Definitions

Question 1

Monetary policy

Answer 1

The actions taken by central banks to manage the money supply and interest rates

Question 2

Fiscal policy

Answer 2

The use of government spending and taxation to influence a country’s economy

Question 3

Monetary neutrality

Answer 3

An increase in the money supply will lead to an increase in the price level but not in real variables such as output, consumption and relative prices

Question 4

GDP

Answer 4

The market value of all final goods and services produced within an economy

Question 5

Exports

Answer 5

Spending on domestically produced goods and services by foreigners

Question 6

Imports

Answer 6

Spending on foreign goods and services by domestic residents

Question 7

Inflation

Answer 7

Rise in economy’s overall price level

Question 8

Inflation rate

Answer 8

Percentage change in GDP deflator over a given period

Question 9

Define nominal GDP

Answer 9

Production of goods and services valued at current prices

Question 10

Define real GDP

Answer 10

Production of goods and services valued at constant prices given a base year

Question 11

Productivity

Answer 11

The quantity of products and goods produced from one unit of labour input