LS11 - Economic Objects & The Business Cycle

Question 1

Macroeconomic Objectives

Answer 1

Sustainable Economic Growth.
Low & Stable Unemployment.
Price Stability (Low & Positive Inflation).
Long Term Balance Of Trade Stability

Question 2

Other Objectives

Answer 2

Balance Of Government Budget
Protection Of The Environment
Greater Income Equality

Question 3

Economic Growth (M&I)

Answer 3

Measurement - Rate of change in real GDP per annum.

Indicates - Economic well-being/welfare

Question 4

Unemployment (M&I)

Answer 4

Measurement - Labour Force Survey/Claimant Count

Indicates - Spare capacity and under-utilised resources.

Question 5

Inflation (M&I)

Answer 5

Measurement - CPI

Indicates - Capacity of economy to produce goods and services to meet the total demand.

Question 6

Balance Of Payments (M&I)

Answer 6

Measurement - Measuring the value of imports and exports

Indicates - A country’s international competitiveness.

Question 7

Public Debt

Answer 7

The total financial obligations incurred by all governmental bodies of a nation.

Question 8

The Business Cycle

Answer 8

1. Boom
2. Downturn
3. Recession
4. Recovery
5. Slowdown

Question 9

Boom

Answer 9

GDP growth is above trend, inflation rate rises, positive output gap, unemployment rate falls, and business/consumer confidence is high.

Question 10

Recovery

Answer 10

GDP growth turns from negative to positive but it’s still below trend.

Question 11

Recession

Answer 11

A fall in real GDP for more than 2 consecutive quarters. GDP falls, unemployment rises inflation rate falls, negative output gap, low business and consumer confidence.

Question 12

Slowdown

Answer 12

Everything becomes more steady, and things are back to normal

Question 13

Long Term Trend Rate Of Real GDP

Answer 13

The average sustainable rate of economic growth over a period of time, which is determined by growth in the productive capacity i.e. a benchmark for where the economy should be.