External Economic Influences on Business Activity

Question 1

market failure

Answer 1

when market fails to achieve the most efficient allocation of resources, resulting in under or overproduction of certain goods or services

Question 2

external costs

Answer 2

the costs of an economic activity that are not paid for by the producer or consumer, but by the rest of society

Question 3

macroeconomic objectives

Answer 3

the goals a government is aiming to achieve for the whole economy

Question 4

economic growth

Answer 4

an increase in a country’s productive potential, measured by an increase in it’s real GDP

Question 5

Gross Domestic Product

Answer 5

the total value of goods and services produced in a country in one year

Question 6

real GDP

Answer 6

gross domestic product data adjusted for the effects of inflation

Question 7

inflation

Answer 7

an increase in the average price level of goods and services resulting in a fall in the value of money

Question 8

unemployment

Answer 8

when members of the working population are willing and able to work but are unable to find a job

Question 9

imports

Answer 9

goods and services purchased from other countries

Question 10

exports

Answer 10

goods and services sold to consumers and businesses in other countries

Question 11

exchange rate

Answer 11

the price of one currency in terms of another

Question 12

recession

Answer 12

a decline in real GDP of two or more quarters (at least six months)

Question 13

business investment

Answer 13

expenditure by businesses on capital equipment, new technology and research and development

Question 14

labour productivity

Answer 14

average output per employee in a given time period

Question 15

business cycle

Answer 15

the regular swings in output, measured by real GDP, that occur in most economies, varying from boom conditions to recession

Question 16

deflation

Answer 16

a fall in average price level of goods and services

Question 17

hyperinflation

Answer 17

very high and accelerating inflation, which quickly erodes the real value of the local currency

Question 18

working population

Answer 18

all those in the population of working age who are willing and able to work

Question 19

cyclical unemployment

Answer 19

unemployment caused by low demand for goods and services during a period of slow economic growth or recession

Question 20

structural unemployment

Answer 20

unemployment caused by the decline in important industries, leading to significant job losses in one sector of industry

Question 21

frictional unemployment

Answer 21

unemployment caused by workers losing or leaving jobs and taking a substantial period of time to find alternative employment

Question 22

monetary policy

Answer 22

decisions about the level of interest rates and the supply of money in the economy

Question 23

fiscal policy

Answer 23

decisions about government expenditure, tax rates and government borrowing

Question 24

budget deficit

Answer 24

the value of government spending exceeds revenue from taxation

Question 25

budget surplus

Answer 25

the value of taxation revenue exceeds the value of government spending

Question 26

supply - side policy

Answer 26

government measures that aim to improve the competitiveness of markets and the economy

Question 27

exchange rate depreciation

Answer 27

a fall in the external value of a currency as measured by its exchange rate against other currencies

Question 28

exchange rate appreciation

Answer 28

a rise in the external value of a currency as measured by its exchange rate against other currencies

Question 29

common currency

Answer 29

a currency that is used by more than one country

Question 30

eurozone

Answer 30

countries in the European Union that all use the euro currency