MAcro def

Question 1

What is macroeconomics?

Answer 1

Study of large economic systems such as those of a whole country or area of the world.

Question 2

Define economic growth.

Answer 2

Increase in level of output by a nation.

Question 3

What is a budget deficit?

Answer 3

Amount which by government spending is greater than government revenue.

Question 4

What does national income refer to?

Answer 4

Value of income, output or expenditure over a period of time.

Question 5

What is Gross Domestic Product (GDP)?

Answer 5

Market value of all final goods and services produced in a period (usually yearly).

Question 6

What is a boom in economic terms?

Answer 6

Peak of the economic cycle where GDP is growing at its fastest.

Question 7

Define depression in economics.

Answer 7

Bottom of the economic cycle where GDP starts to fall with significant increases in unemployment.

Question 8

What is a downturn?

Answer 8

Period in the economic cycle where GDP grows, but more slowly.

Question 9

What is a recession?

Answer 9

Period of temporary economic generally identified by a fall in GDP in two successive quarters.

Question 10

What is aggregate demand?

Answer 10

Total demand in the economy including consumption, investment, government expenditure and exports minus imports.

Question 11

Define deflation.

Answer 11

Period of time where average price levels is falling.

Question 12

What is inflation?

Answer 12

When average price levels increase over a period of time.

Question 13

What is hyperinflation?

Answer 13

Very high levels of inflation; rising prices get out of control.

Question 14

What does the Consumer Price Index (CPI) measure?

Answer 14

Measure of the general price level (excluding housing costs).

Question 15

What is the Retail Price Index (RPI)?

Answer 15

Measure of the general price level, which includes house prices and council tax.

Question 16

What causes demand-pull inflation?

Answer 16

Inflation caused by too much demand in the economy relative to supply.

Question 17

What is cost-push inflation?

Answer 17

Inflation caused by rising business costs.

Question 18

What does purchasing power of money refer to?

Answer 18

Amount of goods and services that can be bought with a fixed sum of money.

Question 19

What are menu costs?

Answer 19

Costs to firms of having to make repeated price changes, such as having to update brochures containing prices.

Question 20

Define shoe leather costs.

Answer 20

Costs to firms and consumers of searching for new suppliers with cheaper prices when inflation is high (such as time).

Question 21

What is unemployment?

Answer 21

When those actively seeking work are unable to find a job.

Question 22

What is cyclical unemployment?

Answer 22

Unemployment caused by falling demand as a result of a downturn in the economic cycle.

Question 23

What is structural unemployment?

Answer 23

Unemployment caused by changes in the structure of the economy, such as the decline in an industry.

Question 24

Define frictional unemployment.

Answer 24

When workers are unemployed for a short period of time as they move from one job to another.

Question 25

What is seasonal unemployment?

Answer 25

Unemployment caused when seasonal workers, such as those in the holiday industry, are laid off because the season has ended.

Question 26

What is voluntary unemployment?

Answer 26

Unemployment resulting from people choosing not to work.

Question 27

What is the balance of payments?

Answer 27

Record of all transactions relating to international trade.

Question 28

Define current account.

Answer 28

Part of the balance of payments where all exports and imports are recorded.

Question 29

What is the capital and financial account?

Answer 29

That part of the balance of payments where flows of savings, investments and currencies are recorded.

Question 30

What are exports?

Answer 30

Goods and services sold overseas.

Question 31

What are imports?

Answer 31

Goods and services bought from overseas.

Question 32

What is the current balance?

Answer 32

Difference between total exports and total imports.

Question 33

What is a current account deficit?

Answer 33

When value of imports exceeds value of exports.

Question 34

What is a current account surplus?

Answer 34

When value of exports exceeds value of imports.

Question 35

Define balance of trade.

Answer 35

Difference between visible exports and visible imports.

Question 36

What is invisible trade?

Answer 36

Trade in services.

Question 37

What is visible trade?

Answer 37

Trade in physical goods.

Question 38

What is primary income?

Answer 38

Money received from the loan of production factors abroad.

Question 39

Define secondary income.

Answer 39

Government transfers to and from overseas agencies such as the EU.

Question 40

What is an exchange rate?

Answer 40

Price of one currency in terms of another.

Question 41

What is income inequality?

Answer 41

Differences in the income that between the different groups of earners in society; the gap between the rich and the poor.

Question 42

Define absolute poverty.

Answer 42

Where people do not have enough resources to meet all their basic human needs.

Question 43

What is relative poverty?

Answer 43

Poverty that is defined relative to existing living standards for the average individual.

Question 44

What is progressive taxation?

Answer 44

Where the proportion of income paid in tax rises as the income of the taxpayer rises.

Question 45

Define regressive taxation.

Answer 45

Tax system that places the burden of the tax more heavily on the poor.

Question 46

What is fiscal policy?

Answer 46

Decisions about government spending and levels of taxation that affect aggregate demand in the economy.

Question 47

What is a budget in economic terms?

Answer 47

Government’s spending and revenue plans for the next year.

Question 48

What is a fiscal deficit?

Answer 48

Amount by which government spending exceeds government revenue.

Question 49

Define fiscal surplus.

Answer 49

Amount by which government revenue exceeds government spending.

Question 50

What are direct taxes?

Answer 50

Taxes levied directly upon the income earned by firms and individuals.

Question 51

What are indirect taxes?

Answer 51

Taxes levied upon spending such as VAT.

Question 52

What is value-added tax (VAT)?

Answer 52

Tax on some goods and services, businesses pay VAT on most goods and services they buy, and if they are VAT registered, charge value-added tax on the goods and services they sell.

Question 53

What is national debt?

Answer 53

Total amount of money owed by a country.

Question 54

What is expansionary fiscal policy?

Answer 54

Fiscal measures designed to stimulate demand in the economy.

Question 55

Define contractionary fiscal policy.

Answer 55

Fiscal measures designed to reduce demand in the economy.

Question 56

What is monetary policy?

Answer 56

The central bank’s use of interest rates and the money supply to control aggregate demand in the economy.

Question 57

What does money supply refer to?

Answer 57

Amount of money circulating in the economy.

Question 58

What are interest rates?

Answer 58

Price paid to lenders for borrowed money; it is the price of money.

Question 59

What is aggregate supply?

Answer 59

Total amount of goods and services produced in a country at a given price level in a given time period.

Question 60

What is supply-side policy?

Answer 60

Government measures designed to influence aggregate supply and increase productive potential.