Macro

Question 1

3 injections

Answer 1

Investment
Government expenditure
Exports

Question 2

3 leakages/withdrawals

Answer 2

Savings
Taxation
Imports

Question 3

Factors affecting AD

Answer 3

AD is affected by injections and leakages:
e.g.
The level of I (business confidence)
The size of the MPC (consumer confidence)
The size of the MPW (e.g. imports, level of taxes, savings ratio)

Question 4

Factors affecting AS

Answer 4

AS is affected anything that affects the factors of production.
e.g.
Land:(availability/rents/ planning regulations)
Labour: Immigration/wages levels/employment laws;
Capital: Interest rates/regulations etc
Enterprise: Regulations /incentives/ potential for profit

Question 5

Unemployment

Answer 5

Where workers do not have jobs but are willing and able to work

Question 6

Unemployment rate

Answer 6

The % of those in the labour force (employed+ unemployed) that are unemployed

Question 7

Inflation

Answer 7

A sustained increase in the price level

Question 8

Deflation

Answer 8

a general fall in the average price level of goods and services (negative inflation)

Question 9

Inflation rate

Answer 9

The % by which price levels have increased for the latest month with the same month a year ago.

Question 10

CPI (consumer price index)

Answer 10

The mechanism for measuring inflation in the UK. A basket of 650 goods & services whose prices are compared each month. Each good is given a weight according to its importance in household expenditure. The bigger the weight the higher the % of total expenditure spent on that good or service.

Question 11

Disinflation

Answer 11

When the inflation rate is falling but still positive. In other words the price level is increasing but at a slower rate than before

Question 12

Cost-Push inflation

Answer 12

inflationcaused by an increase inpricesof inputs like labour, raw material.

Question 13

Demand Pull Inflation

Answer 13

Inflation caused by increases in aggregate demand

Question 14

Cyclical (Demand –deficient) unemployment

Answer 14

Unemployment caused by sustained decrease in aggregate demand (common in recessions)

Question 15

Recession

Answer 15

2 consecutive periods of negative growth (fall) in GDP

Question 16

Structural unemployment

Answer 16

Unemployment caused by lack of mobility in the labour market. (There are spare jobs but the unemployed lack the knowledge or skills needed to fill them- occupational or geographical immobility)

Question 17

Frictional Unemployment

Answer 17

unemployment which exists in any economy due to people being in the process of moving from one job to another. Frictional unemployment will always exist which is why 4% unemployment rate is considered full employment

Question 18

claimant count

Answer 18

numbers claiming job-seekers allowance

Question 19

Labour Force Survey (LFS)

Answer 19

based on interviews with 60,000 people every 3 months.

Question 20

Macroeconomic objectives

Answer 20

Economic growth
Stable price level
Full employment
Balance of payments surplus
Fairer distribution of income

Question 21

Fiscal policy

Answer 21

the taxation and spending decisions of a government

Question 22

Taxation (T)

Answer 22

Raising the funds needed to pay for government expenditure

Question 23

Government expenditure (G)

Answer 23

government spending on current (e.g. running schools and hospitals) and capital (e.g. building new roads) items.

Question 24

Budget deficit/surplus

Answer 24

If G=T, its called a balanced budget
If G>T, its called a budget deficit
If G

Question 25

Expansionary fiscal policy

Answer 25

(borrow more/spend more) can: | Boost employment and economic growth

Question 26

Deflationary fiscal policy

Answer 26

(higher taxes/lower spending) can: | slow economic growth and lower/control price levels

Question 27

Monetary policy

Answer 27

Its carried out by the Bank of England, | It uses interest rates as the main tool

Question 28

Expansionary monetary policy

Answer 28

lowering interest rates: This puts more money in consumer pockets (lower mortgage repayments/cheaper credit) Make it cheaper for businesses to borrow (higher levels of I) Tends to lower value of the pound0 WPIDEC- improved balance of payments current account

Question 29

Deflationary monetary policy

Answer 29

raising interest rates: higher repayments/expensive credit more expensive for businesses to borrow (lower levels of I) tends to increase value of pound SPICED - reduced balance of payments current account

Question 30

Free-market supply-side policies

Answer 30

involve policies to increase competitiveness and competition. For example, privatisation, deregulation, lower income tax rates, and reduced power of trade unions.

Question 31

Interventionist supply-side policies

Answer 31

involve government intervention to overcome market failure. For example, higher government spending on transport and communication.

Question 32

International trade

Answer 32

This is the exchange of goods and services across international borders.

Question 33

Absolute advantage

Answer 33

This is when a country can produce a good or service | using fewer resources and at a lower cost than another country

Question 34

Comparative advantage

Answer 34

This occurs when a country can produce a good or service at a lower opportunity cost than another country

Question 35

Terms of Trade

Answer 35

This measures the price index of exports divided by the price index of imports. It is expressed as a percentage so in the base year it will be 100 . (Index of Export Prices/Index of Import Prices)x100

Question 36

Balance of Payments

Answer 36

is a record of a country’s transactions with the rest of the world. It shows the receipts from trade. It consists of the current and financial account. (X-M)

Question 37

Current account surplus/deficit

Answer 37

If the value of exports from a country is greater than the value of imports we have what is called a balance of payments current account surplus If the value of imports from a country is greater than the value of exports we have what is called a balance of payments current account deficit

Question 38

Current account

Answer 38

all payments for trade in goods and services plus income flow it is divided into four parts: Balance of trade in goods Balance of trade in services Net income flows. Primary income flows Net current transfers. Secondary income flows

Question 39

exchange rate

Answer 39

the price of one currency in terms of another

Question 40

fixed exchange rate

Answer 40

a type of exchange rate regime where a currency's value is fixed against either the value of another single currency, or to a basket of other currencies.

Question 41

floating exchange rate system

Answer 41

where the value of the currency is solely determined by the forces of demand and supply. There is no target exchange rate, no government intervention to determine the rate.

Question 42

The demand for currencies is based up on:

Answer 42

1. The demand for exports of goods and services 2. Inflows of investment into a country 3. Speculative buying of the currency (hot money) 4. Central bank buying up their own currency

Question 43

The supply of currencies is based up on:

Answer 43

1. The demand for imports of goods and services 2. Outflows of investment into a country 3. Speculative selling of the currency 4. Central bank selling their own currency

Question 44

Absolute poverty

Answer 44

This is when someone doesn't have the income or wealth to meet their basic needs, such as food, shelter and water.

Question 45

Accelerator process

Answer 45

This is where any change in demand for goods/ services beyond current capacity will lead to