Macro 1.8

Question 1

What are seasonal fluctuations?

Answer 1

Variations of economic activity resulting from seasonal changes in the economy

Question 2

What are cyclical fluctuations?

Answer 2

Upswing and downside in the economic activity taking place over 4-12 years. Its caused by demand-side and supply-side shocks

Question 3

What is a boom/expansion?

Answer 3

The level of real output becomes greater than the trend level of output.

Question 4

What is a slowdown?

Answer 4

Occurs when the rate of growth decelerates, but national output is still rising

Question 5

What is a recession?

Answer 5

Real national output falling for 6 months or more

Question 6

What is a recovery?

Answer 6

When real GDP begins to grow after the end of a recession

Question 7

What is the output gap?

Answer 7

The difference between the actual level of GDP and its estimated potential level

Question 8

What is long-term unemployment?

Answer 8

People unemployed for at least one year

Question 9

What is the claimant count?

Answer 9

The number of people officially claiming unemployment related benefits

Question 10

What is the labour force survey?

Answer 10

All those actively seeking and available for work, whether they’re claiming benefit or not

Question 11

What is the labour force?

Answer 11

The number of people of working age who are able, available and willing to work

Question 12

What is full employment?

Answer 12

When there are enough unfilled job vacancies for all the unemployed to take work

Question 13

What is a discouraged worker?

Answer 13

People out of work for a long time who may give up on job search and effectively leave the labour market

Question 14

Who are the economically inactive?

Answer 14

Those who are of working age but neither in work nor actively seeking paid work

Question 15

What is the employment rate?

Answer 15

The percentage of the population of working age in full-time or part-time paid work

Question 16

What is the unemployment rate?

Answer 16

The percentage of the economically active population who are unemployed

Question 17

What is demand-pull inflation?

Answer 17

A rising price level caused by an increase in aggregate demand, this is also known as demand inflation.
Note: This can be shown by an outwards shift of the AD curve (to the right)

Question 18

What is cost-push inflation?

Answer 18

A rising price level caused by an increase in the costs of production.
Note: This can be shown by an inwards shift of the SRAS curve (to the left)

Question 19

What is frictional unemployment?

Answer 19

Short term unemployment when a workers switching between jobs.

Question 20

What is geographical immobility of labour?

Answer 20

When workers are unwilling or unable to move from one area to another in search of work

Question 21

What is the occupational immobility of labour?

Answer 21

The inability to switch between different occupations due to lack of transferable skills

Question 22

What is structural unemployment?

Answer 22

When the demand for labour is less than the supply of labour in an individual labour market

Question 23

What is cyclical unemployment?

Answer 23

Unemployment linked to the economic cycle and occurs when there is a negative output gap.
Note: This is also known as Keynesian unemployment and demand-deficient unemployment.

Question 24

What is seasonal unemployment?

Answer 24

Workers getting laid off on a short-term basis at certain times of the year (e.g. farming, ski resorts, festivals)

Question 25

What is deindustrialisation?

Answer 25

The decline of manufacturing industries, together with coal mining

Question 26

What is demand-side unemployment?

Answer 26

Unemployment which relates to the impact of changes in aggregate demand on the economy.

Question 27

What is supply-side unemployment?

Answer 27

Unemployment which relates to changes in the potential output of the economy which is affected by the factors of production.

Question 28

What is the real wage?

Answer 28

The purchasing power of the nominal (or money) wage.
Note: real wages fall when inflation is higher than the rise in the nominal wage rate and real wage rises when the nominal wage rate increases faster than inflation.

Question 29

What is real-wage unemployment?

Answer 29

Unemployment caused by real wages being stuck above the equilibrium real wage.

Question 30

When does the equilibrium unemployment exist?

Answer 30

When the economy’s aggregate labour market is in equilibrium, meaning it is the same as the natural level of unemployment.

Question 31

What is the NRU (natural rate of unemployment)?

Answer 31

The rate of unemployment when the aggregate labour market is in equilibrium.

Question 32

What is voluntary unemployment?

Answer 32

When a worker chooses to remain unemployed and refuses job offers at the current market wage rates.

Question 33

What is involuntary unemployment?

Answer 33

When a worker is willing to work at current market wage rates but there are no jobs available.

Question 34

What is the causes of demand-pull inflation?

Answer 34

Lower income tax, Lower interest rates, a rise in consumption, an improved availability of credit/money supply, weak exchange rates, fast growth in other countries and a rise in consumer confidence.

Question 35

What is the causes of cost-push inflation?

Answer 35

Increased wages, Stronger trade union power, higher raw material costs, higher taxes, higher import prices and natural disasters.

Question 36

What is wage-cost inflation?

Answer 36

A rising price level caused by an increase in wages and salaries.

Question 37

What is import-cost inflation?

Answer 37

A rising price level caused by an increase in the cost of imported energy, food, raw materials and manufactured goods.

Question 38

What is an emerging-market country?

Answer 38

A country that is progressing towards becoming more economically advanced by means of rapid growth and industrialisation.

Question 39

When does a current account deficit occur?

Answer 39

When currency outflows in the current account exceed currency inflows.
Note: This can also be shortened to exports less than imports

Question 40

When does a current account surplus occur?

Answer 40

When currency inflow in the current account exceeds currency outflow.
Note: This can also be shortened to exports greater that imports

Question 41

What is the balance of trade in goods?

Answer 41

The part of the current account measuring payments for imports and exports of goods.

Question 42

What is the balance of trade in service?

Answer 42

The part of the current account and is the difference between the payments for the exports of the services and the payments for the imports of services.

Question 43

What is net investment income?

Answer 43

The difference between inward and outward flows of investment income.

Question 44

What are transfers?

Answer 44

Payments flowing between countries in forms such as foreign aid, grants, private transfers and gifts. They are payments that are made without anything of economic value being received in return.

Question 45

What is export-led growth?

Answer 45

In the short-run it’s economic growth resulting from an increase in exports as a component of aggregate demand.
In the long-run it’s economic growth and increased international competitiveness of exporting industries.

Question 46

What is reindustrialisation?

Answer 46

Growth of manufacturing industries to replace industries which have disappeared or declined significantly in size.
Note: It’s the opposite of deindustrialisation