macro def(green)

Question 1

Accelerator effect

Answer 1

a rise in national income can lead to a proportionally greater final rise in investment

Question 2

Aggregate demand*

Answer 2

the total demand for a country’s goods and services at a given price level and in a given time period

Question 3

Aggregate supply

Answer 3

the total amount that producers in an economy are willing and able to supply at a given price level in a given time period

Question 4

Average propensity to consume

Answer 4

the proportion of disposable income saved in an economy. consumer expenditure divided by disposable income

Question 5

Average propensity to save

Answer 5

the proportion of disposable income saved in an economy. savings divided by disposable income

Question 6

Balance of payments*

Answer 6

a record of the money flows into and out of a country in a year

Question 7

Circular flow of income*

Answer 7

a model of the movements of spending and income throughout the economy, which shows the impact of injections and withdrawals on real GDP

Question 8

Consumer expenditure

Answer 8

spending by households on domestically produced goods and services

Question 9

Disposable income

Answer 9

total personal income minus total personal taxes

Question 10

Economic growth

Answer 10

in the short run, an increase in real GDP. in the long run, an increase in productive capacity

Question 11

Economic stability

Answer 11

avoiding volatility in economic growth rates, inflation, employment and exchange rates

Question 12

Exchange rate*

Answer 12

the value of one currency in terms of another currency

Question 13

Expenditure method measure of GDP

Answer 13

add up all the spending on goods and services in a year

Question 14

Exports

Answer 14

the value of goods and services sold abroad

Question 15

Full employment (keynesian)

Answer 15

full employment is achieved when there is no cyclical unemployment (demand deficient unemployment) and therefore only frictional voluntary unemployment in the economy. i.e. no involuntary unemployment (as it is a waste of human potential)

Question 16

Full employment (monetarist)

Answer 16

full employment or the ‘non-inflation accelerating rate of unemployment’ NAIRU is the level of involuntary unemployment that a central bank judges to be acceptable or necessary to keep inflation low. i.e. at or around the 2% inflation target

Question 17

GDP*

Answer 17

the value of output produced in a country in a year

Question 18

Government spending

Answer 18

current and capital expenditure on goods and services by the the central government

Question 19

Imports

Answer 19

the value of goods and services bought from abroad

Question 20

Income method measure of GDP

Answer 20

add up all the factor incomes earned in the country in a year

Question 21

Income redistribution

Answer 21

the transfer of income from rich to poor to ensure greater access to necessities

Question 22

Inflation*

Answer 22

a sustained rise in the general price level

Question 23

Injections

Answer 23

additions of extra spending into the circular flow of income in the form of government spending, investment and export revenue

Question 24

Investment

Answer 24

business and government spending on capital goods

Question 25

Keynesian school

Answer 25

a group of economists who believe that macroeconomy can settle at an equilibrium that is below full employment

Question 26

Leakages

Answer 26

withdrawals of possible spending from the circular flow of income in the form of savings, taxation and import expenditure

Question 27

Macro economic equilibrium

Answer 27

a situation where aggregate demand equals supply and real GDP is not changing

Question 28

Marginal propensity to consume

Answer 28

the proportion of an increase in disposable income that households devote to consumer expenditure

Question 29

Marginal propensity to import

Answer 29

the proportion of an increase in disposable income that households spend on imported goods and services

Question 30

Marginal propensity to save

Answer 30

the proportion of an increase in disposable income that households devote to saving

Question 31

Marginal propensity to tax

Answer 31

the proportion of an increase in disposable income that households pay as tax

Question 32

Monetarist school

Answer 32

a group of economists who believe that the macroeconomy always adjusts rapidly to a full employment level of output

Question 33

Multiplier effect*

Answer 33

the process by which any change in a component of aggregate demand results in a greater final change in real GDP

Question 34

Net exports*

Answer 34

the value of exports minus the value of imports

Question 35

Output method measure of GDP

Answer 35

add up the total value-added or final value of goods and services produced in a year

Question 36

Price level*

Answer 36

the average of each of the prices of all the products produced in an economy

Question 37

Real GDP*

Answer 37

the country’s output measured in constant prices and so adjusted for inflation

Question 38

Shock

Answer 38

a shock is an unexpected or unpredictable event that affects an economy, either positively or negatively

Question 39

Unemployment*

Answer 39

describes people without a job, who have been actively seeking work in the past four weeks and are available to start work in the next two weeks (ILO) /the number of people who are willing and able to work (economically active actual labour force) but who cannot find work