Macro

Question 1

Investment

Answer 1

Spending by firms on capital goods (e.g. machinery, buildings)

Question 2

Real GDP

Answer 2

The total value of goods and services produced within an economy, adjusted for inflation. 

Question 3

Multiplier effect:

Answer 3

An initial change in AD has a greater final impact on RGDP 

Question 4

Accelerator effect

Answer 4

The tendency of increases in RGDP to create larger increases in Investment (also works in reverse i.e. decreases/decreases) 

Question 5

Economic growth:

Answer 5

increases in RGDP from one period to the next 

Question 6

Recession

Answer 6

2 consecutive quarters of negative economic growth.

Question 7

Long run economic growth

Answer 7

Sustained increases or improvements in the factors of production available to an economy (land/labour/capital/enterprise) 

Question 8

Inflation

Answer 8

sustained increase in the general price level 

Question 9

Deflation

Answer 9

When the inflation rate for a period is negative (price level falls) 

Question 10

Disinflation:

Answer 10

When the price level increases but the inflation rate falls 

Question 11

Unemployment

Answer 11

The number of economically active workers not in work. 

Question 12

Balance of payments

Answer 12

The money flowing into an economy from overseas compared to money flowing out of an economy to overseas. (More money in = surplus, more money flowing out =deficit) 

Question 13

Inequality

Answer 13

where there is an unfair disparity in income and/or wealth between different groups within an economy. 

Question 14

Absolute poverty

Answer 14

where households cannot afford basic needs- technically living on less than $2.15 per day

Question 15

Relative poverty

Answer 15

Households whose incomes are less than 60% of the median income level

Question 16

Fiscal Policy

Answer 16

The deliberate use of government expenditure and taxation to influence AD within an economy. (Can be expansionary or deflationary) 

Question 17

Budget deficit

Answer 17

Where the government spends more in G than it raises in T. (Can be structural or cyclical) 

Question 18

Crowding Out

Answer 18

where increased government borrowing reduces the funds available for private sector borrowing 

Question 19

Monetary Policy

Answer 19

The deliberate manipulation of money supply by the central bank, aimed at influencing levels of AD. (Usually by changing base rate or by QE) 

Question 20

Supply-side policies

Answer 20

Government policies aimed at shifting AS curve to the right, particularly LRAS. 

Question 21

Exchange Rate

Answer 21

The value of one currency expressed in terms of another. (e.g. £1=US$1.30) Can be floating, fixed or semi-fixed. 

Question 22

Comparative advantage

Answer 22

Where one country can produce a good or service at a lower opportunity cost than another. 

Question 23

Globalisation

Answer 23

The growing interdependence of the world’s economies 

Question 24

Protectionism

Answer 24

Where countries implement barriers to trade between themselves and other countries. (Free trade is where barriers removed) 

Question 25

Financial Sector

Answer 25

That part of the economy responsible for providing financial services (e.g. banking, insurance, accounting) to other economic agents. 

Question 26

AD=

Answer 26

C+I+G+(X-M) 

Question 27

MPC=

Answer 27

The change in C/Change in Income 

Question 28

MPW=

Answer 28

MPS+MPT+MPM 

Question 29

Fiscal Multiplier=

Answer 29

1/MPC or else 1/MPW 

Question 30

Real GDP (formula)

Answer 30

(Nominal GDP / Price Index) x 100 

Question 31

GDP Per Capita=

Answer 31

Real GDP/Population of the country 

Question 32

HDI components:

Answer 32

i) Income (GNIPC) ii) Health (Average Life Expectancy at birth) iii) Education (Mean years of schooling) 

Question 33

Inflation Rate=

Answer 33

Change in Price Level Index/Last years PL index x 100 

Question 34

Unemployment Rate=

Answer 34

Numbers unemployed/Working Population x 100 

Question 35

Balance of Payments Current Account=

Answer 35

Trade in goods + Trade in Services + Primary Income+ Secondary income. (Primary income is income earned by the factors of production, secondary income is income not earned, often gifted) 

Question 36

Marginal Rate of Tax: =

Answer 36

(Change in Tax Paid / Change in Taxable Income) ×100 

Question 37

Average Rate of Tax =

Answer 37

(Total Tax Paid/ Total Taxable Income) × 100 

Question 38

Marshall Lerner Condition:

Answer 38

The sum of the PeD for imports and PeD for exports must be greater than one. Otherwise, a currency depreciation may not improve a Balance of Payments deficit. 

Question 39

terms of Trade:

Answer 39

Index of Export prices/Index of Import prices (x 100)