to that value