Macro 3/6 1st year

Question 1

define economic cycle

Answer 1

short run fluctuations of national output (real gdp) around its long term trend

Question 2

what is an output gap

Answer 2

when actual output is greater/smaller than the productive potential of an economy

Question 3

define economic growth

Answer 3

an increase in the capacity of an economy to produce goods and services

Question 4

define inflation

Answer 4

a persistent rise in the price level of an economy over a period of time

Question 5

what is the preferred index for measuring inflation

Answer 5

CPI - average price of al goods and services in an economy

Question 6

define deflation

Answer 6

when the price level I an economy falls over time

Question 7

define hyperinflation

Answer 7

large and rapid increases in the price level

Question 8

define recession

Answer 8

2 consecutive quarters of negative gdp growth

Question 9

define growth in capacity

Answer 9

increase in potential output of the economy- occurs when there is an increase in quality or quantity of resources

Question 10

what does a PPF show

Answer 10

maximum possible output combinations of 2 goods or services an economy can achieve when all resources are fully and efficiently employed

Question 11

what has to change in factors of production in order to bring about long run economic growth?

Answer 11

increases in quality or quantity

Question 12

what has to change in factors of production in order to bring about short run economic growth?

Answer 12

increase in capacity of economy

Question 13

why is it better for governments to invest in infrastructure

Answer 13

its hard to increase productivity so investing in infrastructure allows for private firms to run businesses as they are very efficient

Question 14

define invention

Answer 14

completely new technology that improves how things are done

Question 15

define innovation

Answer 15

taking something and making it better

Question 16

define labour force

Answer 16

the number of individuals of working age and fit for work

Question 17

when does natural unemployment occur

Answer 17

when there is market equilibrium between AS (how many hour workers are willing to put in and and AD (the amount of hours firms require) all at a given wage rate

Question 18

when does real wage unemployment occur

Answer 18

market disequilibrium when the wage rates should actually be higher than what is being payed.

Question 19

what does it mean to be economically active

Answer 19

1. people in employment
2. those who are unemployed but willing and able to work

Question 20

what does it mean to be economically inactive

Answer 20

choosing not to work or not able to

Question 21

what are the two types of unemployment

Answer 21

1. without a job, have been actively seeking work and are able to start in the next 2 weeks
2. out of work, have found a job and are waiting to start in the next 2 weeks

Question 22

what is the labour force survey

Answer 22

surveying a pool of candidates in the labour market, and tells us how below max capacity a country is

Question 23

what is a benefit of the labour force survey

Answer 23

can work out which % of the population is unemployed

Question 24

what is the claimant count

Answer 24

identifies the number of people who are claiming benefits

Question 25

what is a benefit of the claimant count

Answer 25

tells the government how much money is being given to those on benefits

Question 26

what is the equation for unemployment rate

Answer 26

(no. unemployed / size of labour force) x 100

Question 27

what are the four types of unemployment

Answer 27

seasonal, cyclical, structural, frictional

Question 28

define underemployment

Answer 28

a situation where someone is working fewer hours than they wish

Question 29

why does cyclical employment occur and how can it be fixed

Answer 29

lack of aggregate demand- expansionary monetary policies and expansionary fiscal policies

Question 30

why does seasonal unemployment occur and how can it be fixed

Answer 30

demand for goods changes at different times of the year and therefore demand for workers fluctuates at different times- supply side policies

Question 31

why does structural unemployment occur and how can it be fixed

Answer 31

a mismatch between existing skills and those needed in new growth industries- supply side policies (long term) e.g. 1. improving skills through education and training 2. encouraging investment in new growth industries 3. helping workers move from one region to another

Question 32

why does frictional unemployment occur and how can it be fixed

Answer 32

workers are unemployed between jobs for short periods of time- supply side policies (short term)

Question 33

what is the budget deficit

Answer 33

when gov spending > taxes

Question 34

what is the budget surplus

Answer 34

gov spending < taxes

Question 35

which 2 policies can influence aggregate demand

Answer 35

monetary and fiscal

Question 36

what is the monetary policy

Answer 36

run by Bank of England and uses money supply and interest rates to influence AD

Question 37

what is the fiscal policy

Answer 37

run by government and uses gov spending and taxation to influence AD