Macro 1.7

Question 1

What is national capital stock?

Answer 1

The stock of capital goods that has accumulated in the economy and is measured at a point in time

Question 2

What is wealth?

Answer 2

The stock of assets which have a value at a point in time

Question 3

What is national wealth?

Answer 3

The stock of all goods that exist at a point in time that have value in the economy

Question 4

What is national income?

Answer 4

The flow of new output produced by the economy in a particular period

Question 5

What is national output?

Answer 5

The same as national income

Question 6

What is national product?

Answer 6

Another name for national income and national output

Question 7

What is consumption?

Answer 7

Total planned spending by households on consumer goods and services produced within the economy

Question 8

What is a closed economy?

Answer 8

An economy with no international trade

Question 9

What are the determents of saving?

Answer 9

Income, Wealth, Consumer confidence, expected income, expected wealth, current debt

Question 10

What is saving?

Answer 10

Income which is not spent

Question 11

What is a withdrawal?

Answer 11

A leakage of spending power out of the circular flow of income into saving, taxation or imports

Question 12

What is investment?

Answer 12

Total planned spending by firms on capital goods produced within the economy

Question 13

What is an injection?

Answer 13

Spending entering the circular flow of income as a result of investment, government spending and exports

Question 14

What is an open economy?

Answer 14

An economy open to international trade

Question 15

What is gross national income (GNI)?

Answer 15

A measurement of a country’s income including all income earned by country’s residents and firms regardless of where it’s produced

Question 16

What is reflationary policies?

Answer 16

Policies that increase aggregate demand with the intention of increasing real output and employment

Question 17

What is equilibrium national income?

Answer 17

The level of real output at which aggregate demand equals aggregate supply.

Question 18

What is the calculation for aggregate demand (AD)?

Answer 18

AD = Consumption (C) + Investment (I) + Government spending (G) + (Exports (X) - Imports (M))
AD = C + I + G + X - M

Question 19

What is aggregate demand (AD)?

Answer 19

The total planned spending on real output produced within the economy

Question 20

What is aggregate supply (AS)?

Answer 20

The level of real national output that producers are prepared to supply at different average price levels

Question 21

What is a shrinking circular flow?

Answer 21

When withdrawal is greater than injection

Question 22

What is a growing circular flow?

Answer 22

When injection is greater than withdrawal

Question 23

What is the rate of interest?

Answer 23

The reward for lending savings to somebody else and the cost of borrowing

Question 24

What is the availability of credits?

Answer 24

The funds available for households and firms to borrow

Question 25

When does a credit crunch occur?

Answer 25

It occurs when there is a lack of funds available in the credit market, making it difficult for borrowers to obtain financing, and leads to a rise in the cost of borrowing

Question 26

What is the distribution of income?

Answer 26

The spread of different incomes among individuals and different income groups in the economy

Question 27

What is the wealth effect?

Answer 27

It examines how a change in personal wealth influences consumer spending and economic growth

Question 28

What is aggregate consumption?

Answer 28

The spending by all households in the economy on consumer goods and services

Question 29

What is the marginal propensity to consume (MPC)?

Answer 29

The change in consumer spending arising from a change in disposable income

Question 30

How do you calculate MPC?

Answer 30

Change in consumption / Change in income

Question 31

What is an accelerator?

Answer 31

A change in the levels of investment in new capital goods induced by a change in growth rate of national income or aggregate demand

Question 32

What is the marginal propensity to save (MPS)?

Answer 32

The amount of extra income that is saved

Question 33

What is the marginal propensity to import (MPM)?

Answer 33

The amount of extra income that is spent on import?

Question 34

What is the marginal propensity to tax (MPT)?

Answer 34

The amount of extra income that is spent in taxation.

Question 35

What is a multiplier?

Answer 35

The relationship between a change in aggregate demand and the resulting usually larger change in national income

Question 36

How do you calculate the multiplier?

Answer 36

change in national income / initial change in government spending

Question 37

What is short-run aggregate supply (SRAS)?

Answer 37

Aggregate supply when the level of capital is fixed

Question 38

What is long-run aggregate supply (LRAS)?

Answer 38

Aggregate supply when the economy is producing at its production potential

Question 39

What is investment in real life?

Answer 39

A situation when people invest in shares, bonds, properties or antiques

Question 40

What is a trade surplus?

Answer 40

When exports (X) > imports (M) leading to an increase in aggregate demand

Question 41

What is a trade deficit?

Answer 41

When imports (M) > exports (X) leading to a fall in aggregate demand

Question 42

What does productivity measure?

Answer 42

The efficiency of the production process

Question 43

How do you calculate output?

Answer 43

Factors input + Factor productivity