Little Parts

Question 1

Causes of a negative output gap

Answer 1

Increase in spare capacity
AD is insufficient

Question 2

Consequences of negative output gap

Answer 2

Unemployment
Deflation
Wage inflation

Question 3

Causes of positive output gap

Answer 3

Demand is high
Factories and workers operate far above capacity

Question 4

Consequences of positive output gap

Answer 4

Increase in imports due to supply shortages
Current account deficit
Inflation

Question 5

Terms of trade formula

Answer 5

Average export price / average import price x100

Question 6

Comparative advantage

Answer 6

A country specialises in producing goods where they have a lower opportunity cost than others

Question 7

Benefits of IT to developing economies

Answer 7

Economic growth
Reduced unemployment

Question 8

Negatives of IT to developing economies

Answer 8

Vunrelable to external shocks
Devalue currency due to high exports
Inflation

Question 9

Disadvantages of IT to developed countries

Answer 9

Currency fluctuations
External shock susceptibility

Question 10

Advantages of IT to developed countries

Answer 10

Economic growth
Availability of resources

Question 11

Short run economic growth diagram

Answer 11

Ad shifting outwards on SRAS

Question 12

Causes of unemployment

Answer 12

Cyclical- negative econ growth
Structural -mismatch in skills
Real wage- wages above equilibrium

Question 13

Characteristics of money

Answer 13

Portability - easy to carry
Divisability - divided into smaller values
Acceptability - accepted as a medium of exchange
Scarcity-
Durability- survive wear and tear
Stability in value

Question 14

Functions of money

Answer 14

Medium of exchange
Store of value
Unit of account
Standard of deferred payment

Question 15

Aggregate demand: expectations

Answer 15

Expectations can consist on:

Future income
Inflation rates
Economic growth

Question 16

CPI

Answer 16

Measures the change in price level of a basket of goods and services in an economy

Only measures specific area

Question 17

SRAS

Answer 17

Measures the change in cost of production e.g wages and oil prices

Cost of production increases SRAS inwards VICE VERSA

Question 18

Marginal tax rate

Answer 18

Change in tax/change in income

Question 19

Macroeconomic measures

Answer 19

Economic growth- GDP- long term impacts doesn’t take into account

Inflation- CPI and RPI- doesn’t measure other areas

Measuring unemployment- labour force survey - tech required

and claimant count - work in hidden economy

Question 20

Difference between RPI and CPI

Answer 20

Both measure the average price for a basket of goods
Whereas
CPI doesn’t measure council tax or mortgage interest payments

Question 21

Labour force survey

Answer 21

A survey which asks are you u employed and actively seeking work

Question 22

Claimant count

Answer 22

Number of people receiving unemployment benefits

Question 23

Uk economy key macro trends

Answer 23

Real gdp rising every year since 1955

Manufactured less goods and moved toward tertiary

Current account deficit since 1980s

Migration rising since 1991

Question 24

Gini coefficient

Answer 24

Measured from 0 - 1 perfectly equal to perfectly unequal

Measure distribution of income across a population

Question 25

Absolute and relative poverty

Answer 25

Absolute - lack of basic resources needed for survival Relative - less than a certain percentage of the median income

Question 26

Keynes view of aggregate supply

Answer 26

Argued economy can be below full employment level in even long run As in a recession there is excess saving leading to decline in ADV

Question 27

GNI and GDP difference

Answer 27

GNI measures income received domestically and through foreign income GDP measures income domestically

Question 28

Unemployment (E)

Answer 28

Pros Phillips curve Elastic supply Improved CA Cons Lower output Govt budget deficit Inequality

Question 29

Causes of econ growth

Answer 29

Lower interest rates Lower taxation Increased consumer confidence Weaker currency SR- AD LR- LRAS

Question 30

Deflation

Answer 30

Good - supply side deflation- lower prices for production Bad - demand side- lower econ growth or recession

Question 31

Policy conflicts

Answer 31

Higher growth- inflation , worsened CA Lower inflation positive CA position - lower growth higher unemployment Phillips curve

Question 32

Economic development

Answer 32

Improvement in economic welfare Higher incomes Improved literacy Reduced poverty Better healthcare Measured using HDI

Question 33

HDI

Answer 33

Life expectancy Mean years of schooling Income index Cons LR NOT SR depends on other factors

Question 34

Causes of poverty

Answer 34

Increased unemployment - cyclical Low econ growth Structural unemployment Deflation