Macro Book 1

Question 1

3 methods of calculating the level of economic activity

Answer 1

1. output method - add up value of all goods + services produced
2. expenditure method - add up value of all household spending
3. income method - add up the total amount firms pay to households

Question 2

4 Factors of production + factor incomes

Answer 2

land - rent
labour - wages
capital - interest
enterprise - profit

Question 3

circular flow of income leakages (3)

Answer 3

• imports
• taxation
• savings

Question 4

circular flow of income injections (3)

Answer 4

• exports
• government spending
• investment ( spending past savings )

Question 5

GDP

Answer 5

the total value of all goods and services produced in a country in a year

Question 6

evaluative points for GDP (4)

Answer 6

• real GDP per capita skewed by rising inequality
• difficult to measure as data are incomplete
• illegal activity and unpaid work overlooked
• retrospective not current

Question 7

4 main government macroeconomic objectives

Answer 7

1. sustainable economic growth
2. stable price level (low inflation)
3. minimise unemployment
4. maintain stable balance of payments on current account

Question 8

3 secondary government macroeconomic objectives

Answer 8

1. maintain balanced budget
2. achieve greater equality in the distribution of income
3. protect the environment