MACRO Flashcards
(234 cards)
1
Q
WHAT IS THE CIRCULAR FLOW OF INCOME?
A
MONEY FLOW AROUND THE ECONOMY BETWEEN HOUSEHOLDS AND FIRMS.
2
Q
WHAT IS AN INJECTION?
A
MONEY FLOW INTO THE CIRCULAR FLOW OF INCOME.
3
Q
WHAT ARE EXAMPLES OF INJECTIONS?
A
GOVT SPENDING
INVESTMENT
EXPORTS
4
Q
WHAT IS FDI?
A
WHEN FIRMS INVEST IN OTHER COUNTRIES BY BUILDING FACTORIES OR TAKING OVER FOREIGN COMPANIES.
5
Q
WHAT IS A WITHDRAWAL?
A
MONEY FLOW OUT OF THE CIRCULAR FLOW OF INCOME.
6
Q
WHAT IS EXAMPLES OF WITHDRAWALS?
A
SAVING
TAXATION
IMPORTS
7
Q
WHAT IS THE MULTIPLIER?
A
THE KEYNESIAN IDEA THAT AN INJECTION INTO THE CIRCULAR FLOW OF INCOME WILL CREATE A GREATER INCREASE IN DEMAND THAN THE ORIGINAL INJECTION.
8
Q
WHAT DOES THE SIZE OF THE MULTIPLIER DEPEND ON?
A
HOW MUCH PEOPLE SAVE
HOW MUCH PEOPLE SPEND
TAX RATES
WHETHER PEOPLE BUY IMPORTS OR DOMESTICALLY PRODUCED GOODS
WHETHER FOREIGN CURRENCY INFLOW IS INVESTED DOMESTICALLY OR ABROAD
9
Q
WHAT IS THE MARGINAL PROPENSITY TO CONSUME?
(SAME FOR ALL MPS)
A
PERCENTAGE OF EACH ADDITIONAL POUND EARNED THAT WILL BE SPENT ON DOMESTIC GOODS AND SERVICES.
10
Q
WHAT ARE THE FORMULAS FOR THE MULTIPLIER?
A
1 ÷ 1-MPC
1 ÷ MPW
11
Q
WHAT IS THE FORMULA FOR MPW?
A
MPS + MPT + MPM
12
Q
WHAT ARE THE ROLE OF FINANCIAL MARKETS?
A
- FACILITATE SAVING
- LEND TO BUSINESSES AND HOUSEHOLDS
- FACILITATE EXCHANGE OF GOODS AND SERVICES
- PROVIDE FORWARD MARKET FOR CURRENCIES AND COMMODITIES
- PROVIDE A MARKET FOR EQUITIES
13
Q
WHAT IS THE EXPLANATION FOR FACILITATING SAVING?
A
HOUSEHOLDS NEED ABILITY TO SET ASIDE MONEY FOR FUTURE PURCHASES AND FINANCIAL MARKETS ENABLE THIS.
14
Q
WHAT IS THE EXPLANATION FOR LENDING TO BUSINESSES AND HOUSEHOLDS?
A
BUSINESSES NEED TO BORROW FOR INVESTMENT AND HOUSEHOLDS NEED TO BORROW TO FUND SPENDING, PARTICULARLY ON EXPENSIVE ITEMS E.G HOUSES.
15
Q
WHAT IS THE EXPLANATION FOR FACILITATING THE EXCHANGE OF GOODS AND SERVICES?
A
IN DEVELOPED COUNTRIES, GOODS AND SERVICES ARE OFTEN PAID FOR USING BANK TRANSFERS, CONTACTLESS PAYMENTS OR DEBIT/CREDIT CARDS.
16
Q
WHAT IS THE EXPLANATION FOR PROVIDING FORWARD MARKETS FOR CURRENCIES AND COMMODITIES?
A
WHEN ORGANISATIONS WANT TO REDUCE THE UNCERTAINTY CREATED BY FUTURE CHANGE IN PRICES, THEY WILL AGREE TO BUY/SELL A GOOD IN ADVANCE AT A SET PRICE -REDUCES RISK OF VOLATILITY FOR COMMODITIES E.G OIL.
17
Q
WHAT IS THE EXPLANATION FOR PROVIDING A MARKET FOR EQUITIES?
A
COMPANIES NEED TO RAISE MONEY FOR INVESTMENT BY SELLING SHARES.
18
Q
WHAT IS INCOME?
A
THE AMOUNT OF EARNING DURING A PERIOD.
IS A FLOW CONCEPT
REWARD FOR A SERVICE PRODUCED BY A FACTOR OF PRODUCTION.
19
Q
WHAT IS AN EXAMPLE OF INCOME?
A
WAGES
20
Q
WHAT IS WEALTH?
A
A STOCK OF ASSETS
21
Q
WHAT IS AN EXAMPLE OF WEALTH?
A
OWNING HOMES
22
Q
WHAT IS THE LINK BETWEEN INCOME AND WEALTH?
A
INCOME LEADS TO WEALTH AS PEOPLE USE EARNINGS TO GENERATE WEALTH.
WEALTH LEADS TO HIGHER INCOMES AS PEOPLE CAN EARN INCOME FROM ASSETS.
23
Q
WHAT IS THE WEALTH EFFECT?
A
IDEA THAT AN INCREASE IN WEALTH ACCOMPANIES AN INCREASE IN SPENDING.
24
Q
WHAT IS AD?
A
THE TOTAL DEMAND OF NEW GOODS AND SERVICES IN AN ECONOMY OVER A PERIOD OF TIME.
25
WHAT IS THE FORMULA FOR AD?
CONSUMPTION + INVESTMENT + GOVT SPENDING + EXPORTS - IMPORTS
26
WHAT IS NATIONAL INCOME?
TOTAL SPENDING ON GOODS AND SERVICES.
27
WHAT DOES SHORT RUN MEAN IN ECONOMICS?
AT LEAST 1 FOP IS FIXED
28
WHAT DOES LONG RUN MEAN IN ECONOMICS?
ALL FOP CAN CHANGE.
29
WHAT IS AD?
THE TOTAL DEMAND OF NEW GOODS AND SERVICES IN AN ECONOMY OVER A PERIOD OF TIME.
30
WHAT IS THE FORMULA FOR AD?
CONSUMPTION + INVESTMENT + GOVT SPENDING + EXPORTS - IMPORTS
31
WHAT IS CONSUMPTION?
SPENDING BY HOUSEHOLDS ON DOMESTICALLY PRODUCED GOODS AND SERVICES.
32
WHAT PERCENTAGE OF AD IS CONSUMPTION?
60%
33
WHAT IS INVESTMENT?
SPENDING BY FIRMS AND GOVT ON CAPITAL GOODS.
34
WHAT PERCENTAGE OF AD DOES INVESTMENT TAKE?
15-20%
35
WHAT PERCENTAGE OF AD IS GOVT SPENDING?
18-20%
36
WHAT PERCENTAGE OF AD IS THE TRADE BALANCE?
5%
37
WHAT CAUSES A SHIFT IN THE AD CURVE?
CONSUMPTION
INVESTMENT
GOVT EXPENDITURE
TRADE BALANCE
38
WHY IS THE AD CURVE THAT SHAPE?
1. IF PRICE LEVEL IS HIGH, CONSUMPTION FALLS AS PURCHASING POWER WILL NOT GO AS FAR WITH HIGHER PRICES.
2. EXPORTS WILL FALL AND IMPORTS WILL RISE AS UK GOODS ARE EXPENSIVE RELATIVE TO OTHER COUNTRIES
39
WHY IS CLASSICAL LRAS THAT SHAPE?
CLASSICAL ECONOMISTS E.G HAYEK BELIEVE THAT IN THE LONG RUN, THE ECONOMY WILL ALWAYS SELF CORRECT SO ECONOMY WILL ALWAYS BE OPERATING AT FULL CAPACITY AS IT IS UTILISING ALL FACTORS OF PRODUCTION.
40
WHY IS SRAS THAT SHAPE?
IN THE SHORT RUN, INCREASING PRODUCTION IS LIKELY TO INCREASE COSTS AND HENCE PRICES.
41
WHY IS KEYNESIAN LRAS THAT SHAPE?
KEYNESIANS BELIEVE THAT FIRMS WON'T ALWAYS PRODUCE AT MAX OUTPUT SO SPARE CAPACITY IS CREATED. AS DEMAND INCREASES, OUTPUT INCREASES WITHOUT SIGNIFICANT IMPACTS ON INFLATION UP UNTIL THE POINT WHERE ALL RESOURCES ARE USED UP. AT THIS POINT, KEYNESIAN LRAS BECOMES PERFECTLY INELASTIC.
42
WHAT CAUSES SHIFTS IN SRAS?
CHANGE IN PRODUCTION COSTS FOR FIRMS.
43
WHAT ARE EXAMPLES OF FACTORS THAT SHIFT SRAS?
1. CHANGES IN RAW MATERIAL PRICES
2. CHANGES IN INDIRECT TAXES
3. CHANGES IN LABOUR COSTS
4. CHANGES IN SUBSIDIES
5. CHANGES IN REGULATIONS
44
WHAT CAUSES SHIFTS IN LRAS?
CHANGES IN QUALITY OR QUANTITY OF THE FACTORS OF PRODUCTION
45
WHAT IS A BOTTLENECK?
WHEN THERE IS LIMITED SUPPLY OF 1 FACTOR OF PRODUCTION.
46
WHAT ARE EXAMPLES OF BOTTLENECKS?
1. LACK OF RAW MATERIALS
2. LACK OF SKILLED LABOUR (E.G NOT ENOUGH NURSES POST BREXIT)
3. INSUFFICIENT CAPITAL
47
WHAT IS MEANT BY SPARE CAPACITY?
UNDER UTILISATION OF FOP SO THERE'S ROOM TO INCREASE OUTPUT AS THE ECONOMY ISN'T OPERATING AT FULL EMPLOYMENT.
CAN DRAW A PPF TO SHOW SPARE CAPACITY.
48
WHAT IS A FISCAL POLICY?
GOVT SPENDING AND TAXATION THAT IS USUALLY SET OUT IN THE BUDGET.
49
WHAT IS CAPITAL EXPENDITURE?
REFERS TO LONG TERM INVESTMENT EXPENDITURE.
50
WHAT IS CURRENT EXPENDITURE?
RELATES TO THE GOVT'S DAY TO DAY EXPENDITURE ON GOODS AND SERVICES.
51
WHAT IS A TRANSFER PAYMENT?
PAYMENTS MADE BY THE STATE TO INDIVIDUALS WITHOUT THERE BEING AN EXCHANGE OF ANY GOODS OR SERVICES.
52
WHY DOES PUBLIC EXPENDITURE CHANGE OVER TIME?
1. LEVEL OF TREND GDP
2. SIZE AND AGE DISTRIBUTION OF POPULATION
3. ECONOMIC CYCLE
4. DEBT INTEREST
53
WHAT ARE THE 2 TYPES OF GOVT SPENDING?
1. AUTOMATIC STABILISERS
2. DISCRETIONARY
54
WHAT IS A DIRECT TAX?
TAX LEVIED ON AN INDIVIDAL OR ORGANISATION.
55
WHAT ARE EXAMPLES OF DIRECT TAXES?
1. INCOME TAX
2. CORPORATION TAX
3. INHERITANCE TAX
56
WHAT IS AN INDIRECT TAX?
TAX LEVIED ON PURCHASING GOODS OR SERVICES.
57
WHAT IS AN EXAMPLE OF INDIRECT TAXES?
1. VAT
2. EXCISE DUTY
58
WHAT IS A PROGRESSIVE TAX?
MARGINAL RATE OF TAX INCREASES AS INCOME RISES CAUSING A FALL IN INEQUALITY.
59
WHAT ARE EXAMPLES OF A PROGRESSIVE TAX?
1. INCOME TAX
2. CORPORATION TAX
3. NATIONAL INSURANCE
60
WHAT IS A REGRESSIVE TAX?
MARGINAL RATE OF TAX FALLS AS INCOME RISES CAUSING A RISE IN INEQUALITY.
61
WHAT ARE EXAMPLES OF REGRESSIVE TAXES?
1. VAT
2. COUNCIL TAX
3. BUSINESS RATES
62
WHAT IS PROPORTIONAL TAXATION?
A CONSTANT MARGINAL RATE OF TAXATION.
63
WHAT IS THE MARGINAL RATE OF TAXATION?
THE TAX RATE AN INDIVIDUAL WOULD PAY ON ONE ADDITIONAL POUND OF INCOME.
64
WHAT IS THE LAFFER CURVE?
SOMETIMES INCREASING TAX MEANS THAT YOU GET LOWER TAX REV AS THERE IS LESS INCENTIVE TO WORK AND PEOPLE MAY EMIGRATE.
65
WHAT IS A BUDGET DEFICIT?
WHEN GOVT SPENDING EXCEEDS TAX REV.
66
WHAT IS NATIONAL DEBT?
ACCUMULATION OF BUDGET DEFICITS.
67
WHO DOES THE GOVT BORROW MONEY FROM?
THE GOVT BORROWS MONEY FROM FINANCIAL MARKETS - ANYONE CAN BUY GOVT BONDS.
68
WHAT ARE STRUCTURAL DEFICITS?
DEFICITS THAT EXIST EVEN IN A BOOM SUGGESTING THE GOVT IS SPENDING TOO MUCH.
69
WHAT ARE CYCLICAL DEFICITS?
CAUSED BY THE ECONOMIC CYCLE (E.G AUTOMATIC STABILISERS AND EXPANSIONARY POLICY) IN A RECESSION SO CAN BE PAID FOR IN A BOOM WHEN SPENDING IS LOWER AND TAX RECEIPTS ARE HIGHER.
70
WHY DO FISCAL DEFICITS AND NATIONAL DEBT MATTER?
1. INTER-GENERATIONAL OPPORTUNITY COSTS
2. CROWDING OUT
3. INFLATION
4. FUTURE BORROWING (FCREDIT RATING)
5. ATTRACTING FDI
71
WHAT IS MEANT BY INTER-GENERATIONAL OPPORTUNITY COSTS?
BUDGET DEFICITS CREATED BY THE CURRENT GENERATION WILL HAVE TO BE PAID OFF BY BUDGET SURPLUSES FROM FUTURE GENERATIONS.
72
HOW DO FISCAL DEFICITS AND NATIONAL DEBT CAUSE INFLATION?
BUDGET DEFICIT INCREASES AD AS INJECTIONS ARE GREATER THAN WITHDRAWALS WHICH CAN CAUSE INFLATION AT FULL CAPACITY.
73
HOW DO FISCAL DEFICITS AND NATIONAL DEBT AFFECT FUTURE BORROWING?
A LARGE NATIONAL DEBT MAY MAKE IT HARDER TO BORROW ADDITIONAL FUNDS AND MIGHT LEAD TO DOWNGRADING OF A COUNTRY'S CREDIT RATING CAUSING THE IR ON BORROWING TO INCREASE.
74
HOW DO FISCAL DEFICITS AND NATIONAL DEBT PREVENT FDI?
MNC'S ARE ATTRACTED BY STABILITY AND HIGH NATIONAL DEBTS ARE MORE LIKELY TO LEAD TO FINANCIAL PROBLEMS.
75
WHAT ARE EXPANSIONARY FISCAL POLICIES?
1. INCREASING GOVT SPENDING
2. CUTTING TAXES
76
WHAT ARE DEFLATIONARY FISCAL POLICIES?
1. CUTTING GOVT SPENDING
2. INCREASING TAXES
77
WHAT ARE THE ADVANTAGES OF EXPANSIONARY FISCAL POLICIES?
1. INCREASED ECONOMIC GROWTH
2. DECREASED UNEMPLOYMENT
3. POSITIVE MULTIPLIER EFFECT
4. POSITIVE ACCELERATOR EFFECT
5. CROWDING IN
78
WHAT ARE THE DISADVANTAGES OF EXPANSIONARY FISCAL POLICIES?
1. INCREASED INFLATION
2. WORSENING OF CURRENT ACCOUNT
3.. INCREASED NATIONAL DEBT
4. OPPORTUNITY COST
5. RICARDIAN EQUIVALENCE
79
WHAT IS THE ACCELERATOR EFFECT?
CHANGE IN INCOME LEADS TO GREATER CHANGE IN CAPITAL EXPENDITURE.
80
WHY MIGHT A COUNTRY NOT ACTIVELY TRY TO REDUCE ITS NATIONAL DEBT?
1. SELF-DEFEATING AUSTERITY
2. CAPITAL EXPENDITURE
3. CYCLICAL DEFICIT
4. SIZE OF DEBT AS % OF GDP
5. HIGH ECONOMIC GROWTH
81
WHAT R DISCRETIONARY FISCAL POLICIES?
INTENTIONAL GOVT POLICIES TO INCREASE/DECREASE SPENDING OR TAXATION
82
WHAT R AUTOMATIC STABILISERS?
AUTOMATIC FISCAL CHANGES AS THE ECONOMY MOVES THROUGH THE ECONOMIC CYCLE E.G INCREASE IN BENEFITS DURING RECESSIONS.
83
WHAT IS RICARDIAN EQUIVALENCE?
RATIONAL CONSUMERS ANTICIPATE THE FUTURE SO IF TAX CUTS R FINANCED BY GOVT BORROWING, THEY ANTICIPATE FUTURE TAX RISES SO THEIR CONSUMPTION DOESN'T CHANGE. INCENTIVE TO SAVE TO OFFSET FUTURE TAX RISES.
84
WHY MAY A GOVT ABANDON A BUDGET SURPLUS TARGET?
FALLS IN GROWTH MEANING THE ECONOMY IS IN NEED OF GOVT SUPPORT FOR LONGER TO ENSURE STABLE GROWTH.
85
WHAT IS A MONETARY POLICY?
A DEMAND SIDE POLICY THAT USES IR AND THE MONEY SUPPLY IN ORDER TO MANAGE AD.
86
WHAT IS THE GOVT TARGET FOR MONETARY POLICIES?
TO KEEP CPI INFLATION AT AROUND 2%
87
WHAT IS A CENTRAL BANK?
INSTITUTION WHICH IS USUALLY IN CHARGE OF ISSUING NOTES AND COINS WHICH WILL HAVE A LARGE IMPACT ON MONEY SUPPLY.
88
WHAT R THE RILES OF A CENTRAL BANK?
1. IMPLEMENTATION OF MONETARY POLICY
2. BANKER TO THE GOVT
3. BANKER TO RETAIL BANKS
4. LENDER OF LAST RESORT
5. REGULATION OF THE BANKING INDUSTRY
89
WHAT IS THE EXPLANATION FOR IMPLEMENTATION OF MONETARY POLICIES?
USE IR, QUANTITATIVE EASING AND FORWARD GUIDANCE TO ENSURE TARGET OF 2% CPI INFLATION RATE IS KEPT.
90
WHAT IS THE EXPLANATION FOR BANKER TO THE GOVT?
CENTRAL BAMKS WILL LOOK AFTER THE GOVT DEPOSITS, PAY ITS BILLS AND MAKE SHORT TERM LOANS TO IT.
91
WHAT IS THE EXPLANATION FOR BANKER TO RETAIL BANKS?
BY LAW, RETAIL BANKS MUST HAVE AN ACCOUNT WITH THE BoE AND THEY CAN DEPOSIT FUNDS WITH THE CENTRAL BANK TO EARN INTEREST AND CAN ALSO BORROW FROM THE CENTRAL BANK
92
WHAT IS THE EXPLANATION FOR LENDER OF LAST RESORT?
THEY CAN MAKE EMERGENCY LOANS TO STOP RETAIL BANKS GOING BANKRUPT.
93
WHAT IS THE EXPLANATION FOR REGULATION OF THE BANKING INDUSTRY?
CENTRAL BANK IS RESPONSIBLE FOR BOTH MONETARY(PRICE) AND FINANCIAL (LIQUIDITY) STABILITY.
94
WHICH GROUPS
WOULD LIKE TO SEE IR RAISED?
1. PENSIONERS
2. FOREIGN SAVERS
3. IMPORTERS( AS £ STRENGTHENS)
95
WHICH GROUPS WOULD LIKE TO SEE IR LOWERED?
1. TRADE UNIONS
2. HOMEOWNERS WITH MORTGAGES
3. SMALL BUSINESSES LOOKING TO EXPAND
4. EXPORTERS( AS £ WEAKENS)
96
WHAT IS THE TRANSMISSION MECHANISM?
PROCESS BY WHICH A CHANGE IN THE BoE's BASE RATE AFFECTS INFLATION.
97
WHAT IS THE PROCESS OF THE TRANSMISSION MECHANISM?
1. MARKET RATES, ASSET PRICES, EXPECTATIONS, EXCHANGE RATE
2. DOMESTIC AND NET EXTERNAL DEMAND
3. TOTAL DEMAND
4. IMPORT PRICES
5. INFLATION
98
WHAT IS THE EXPLANATION FOR MARKET RATES?
IF THE OFFICIAL BoE RATE INCREASES, HIGH STREET BANKS SHOULD FOLLOW SUIT AND INCREASE MARKET IR AS IT'S MORE EXPENSIVE FOR THEM TO BORROW.
IF IR INCREASES, PEOPLE R MORE LIKELY TO SAVE AND BUSINESSES R LESS LIKELY TO BORROW SO C+I FALLS
99
WHAT IS THE EXPLANATION FOR ASSET PRICES?
IF IR INCREASES, THIS MAKES SAVING MORE ATTRACTIVE SO INVESTORS R LIKELY TO INCREASE SAVING RATHER THAN BUY ASSETS E.G PROPERTY.
IF DEMAND FOR ASSETS FALL, THEN ASSET PRICES DECREASE WHICH CREATES A NEGATIVE WEALTH EFFECT SO C+I FALLS.
100
WHAT IS THE EXPLANATION FOR EXPECTATIONS?
IF IR INCREASES, IT IS A SIGN THAT THE BoE IS FEELING THAT THE ECONOMY MAY GO OVER THE INFLATION TARGET LEADING TO HIGHER PRICES.
THIS SHOULD MAKE BUSINESS AND CONSUMER CONFIDENCE FALL SO C+I FALLS.
101
WHAT IS THE EXPLANATION FOR EXCHANGE RATES?
IF IR INCREASES(HOT MONEY), INVESTORS R ENCOURAGED TO PUT THEIR MONEY IN UK BANKS WHICH INREASES IMPORTS AND REDUCES EXPORTS.
102
WHAT IS DOMESTIC DEMAND?
CONSUMPTION+ INVESTMENT+ GOVT SPENDING
103
WHAT HAPPENS TO DOMESTIC DEMAND AS A RESULT OF THE TRANSMISSION MECHANISM?
DOMESTIC DEMAND FALLS AS C+I FALLS.
104
WHAT IS NET EXTERNAL DEMAND?
EXPORTS - IMPORTS
105
WHAT HAPPENS TO NET EXTERNAL DEMAND AS A RESULT OF THE TRANSMISSION MECHANISM?
HOT MONEY CAUSES NET EXTERNAL DEMAND TO FALL AS IMPORTS INCREASE AND EXPORTS FALL.
106
WHAT HAPPENS TO IMPORT PRICES AS A RESULT OF THE TRANSMISSION MECHANISM?
ER INCREASES SO IMPORT PRICES R CHEAPER MEANING LOWER COSTS SHIFTING SRAS OUTWARDS CAUSING LOWER PRICES MEANING REDUCED INFLATION.
107
WHAT R EXPANSIONARY MONETARY POLICIES?
CUTTING IR AND INCREASING THE MONEY SUPPLY.
108
WHAT R CONTRACTIONARY MONETARY POLICIES?
RAISING IR ASND CUTTING MONEY SUPPLY.
109
WHAT R THE ADVANTAGES OF LOW IR?
1. ECONOMIC GROWTH IF THERE IS SPARE CAPACITY
2. REDUCED UNEMPLOYMENT
3. REDUCED INEQUALITY
4. INCREASED WEALTH EFFECT ( HIGHER ASSET PRICES)
5. MULTIPLIER EFFECT
110
WHAT R THE DISADVANTAGES OF LOW IR?
INCREASED INFLATION AT FULL EMPLOYMENT
2. INCREASE IN NEGATIVE EXTERNALITIES
3. TIME LAG OF 18-24 MONTHS
4. BLUNT POLICY(AFFECTS WHOLE ECONOMY)
5. LIQUIDITY TRAP( IF THERE IS DEFLATION, IR CAN'T NORMALLY BE CUT BELOW 0%)
111
IN WHICH COUNTRIES R THERE NEGATIVE INTEREST RATES?
SWEDEN AND DENMARK HAVE BASE RATES OF -0.25% FOR DEPOSITS.
112
WHAT DO NEGATIVE INTEREST RATES MEAN?
HIGH STREET BANKS R OVERCHARGED FOR PUTTING THEIR MONEY IN THE CENTRAL BANK AND THIS IS MEANT TO DISCOURAGE SAVINGS BY HIGH STREET BANKS AND PROMOTE LENDING.
113
WHAT IS QUANTITATIVE EASING?
AIMS TO ENCOURAGE HIGH STREET BANKS TO LEND TO CONSUMERS AND BUSINESSES RATHER THAN BUYING LOTS OF GOVT BONDS - DOES THIS BY ATTEMPTING TO MAKE GOVT BONDS LESS VALUABLE.
114
WHAT IS THE 1ST STAFE OF QUANTITATIVE EASING?
BoE CREDITS ITSELF WITH MONEY WHICH THEY USE TO BUY GOVT BONDS. INCREASED DEMAND FOR BONDS INREASES THEIR PRICE MEANING YIELD OF BONDS FALL SO IMVESTMENT IN OTHER ASSETS IS MORE EFFECTIVE. HIGH STREET BANKS THEREFORE SELLS BONDS TO BoE SO THEY HAVE MORE MONEY.
115
WHAT IS THE 2ND STAGE OF QUANTITATIVE EASING?
HIGH STREET BANKS HAVE MORE MONEY FROM SELLING GOVT BONDS TO THE BoE SO SHOULD LEND MORE. BOND PRICES INCREASE SO WEALTH EFFECT OCCURS FOR BOND OWNERS. AS BOND PRICES INCREASE, YIELD OF BONDS FALLS SO BANKS R INCENTIVISED TO INVEST THEIR MONEY INTO OTHER METHODS I.E MORTGAGES.
116
WHAT IS THE 3RD STAGE OF QUANTITITATIVE EASING?
INCREASED BORROWING AND LENDING INCREASES C+I CAUSING AD TO RISE AND HENCE INFLAITON AND GROWTH.
117
WHAT R THE ADVANTAGES OF QUANTITATIVE EASING?
1. CAN BE USEDE WHEN IR DOESN'T WORK DUE TO A LIQUIDITY TRAP
2. CAN HELP AVOID THE DANGERS OF DEFLATION
3. CAN BOOST EXPORTS AS IT LEADS TO A DEPRECIATION OF THE ER.
118
WHAT R THE DISADVANTAGES OF QE?
1. LOWER LIVING STANDARDS FOR PENSIONERS WHO ARE RELIANT ON YIELDS FROM INVESTMENTS TO LIVE
2. REGRESSIVE
3. DIFFICULT TO REVERSE AS THE CENTRAL BANK HAVE TO FIND LOTS OF BUYERS FOR THESE BONDS.
119
HOW MAY FISCAL AND SUPPLY SIDE POLICIES COINCIDE?
AN EXPANSIONARY FISCAL POLICY COULD IMPROVE THE SUPPLY SIDE OF THE ECONOMY AS SOME FISCAL POLICIES WILL INCREASE AS BUT ALSO INCREASE LRAS.
120
WHAT R EXAMPLES OF FISCAL AND SUPPLY SIDE POLICIES THAT COINCIDE?
EDUCATION SPENDING
INFASTUCTURE SPENDING
CUTTING CORPORATION TAX
121
HOW MANY FISCAL AND MONETARY POLICIES CONFLICT?
AN EXPANSIONARY FISCAL POLICY WITH THE GOVT RUNNING BUDGET DEFICIT MAY CAUSE A HIGHER IR AS A BUDGET DEFICIT WILL INCREASE AF AS IT IS AN INJECTION INTO THE CIRCULAR FLOW OF INFOME SO INFLATION RISES SO THE BOE HAVE TO RAISE IR. GOVT NEEDS TO FUND THE BUDGET DEFICIT BY BORROWING SO DEMAND FOR MONEY IN ECONOMY INCREASES.
122
HOW MAY MONETARY AND SUPPLY SIDE POLICIES CONFLICT?
HIGHER IR COULD REDUCE AS LEVELS AS IT IS MORE EXPENSIVE FOR FIRMS TO BORROWING, REDUCING INVESTMENT, LEADING TO LOEE QUALITY CAPITAL AND LABOUR AND HENCE A REDUCTION IN AS.
123
HOW MAY MONETARY AND SUPPLY SIDE POLICIES CONFLICT?
HIGHER IR COULD REDUCE AS LEVELS AS IT IS MORE EXPENSIVE FOR FIRMS TO BORROWING, REDUCING INVESTMENT, LEADING TO LOEE QUALITY CAPITAL AND LABOUR AND HENCE A REDUCTION IN AS.
124
125
WHAT IS ECONOMIC GROWTH?
INCREASE IN THE GDP OVER TIME.
126
WHAT IS ACTUAL ECONOMIC GROWTH?
MEASURED BY THE ANNUAL % IN A COUNTRY'S REAL NATIONAL OUTPUT.
AFFECTED BY AD.
127
WHAT IS POTENTIAL ECONOMIC GROWTH?
MEASURED BY THE ESTIMATED ANNUAL CHANGE IN A COUNTRY'S POTENTIAL LEVEL OF NATIONAL OUTPUT.
AFFECTED BY LRAS.
128
WHAT IS TOTAL/NOMINAL GDP?
TOTAL MARKET VALUE OF ALL GOODS AND SERVICES PRODUCED IN THE COUNTRY IN A GIVEN YEAR.
129
WHAT IS GDP PER CAPITA?
AVERAGE LEVEL OF GDP PER PERSON.
130
WHAT IS REAL GDP?
GDP ADJUSTED FOR INFLATION.
131
WHAT DOES GNI STAND FOR?
GROSS NATIONAL INCOME.
132
WHAT IS GNI?
FINAL VALUE OF INCOME CREATED BY A COUNTRY'S FACTORS OF PRODUCTION.
133
HOW CAN GNI BE MEASURED?
GDP+NET INCOME RECEIVED FROM ABROAD E.G INTEREST/PROFITS/ REMITTANCESES
134
WHAT DOES VALUE MEAN?
REPRESENTS THE AMOUNT OF MONEY SPENT
135
WHAT DOES VOLUME MEAN?
REPRESENTS THE TOTAL QUANTITY PRODUCED.
136
WHAT IS THE GOVERNMENT TARGET FOR ECONOMIC GROWTH?
SUSTAINABLE ECONOMIC GROWTH WHICH IS ESTIMATED TO BE AROUND 2-3% PER YR.
137
WHY IS 10% ECONOMIC GROWTH NOT DESIRABLE?
COULD LEAD TO ENVIRONMENTAL PROBLEMS, FUTURE BOTTLENECKS IN SUPPLY, FUTURE RECESSIONS DUE TO OVERCONFIDENCE AND POTENTIAL INFLATION.
138
WHAT IS AN OUTPUT GAP?
DIFFERENCE BETWEEN THE ACTUAL LEVEL OF GDP AND THE PRODUCTIVE POTENTIAL OF THE ECONOMY.
139
WHAT IS A POSITIVE OUTPUT GAP?
EXISTS WHEN ACTUAL GDP IS ABOVE THE PRODUCTIVE POTENTIAL OF THE ECONOMY (GENERALLY WHEN IN A BOOM)
140
WHAT IS A NEGATIVE OUTPUT GAP?
EXISTS WHEN ACTUAL GDP IS BELOW THE PRODUCTIVE POTENTIAL OF THE ECONOMY (GENERALLY IN A RECESSION)
141
WHAT R THE IMPLICATIONS OF A POSITIVE OUTPUT GAP?
1. HIGH INFLATION
2. BALANCE OF PAYMENTS DEFICIT
142
WHAT R THE IMPLICATIONS OF A NEGATIVE OUTPUT GAP?
1. LOW GDP
2. HIGH UNEMPLOYMENT
143
WHAT IS PRODUCTIVITY?
MEASURE OF THE EFFICIENT USE OF THE FACTORS OF PRODUCTION.
144
WHAT CAUSES THE PRODUCTIVITY GAP?
DIFFERENCES IN THE QUALITY AND QUANTITY OF FACTORS OF PRODUCTION.
145
WHAT R THE BENEFITS OF ECONOMIC GROWTH?
1. INCREASED TAX REV
2. INCREASED CONFIDENCE
3. REDUCED UNEMPLOYMENT
4. GREATER STANDARD OF LIVING
5. INCREASED FDI
146
WHAT R THE COSTS OF ECONOMIC GROWTH?
1. INCREASED EXTERNALITIES
2. INCREASED INFLATION
3. INCREASED BALANCE OF PAYMENTS DEFICIT
4. INCREADED INEQUALITY
5. GREATER VOLATILITY IN ECONOMIC CYCLE E.G DEEPER RECESSIONS
147
WHAT DOES PPP STAND FOR?
PURCHASING POWER PARITY
148
WHAT IS PPP?
MEASURES THE PURCHASING POWER OF DIFFERENT CURRENCIES IN THEIR DOMESTIC COUNTRIES FOR A GIVEN BASKET OF GOODS.
149
WHAT IS THE BENEFIT OF USING PPP?
TAKES INTO ACCOUNT THE RELATIVE COST OF LIVING RATHER THAN JUST GDP.
150
WHAT R THE PROBLEMS OF USING GDP AS A STANDARD OF LIVING INDICATOR?
1. NO QUALITY OF LIFE INCLUDED E.G POLLUTION
2. HIDDEN ECONOMY
3. INFORMAL ECONOMY NOT INCLUDED
4. NO ACCOUNT FOR INCOME DISTRIBUTION
5. DOESN'T TAKE INTO ACCOUNT COST OF LIVING
151
WHAT IS A HIDDEN ECONOMY?
CASH IN HAND WORK.
ESTIMATED TO ACCOUNT FOR 7% OF THE UK ECONOMY.
152
WHAT IS AN INFORMAL ECONOMY?
EXAMPLES R VOLUNTEERING, GROWING YOUR OWN FOOD AND HOUSEWORK.
153
HOW CAN HAPPINESS BE MEASURED?
1. HAPPINESS INDEX
2. WORLD HAPPINESS REPORT
154
WHAT R THE ADVANTAGES OF MEASURING HAPPINESS?
1. FUNDAMENTAL GOAL FOR MANY PEOPLE
2. CONSIDERS MORE THAN JUST INCOME
155
WHAT R THE DISADVANTAGES OF MEASURING HAPPINESS?
1. DIFFICULT TO VALUE/ JUDGE HAPPINESS
2. SUBJECTIVE MEASURE SO HARD TO COMPARE SCORES
3. THINGS MAY MAKE PEOPLE HAPPY BUT BE UNETHICAL E.G SADISTS.
156
WHAT IS THE EASTERLIN PARADOX?
AT LOW LEVELS OF GDP, INCREASES IN INCOME INCREASE HAPPINESS AS PEOPLE CAN MEET THEIR BASIC NEEDS. HOWEVER, BEYOND THIS, HAPPINESS STAGNATES OR EVEN DECLINES AS BEING ABLE TO AFFORD MORE GOODS AND SERVICES DOESN'T INCREASE HAPPINESS.
157
WHY ARE PPPs USED?
IMPROVE ACCURACY WHEN COMPARING DATA BETWEEN COUNTRIES.
COMPARES COST OF LIVING AND BUYING POWER.
158
WHAT IS A RECESSION?
2 OR MROE CONSECUTIVE QUARTERS OF NEGATIVE ECONOMIC GROWTH.
159
WHAT R CHARACTERISTICS OF A RECESSION?
1. FALLING INFLATION
2. RISING UNEMPLOYMENT
3. INCREASED BUDGET DEFICIT
160
WHAT IS INFLATION?
SUSTAINED RISE IN THE AVERAGE PRICE LEVEL OF GOODS AND SERVICES WHICH REDUCES THE PURCHASING POWER OF MONEY.
161
WHAT R THE WAYS OF MEASURING INFLATION?
1. CPI
2. RPI
162
WHEN IS CPI USED?
1. VALUING STATE PENSIONS
2. AS THE INFLATION TARGET
163
WHEN IS RPI USED?
1. TO SET IR ON STUDENT LOANS
2. FOR INDEX-LINKED GOVT BONDS
164
WHAT R THE DIFFERENCES BETWEEN CPI AND RPI?
1. CPI INCLUDES ALL HOUSEHOLDS BUT RPI EXCLUDES TOP 4% OF EARNERS AND PENSIONERS
2. RPI INCLUDES HOUSING COSTS BUT CPI DOESN'T
165
WHAT R THE PROBLEMS OF USING CPI AS A MEASURE OF INFLATION?
1. DOESN'T INCLUDE HOUSING COSTS
2. NOT REPRESENTATIVE OF THOSE WITH ATYPICAL SPENDING E.G NON CAR OWNERS
3. SAMPLING PROBLEMS (ONLY 60% RESPOND TO SURVEY)
4. TASTES AND FASHIONS CHANGE MORE QUIKCLY THAN ONCE A YR FOR THE BASKET
166
WHAT IS THE CURRENT TARGET LEVEL FOR INFLATION?
0.02
167
WHAT IS A NOMINAL VALUE?
MONETARY VALUE NOT ADJUSTED FOR INFLATION.
168
WHAT IS A REAL VALUE?
MONETARY VALUE TAKING INTO ACCOINT INFLATION I.E A MEASURE OF PURCHASING POWER.
169
WHAT IS DEMAND PULL INFLATION?
INFLATION INITIATED BY MORE AD IN THE ECONOMY THAN CAN BE SUPPLIED AT EXISTING PRICES.
170
WHAT R EXAMPLES OF COST PUSH INFLATION?
1. HIGHER MIN WAGE
2. HIGHER INDIRECT TAXES
3. INCREASED REGULATION
4. LOWER SUPPLY OF COMMODITIES E.G DROUGHTS
171
WHAT R EXAMPLES OF DEMAND PULL INFLATION?
1. WEALTH EFFECTS
2. LOW TAXES
3. LOW IR
4. HIGHER CONFIDENCE
5. POSITIVE TRADE BALANCE
172
WHAT IS COST PUSH INFLATION?
INFLATION INITIATED BY INCREASES IN COP TO PRODUCERS WHICH R PASSED TO CONSUMERS.
173
WHAT IS A WAGE PRICE SPIRAL?
HOW INFLATION CAN BECOME PERMANENT. PROCESS BY WHICH INCREASES IN WAGES LEADS TO INCREASES IN PRICES WHICH IN TURN LEADS TO INCREASES IN WAGES AND SO ON. CAN CREATE A POSITIVE OUTPUT GAP.
174
WHAT R THE COSTS TO FIRMS OF INFLATION?
1. REDUCES CERTAINTY AND REDUCES MPI
2. FORCED TO PAY HIGHER WAGES TO MAINTAIN WORKER'S REAL STANDARD OF LIVING
3. MENU COSTS
4. FALL IN EXPORTS
5. HIGHER IR RAISING COSTS OF BORROWING
175
WHAT R MENU COSTS?
FIRMS HAVE TO SPEND ON CHANGING THEIR PROMOTIONAL MATERIAL E.G ADVERTS AND SPECIAL PRICING AS INFLATION WILL INCREASE THEIR COSTS AND LEADS TO THEM HAVING TO CHANGE PRICES.
176
WHAT R THE COSTS OF INFLATION TO CONSUMERS?
1. ERODES PURCHASING POWER
2. SHOE LEATHER COSTS
177
WHAT R SHOE LEVEL COSTS?
CONSUMERS WILL WASTE TIME LOOKING FOR A BARGAIN AS THEY MISTAKENLY BELIEVE THAT INDIVIDUAL FIRMS ARE PRICE GAUGING WHEN INSTEAD THE GENERAL PRICE LEVEL IS RISING.
178
WHAT R THE COSTS OF INFLATION FOR WORKERS?
1. REDUNDANCY DUE TO HIGHER WAGE COSTS AND REDUCED CERTAINTY
2. UNEMPLOYMENT DUE TO DECLINES IN DEMAND FOR UK GOODS.
179
WHAT R THE COSTS OF INFLATION FOR THE GOVT?
1. BALANCE OF PAYMENTS DEFICIT
2. UNEMPLOYMENT
3. NEGATIVE IMPACT ON FISCAL DEFICIT
180
R THERE ANY POSITIVE IMPACTS OF INFLATION?
1. ERODES REAL VALUE OF DEBT
181
WHAT IS DISINFLATION?
TERM USED TO DESCRIBE A DECLINEIN THE RATE OF INFLATION E.G FROM 5% TO 2%
182
WHAT IS DEFLATION?
WHEN OVERALL PRICE LEVEL FALLS TO NEGATIVES E.G FROM 5% TO -3%
183
WHAT PROBLEMS DOES DEFLATION CREATE?
1. DEFLATIONARY SPIRAL
2. INCREASES IN THE REAL VALUE OF DEBT
3. NEGATIVE WEALTH EFFECTS
4. LIQUIDITY TRAPS
184
HOW CAN DEFLATION BE REDUCED?
1. LOWERING IR
2. QE
3. LOWER TAXES
4. INCREASING GOVT SPENDING
TO INCREASE CONFIDENCE
185
WHAT IS STAGFLATION?
OCCURS WHEN THERE IS RISING INFLATION ACCOMPANIED BY FALLING ECONOMIC GROWTH AND RISING UNEMPLOYMENT.
186
WHAT IS HYPERINFLATION?
PERIOD OF HIGH INFLATION.
187
WHAT FIGURE REPRESENTS HYPERINFLATION?
RATES HIGHER THAN 50% PER MONTH
188
WHAT IS A DEFLATIONARY PRICE SPIRAL?
AS PRICES FALL, CONSUMERS AND FIRMS DELAY EXPENDITURE CAUSING AD TO FALL. THIS CAUSES PRICE LEVEL TO FALL MEANING CONSUMERS AND FIRMS CONTINUE TO DELAY EXPENDITURE.
189
WHAT IS AN INDEX NUMBER?
AN ECONOMIC DATA FIGURE THAT SHOWS THE PERCENTAGE CHANGE IN PRICE/QUANTITY FROM THE BASE YR.
190
WHAT IS MEANT BY PRICE LEVEL?
THE AVERAGE OF THE CURRENT PRICES OF GOODS AND SERVICES IN THE ECONOMY.
191
WHAT IS THE 1ST STEP OF MEASURING INFLATION?
THE ONS FIND OUT WHAT BRITISH HOUSEHOLDS BUY THROUGH EXPENDITURE SURVEYS. THEY THEN CREATE AN AVERAGR BASKET OF GOODS OF ABOUT 700 GOODS TO TRACK THE PRICES OF.
192
WHAT IS THE 2ND STEP OF MEASURING INFLATION?
THE GOVT WILL RECORD THE PRICES THESE GOODS R SOLD AT IN DIFFERENT SHOPS IN A PRICE SURVEY. THE AVERAGE PRICES OF THE 700 ITEMS R THEN CALCULATED.
193
WHAT IS THE 3RD STEP OF MEASURING INFLATION?
THE AVERAGE INFLATION RATE IS THEN CALCULATED. EACH INDIVIDUAL PRICE CHANGE IS WEIGHTED ACCORDING TO HOW IMPORTANT IT IS IN THE TYPICAL HOUSEHOLD'S BUDGET.
194
WHAT IS THE 4TH STEP OF MEASURING INFLATION?
AN INDEX NUMBER IS THEN GIVEN TO THE LEVEL OF PRICES AND COMPARED TO THE BASE YR.
195
WHAT IS THE INDEX NUMBER FOR THE BASE YR.
100
196
WHAT IS UNEMPLOYMENT?
THOSE WHO R WILLING AND ABLE TO WORK AT THE GOING WAGE RATE BUT DON'T HAVE A JOB.
197
WHAT R THE 2 WAYS OF MEASURING UNEMPLOYMENT?
1. CLAIMANT COUNT
2. LFS/ILO UNEMPLOYMENT
198
WHY IS THERE A DIFFERENCE BETWEEN LFS AND THE CLAIMANT COUNT?
1. SOME PEOPLE WHO WANT TO WORK R INELIGIBLE FOR BENEFITS DUE TO HIGH SAVINGS OR A PARTNER WITH HIGH INCOME
2. SOME PEOPLE DON'T REGISTER FOR BENEFITS DUE TO STIGMA OF RELYING ON THE STATE FOR HANDOUTS
3. LFS SURVEY COUNTS 16-17 YR OLDS BUT CLAIMANT COUNT STARTS AT 18
199
R THERE ANY GROUPS NOT INCLUDED WITHIN EITHER OF THESE STATISTICS?
1. THOSE WHO R ECONOMICALLY INACTIVE E.G DISABLED/CHILDREN/RETIRED
2. THOSE WHO R VOLUNTARILY UNEMPLOYED
3. WORKERS NOT INCLUDED IN OFFICIAL STATS E..G ILLEGAL IMIGRANTS, HOMELESS, BLACK MARKET WORKERS ETC
200
WHAT DOES IT MEAN TO BE VOLUNTARILY UNEMPLOYED?
THOSE WHO R NOT WILLING TO WORK AT THE GOING WAGE RATE.
201
WHY DOES THE UK LABOUR MARKET TYPICALLY HAVE THOUSANDS OF JOB VACANCIES BUT ALSO UNEMPLOYMENT?
SKILLS MISMATCH
202
WHAT IS UNDEREMPLOYMENT?
WHEN PEOPLE R WILLING TO WORK MORE.
203
WHY IS THE GOVT PARTICULARLY CONCERNED ABOUT YOUTH AND LONG TERM UNEMPLOYMENT?
1. MAY BECOME DISCOURAGED WORKERS AND NEVER FIND WORK BECOMING A LONG TERM COST
2. IF UNI AND SCHOOL GRADUATES CAN'T FIND WORK, THE MONEY SPENT TRAINING THEM WAS WASTED AND THEIR SKILLS WILL DEPRECIATE
204
WHY HAVE WAGES IN THE UK STAYED LOW EVEN THOUGH UNEMPLOYMENT IS FALLING?
WORKERS ACCEPT LOWER REAL WAGES TO AVOID UNEMPLOYMENT.
205
WHAT IS THE GOVT TARGET FOR UNEMPLOYMENT?
FULL EMPLOYMENT
206
WHAT CAN FULL EMPLOYMENT BE DEFINED AS?
1. EVERY1 HAS A JOB
2. LABOUR MARKET IN EQUILIBIUM
3. NUMBER OF VACANCIES MATCH THE NUMBER OF PEOPLE WITHOUT A JOB
207
WHAT IS REAL WAGE UNEMPLOYMENT?
WHEN WAGES R DELIBERATELY MAINTAINED ABOVE EQUILIBRIUM LEVEL CAUSING AN EXCESS SUPPLY OF LABOUR.
208
WHAT R EXAMPLES OF REAL WAGE UNEMPLOYMENT?
1. INCREASES IN MIN WAGE
2. TRADE UNION POWER
209
WHAT IS CYCLICAL UNEMPLOYMENT?
WHEN A DOWNTURN IN THE ECONOMIC CYCLE LOWERS AD REDUCING DERIVED DEMAND FOR WORKERS.
210
WHAT IS STRUCTURAL UNEMPLOYMENT?
OCCURS WHEN THERE'S A CHANGE IN THE STRUCTURE OF THE ECONOMY
211
WHAT IS AN EXAMPLE OF STRUCTURAL UNEMPLOYMENT?
UK USED TO DO A LOT OF MANUFACTURING BUT IS NOW FOCUSED ON SERVICES SO PEOPLE WHO USED TO WORK IN FACTORIES HAVE NOW LOST THEIR JOBS - CAUSES OCCUPATIONAL IMMOBILITY
212
WHAT IS SEASONAL UNEMPLOYMENT?
WHEN WORKERS R ONLY REQUIRED ON A SEASONAL BASIS.
213
WHAT R EXAMPLES OF SEASONAL UNEMPLOYMENT?
1. ICE CREAM VAN WORKERS
2. WORKERS IN TOURIST INDUSTRY
3. CONSTRUCTION WORKERS
214
WHAT IS FRICTIONAL UNEMPLOYMENT?
TRANSITIONAL UNEMPLOYMENT DUE TO PEOPLE MOVING BETWEEN JOBS.
215
HOW DOES IMMIGRATION AFFECT THE UK ECONOMY?
1. INCREASE LRAS AS THERE IS A GREATER QUANTITY OF LABOUR
2. INCEASE AD THROUGH WAGE SPENDING LEADING TO A POSITIVE MULTIPLIER EFFECT AND JOB CREATION
216
WHAT R THE ADVANTAGES OF IMMIGRATION?
1. CAN MEET AREAS WHERE THERE R SHORTAGES E.G TEACHERS/NURSES
2. HELP SOLVE THE PROBLEM OF AN AGIING POPULATION
3. LEADS TO LOWER COSTS FOR FIRMS KEEPING INFLATION LOW
217
WHAT R THE DISADVANTAGES OF IMMIGRATION?
INCREASES COMPETITION LOWERING WAGES
218
WHAT R THE COSTS OF UNEMPLOYMENT FOR FIRMS?
1. LOWER DEMAND
2. NEGATIVE MULTIPLIER EFFECT
219
WHAT R THE COSTS OF UNEMPLOYMENT TO CONSUMERS?
1. CONFIDENCE LOSS
2. LESS DISPOSABLE INCOME
220
WHAT R THE COSTS OF UNEMPLOYMENT TO WORKERS?
1. LOWER INCOME
2. DE-SKILLING
(HYSTERISIS)
3. HOMELESSNESS
4. MENTAL HEALTH ISSUES
221
WHAT R THE COSTS OF UNEMPLOYMENT TO THE GOVT?
1. LESS TAX REV
2. HIGHER WELFARE SPENDING
3. DEPRECIATION OF HUMAN CAPITAL( ESPECIALLY GRADUATE UNEMPLOYMENT)
4. INCREASED BUDGET DEFICIT
222
WHAT R THE COSTS OF UNEMPLOYMENT TO SOCIETY?
1. DEPRIVATION
2. CRIME RISE
3. INEQUALITY RISE
223
WHAT DOES THE PHILLIPS CURVE ARTICULATE?
THERE IS AN INVERSE RELATIONSHIP BETWEEN INFLATION AND UNEMPLOYMENT.
224
WHY MAY UNDEREMPLOYMENT EXIST?
1. ZERO HOUR CONTRACTS
2. LACK OF DEMAND IN THE MARKET.
225
WHAT IS THE CLAIMANT COUNT?
NUMBER OF PEOPLE CLAIMING UNEMPLOYMENT BENEFITS/JOBSEEKERS ALLOWANCE.
226
HOW IS ILO UNEMPLOYMENT MEASURED?
USING THE LABOUR FORCE SURVEY.
227
HOW DOES THE LFS DEFINE UNEMPLOYMENT?
SOME1 WHO IS WITHOUT A JOB BUT WANTS A JOB AND HAS BEEN ACTIVELY LOOKING IN THE LAST 4 WEEKS.
228
WHAT ARE SUPPLY SIDE POLICIES?
POLICIES IMPLEMENTED BY THE GOVT DESIGNED TO INCREASE THE PRODUCTIVE POTENTIAL OF THE ECONOMY.
229
WHAT ARE MARKET BASED SUPPLY SIDE POLICIES?
POLICIES IN WHICH THE GOVT WITHDRAWS ITSELF FROM RESOURCE ALLOCATION, ENLARGING THE ROLE FOR THE PRIVATE SECTOR AND FREE MARKET FORCES.
230
WHAT ARE EXAMPLES OF MARKET BASED POLICIES?
1. REDUCING THE TAX BURDEN
2. LABOUR MARKET REFORMS
3. PRIVATISATION
4. DEREGULATION
231
WHAT ARE INTERVENTIONIST SUPPLY SIDE POLICIES?
POLICIES WHERE THE GOVT INCREASES ITS ROLE IN RESOURCE ALLOCATION.
232
WHAT ARE EXAMPLES OF INTERVENTIONIST SUPPLY SIDE POLICIES?
1. EDUCATION AND TRAINING
2. INFASTRUCTURE INVESTMENT
3. COMPETITION POLICIES
233
WHAT ARE THE ADVANTAGES OF SUPPLY SIDE POLICIES?
1. INCREASED ECONOMIC GROWTH
2. INCREASED PRODUCTIVITY
3. REDUCED UNEMPLOYMENT
4. REDUCED INFLATION
5. CROWDING IN
234
WHAT ARE THE DISADVANTAGES OF SUPPLY SIDE POLICIES?
1. TIME LAG
2. OPPORTUNITY COST OF GOVT SPENDING
3. BUDGET DEFICIT INCREASES LEADING TO GREATER NATIONAL DEBT
