Economics test - Macroeconomics, economic growth, and inflation

Question 1

Macroeconomics definition

Answer 1

Studies the economy as a whole and look at economic indicators

Question 2

The circular flow model

Answer 2

Is a macroeconomic diagrammatic model that describes the flow of resources, goods and services, and income (real and money) between sectors of the economy such as the household, government, firm, overseas, financial sectors.

Question 3

Two flows

Answer 3

Real flow and money flow

Question 4

Real flow

Answer 4

is flow of good and services and resources

Question 5

Money Flow

Answer 5

is the flow of spending and income

Question 6

Factor Market

Answer 6

Firms exchange income in return factors of production to households

Question 7

Microeconomics definition

Answer 7

Refers to individual market

Question 8

Macroeconomic equilibrium

Answer 8

The sum of all the leakages (S+T+M) in the economy equals the sum of all injections (I+G+X)

Question 9

GDP def

Answer 9

Measures the total value of all final goods and services produced in an economy in a year

Question 10

Expenditure method of calculating GDP

Answer 10

AE = C + I + G + (X-M)

Question 11

Input?

Answer 11

Input refers to the resources or factors of production used in the production of a firm’s output

Question 12

Income method of calculating GDP

Answer 12

Calculates GDP based on the total earnings of individuals, business and government.

Question 13

Transfer Payments

Answer 13

Welfares and Grant

Question 14

Current Expenditure

Answer 14

Spending on public servants

Question 15

Capital Expenditure

Answer 15

Services like schools, hospitals, roads etc.

Question 16

Real GDP

Answer 16

GDP adjusted for inflation

Question 17

Economic growth. Indication?

Answer 17

Increase in the productive capacity of an economy over time. Indicated by increased standard of living.

Question 18

Economic growth equation

Answer 18

Change in GDP/Original GDP x 100

Question 19

Factors affecting consumption

Answer 19

Interest rates
Disposable Income
HH Expectations and Confidence
Stock of Wealth
Taxation

Question 20

Investment affecting factors

Answer 20

Interest rates
Business Confidence and Expectation
Past profits
Taxation

Question 21

Gvt expenditure factors

Answer 21

Govt policy

Question 22

Next exports factors

Answer 22

Economic Growth of Trading Partner

Price of commodities

Domestic economic growth

Gov’t policy

Question 23

Price Stability

Answer 23

Refers to low rates of inflation

Question 24

Full employment

Answer 24

Occurs when everyone who is willing and able to work can find paid employment.

Question 25

Standard of living

Answer 25

Material measure

Question 26

Welfare

Answer 26

Refers to wellbeing and happiness

Question 27

Aggregate Expenditure

Answer 27

The total planned spending on final goods and services in an economy.

Question 28

Non-durable goods

Answer 28

Those that are consumed quickly after purchase

Question 29

Durable Goods. Percentage or spending

Answer 29

Can be expected to last 3 or more years. 10%

Question 30

Largest component of spending

Answer 30

Services. 70%

Question 31

Nominal GDP

Answer 31

is the value of output expressed in the prices of the day

Question 32

Natural Resources are called?

Answer 32

Commodities

Question 33

Inflation definition

Answer 33

Inflation is the persistent and appreciable rise in the general price of G&S.

Question 34

CPI

Answer 34

Measures changes in the prices of a basket of goods and services bought by Australian Households

Question 35

CPI weightings

Answer 35

The goods that are the highest weighting have the highest proportional spending of disposable household income

Question 36

Headline inflation

Answer 36

Normal inflation, goods with volatile prices are accounted.

Question 37

Underlying inflation

Answer 37

Removes irregular or extreme price movements

Question 38

Two types of underlying measures

Answer 38

Trimmed mean and weighted median

Question 39

Demand pull inflation

Answer 39

Prices can increase when there are high levels of demand but not enough supply

Question 40

Cost-push inflation

Answer 40

Prices can increase when rising cost of production is pushed to consumers

Question 41

What is environmental sustainability?

Answer 41

Focuses on the conservation and protection of natural resources and ecosystems.

Question 42

Social sustainability

Answer 42

Involves a discussion of the distribution of the proceeds of growth between all individuals and communities

Question 43

Economic sustainability

Answer 43

Refers to developing a thriving economy that provides long-term and efficient use of resources.

Question 44

Aggregate production function model

Answer 44

Real GDP on y-axis, labor force on x axis

Question 45

Labour force

Answer 45

Sum of people in an economy that are able to work

Question 46

Why does the real GDP not increase exponentially according to the labor force in the APF

Answer 46

Law of diminishing returns

Question 47

What would happen to the APF model if capital or technology, or education, or quality increases

Answer 47

The curve would move upwards

Question 48

Sustainable economic growth

Answer 48

Is growth that can be sustained without major economic problems

Question 49

Unemployment target

Answer 49

5-6%

Question 50

inflation target

Answer 50

2-3%

Question 51

Economic growth

Answer 51

4-5%

Question 52

CPI formula

Answer 52

(CPI 2/CPI 1 - 1) x 100