government and macroeconomy

Question 1

Local government- a government organisation with the authority to administer a range of policies within an area of the country

Question 2

Natural monopoly- an industry where a single firm can produce at a lower average cost than two or more firms because of the existence of significant economies of scale

Question 3

Strategic industries- industries are important for the economic development and safety of the country

Question 4

National champions- industries that are

Answer 4

or have the potential to be

Question 5

Trade blocs- a regional group of countries that remove trade restrictions between them

Question 6

Free international trade- the exchange of goods and services between countries without restriction

Question 7

Economic growth- an increase in the output of an economy in the long run

Answer 7

an increase in the economy’s productive potential

Question 8

Actual economic growth- an increase in the output of an economy

Question 9

Potential economic growth- an increase in an economy’s productive capacity

Question 10

Aggregate demand - the total demand for a country’s product at a given price level. It consists of consumer expenditure

Answer 10

investment

Question 11

Aggregate supply- the total amount of goods and services that domestic firms are willing to supply at a given price level

Question 12

Full employment- the lowest level of unemployment possible

Question 13

Economically active- being a member of the labour force

Question 14

Unemployment rate- the percentage of the labour force who are willing and able to work but are without jobs

Question 15

Price stability- the price level in the economy not changing significantly over time

Question 16

Inflation rate- the percentage rise in the price level of goods and services over time

Question 17

Balance of payments- the record of a country’s economic transactions with other countries

Question 18

Budget- the relationship between government revenue and government spending

Question 19

Budget deficit- government spending is higher than government revenue

Question 20

Budget surplus- government revenue is higher than government spending

Question 21

National debt- the total amount the goverment has borrowed over time

Question 22

Multiplier effect- the final impact on aggregate demand being greater than initial change

Question 23

Direct taxes- taxes on income and wealth

Question 24

Indirect taxes- taxes on expenditure

Question 25

Progressive tax- one which takes a larger percentage of the income or wealth of the rich

Question 26

Proportional tax- one which takes the same percentage of income or wealth of all taxpayers

Question 27

Regressive tax- one which takes a larger percentage of the income or wealth of the poor

Question 28

Automatic stabilisers- forms of government expenditure and taxations that reduce fluctuations in economic activity

Answer 28

without any change in government policy

Question 29

Inflation- the rise in the price level of goods and services over time

Question 30

Informal economy- that part of the economy that is not regulated

Answer 30

protected or taxed by the government

Question 31

Flat taxes- taxes with a single rate

Question 32

Fiscal policy- decisions on government spending and taxation designed to influence aggregate demand

Question 33

Expansionary fiscal policy- rises in government expenditure and/or cuts in taxation designed to increase aggregate demand

Question 34

Contractionary fiscal policy - cuts in government expenditure and/or rises in taxation designed to reduce aggregate demand

Question 35

Monetary policy- decisions on the money supply

Answer 35

the rate of interest and the exchange rate taken to influence aggregate demand

Question 36

Foreign exchange rate- the price of one currency in terms of anther currency or currencies

Question 37

Expansionary monetary policy- increases in the money supply and/or the reduction in the rate of interest designed to increase aggregate demand

Question 38

Contractionary monetary policy- cuts in the money supply or growth of money supply and/or rises in the rate of interest designed to reduce aggregate demand

Question 39

Supply-side policy- measures designed to increase aggregate supply

Question 40

Deregulation- the removal of rules and regulations

Question 41

Gross domestic product (GDP)- the total output of a country

Question 42

Circular flow of income- the movement of expenditure

Answer 42

income and output around the economy

Question 43

Value added- the difference between the sales revenue received and the cost of raw materials used.

Question 44

Transfer payments- transfers of income from one group to another not in return for providing a good or service

Question 45

Nominal GDP- GDP at current market prices and so

Answer 45

not adjusted for inflation

Question 46

Real GDP- GDP at constant prices and so

Answer 46

adjusted for inflation

Question 47

Subsistence agriculture - the output agricultural goods for farmers' personal use

Question 48

Recession - a reduction in real GDP over a period of six months or more

Question 49

Sustainable economic growth- economic growth that does not endanger the country's ability to grow in the future

Question 50

Employment- being involved in a productive activity for which a payment is received

Question 51

Unemployment - being without a job while willing and able to work

Question 52

Claimant count- a measure of unemployment which counts as unemployed these in receipt of unemployment benefits

Question 53

Labour force survey (ILO) Measure - a measure of unemployment which counts as unemployed people who identify as such in a survey

Question 54

Frictional unemployment- temporary unemployment arising from workers being in between jobs

Question 55

Structural unemployment - unemployment caused by long-term changes in the pattern of demand and methods of production

Question 56

Cyclical unemployment - unemployment caused by a lack of aggregate demand

Question 57

Search unemployment - unemployment arising from workers who have lost their jobs

Answer 57

looking for a job they are willing to accept

Question 58

Casual unemployment- unemployment arising from workers regularly being between periods of employment

Question 59

Seasonal unemployment- unemployment caused by a fall in demand at particular times of the year

Question 60

Regional unemployment- unemployment caused by a decline in job opportunities in a particular area of the country

Question 61

Technological unemployment- unemployment caused by workers being replaced by capital equipment

Question 62

Deflation- a sustained fall in the prices of goods and services

Question 63

Disinflation- a fall in the rate of inflation

Question 64

Cost-push inflation- rises in the price level caused by higher costs of production

Question 65

Demand-pull inflation- rises in the price level caused by excess demand

Question 66

Wage-price spiral- wage rises leading to higher prices

Answer 66

in turn

Question 67

Monetary inflation- rises in the price level caused by an excessive growth of the money supply

Question 68

Hyperinflation- a very rapid and large rise in the price level

Question 69

Index-linking- changing payments in line with changes in the inflation rate

Question 70

Menu costs- costs involved in having to change prices as a result of inflation

Question 71

Shoe-leather costs- costs involved in moving money around to gain higher interest rates