Macro 1 and 2

Question 1

What is inflation

Answer 1

The rate of the increase of prices over time which means over time peoples money becomes less valuable as they can buy less.

Question 2

How is inflation measured

Answer 2

By comparing the costs of good today to the costs of goods a year ago

Question 2

What is CPI inflation

Answer 2

Consumer price index measures a representative basket of goods and services purchased by households e.g. rent, food, clothing

Question 3

What is RPI inflation

Answer 3

Retails price index includes a broader set of expenses including housing costs, mortgage payments, council tax which CPI does not consider.

Question 4

What is the target inflation rate in the UK

Answer 4

2%

Question 5

What is the current UK inflation rate

Answer 5

6.3% for August 2023

Question 6

What is the effect of high inflation rate on incomes

Answer 6

High inflation can lead to the erosion of real wages as the cost of living increases meaning people have to spend more just to survive so they will have less/no disposable income

Question 7

What is macroeconomics

Answer 7

Macroeconomics is interested in many industries operating in or between national economies

Question 8

What are the three economic agents

Answer 8

Households, firms, governments

Question 9

What is an economic indicator

Answer 9

A statistic about economic activity

Question 10

What is economic growth

Answer 10

The expansion of the productive potential of the economy

Question 11

How is economic growth measured

Answer 11

By the GDP - The total production of goods and services in the economy

Question 12

What does GDP measure

Answer 12

The monetary value of goods and services produced in the economy over a period of time.

Question 13

What is the difference between norminal GDP and real GDP

Answer 13

Norminal GDP reflects the raw number in current British pound unadjusted for inflation. However, real GDP adjusts the value for inflation and deflation

Question 14

What is GDP per capita

Answer 14

Per Capita GDP represents the average GDP per person and is calculated by dividing the total by the population.

Question 15

What is the goverment aim for economic growth in 2022

Answer 15

2.5%

Question 16

What is unemployment

Answer 16

The state in which an individual actively seeks employment but is unsuccessful

Question 17

What is the difference between unemployment level and unemployment rate

Answer 17

Unemployment level is the number of people unemployed, however Unemployment rate is the percentage of people unemployed to the number of people employed

Question 18

How is unemployment level measured

Answer 18

Labour force survey

Question 19

How is unemployment rate measured

Answer 19

Number of people unemployed divided by the economically active population (number employed + number unemployed)

Question 20

What is the difference between claimant count and Labour force survey as measures of unemployment

Answer 20

Claimant count is a count of the number of people who claim unemployment related benefits. Whereas, labour force survey is the self-classification of being ‘out of work’ but ‘actively seeking employment’

Question 21

What are the four broad categories of unemployment

Answer 21

Seasonal, structural, cyclical, frictional

Question 22

What is seasonal unemployment

Answer 22

When workers are unemployed at different times of the year

Question 23

What is structural unemployment

Answer 23

Unemployment resulting from industrial reorganisation

Question 24

What is frictional unemployment

Answer 24

Short-term unemployment between jobs

Question 25

What is cyclical unemployment

Answer 25

Unemployment caused by fluctuations in the business cycle or economic cycle

Question 26

What does the current account on the balance of payments measure

Answer 26

A record of a countries international transactions with different countries

Question 27

What does the government aim to achieve with regards to trade

Answer 27

secure free trade agreements with other countries

Question 28

What is the current balance of payments on the current account in the UK

Answer 28

- £21.1 billion

Question 29

How is trade balance calculated

Answer 29

Value of a countries exports - Value of countries imports

Question 30

What is labour productivity

Answer 30

Value of goods obtained from each employee

Question 31

How is labour productivity measured

Answer 31

Output % number of employees

Question 32

How might a firm or economy go about improving productivity

Answer 32

Improvement in the factors of production

Question 33

What is the role of households

Answer 33

Supply factors of production and purchase goods and services

Question 34

What is the aim of households

Answer 34

Maximise Utility - satisfaction

Question 35

What motivates households

Answer 35

Price changes

Question 36

What is the role of firms

Answer 36

Convert factors of production into goods and services

Question 37

What is the aim of firms

Answer 37

Profit

Question 38

What motivates firms

Answer 38

Cost changes

Question 39

What is the role of governments

Answer 39

Generate revenue to provide an essential economic framework

Question 40

What is the aim of governments

Answer 40

Maximise social welfare

Question 41

What motivates the government

Answer 41

Votes

Question 42

What is national income

Answer 42

The measure of a countries final output of all goods and services produced in a year

Question 43

What is nominal income

Answer 43

Measures income at current prices with no adjustment for the effects of inflation

Question 44

What is real income

Answer 44

Measures income at constant prices and has been adjusted for the effects of inflation

Question 45

What type of income indicator is more regularly used to measure economic performance

Answer 45

Real income is used as it can calculate the rate of economic growth and assist in the measurement of cost of living standards in a country

Question 46

What are Leakages (W)

Answer 46

When income leaves the circular flow

Question 47

How can leakages occur

Answer 47

- When households saves (S) some of their income - When goods and services are imported (M) from another country - When the government imposes taxes (T) on firms and households

Question 48

What are injections (J)

Answer 48

When income enters the circular flow

Question 49

How can injections occur

Answer 49

- When the government spend (G) in an economy - When goods and services are exported (X) to another country - When firms invest (I) to expand their business

Question 50

When does economic growth occur

Answer 50

When injections (J) are greater than leakages (W): J>W

Question 51

When does economic decline occur

Answer 51

When injections are less than leakages J

Question 52

When does economic equilibrium occur

Answer 52

J=W

Question 53

What are the rewards for the factors of production

Answer 53

Land - raw materials Labour - Wages Capital - Interest Enterprise - Profit

Question 54

What is GDP

Answer 54

A measure of economic growth

Question 55

What is growth

Answer 55

Change in national outputs over time

Question 56

What is national output

Answer 56

All the goods and services produced in a country

Question 57

What does GDP equal

Answer 57

Consumer spending (C) + Investments (I) + Government spending (G) + ( Exports (X) - Imports (M))

Question 58

What takes up the greatest proportion of GDP

Answer 58

Consumer spending (C) - 60% of GDP