Macro Economic Definitions

Question 1

Macro economic equilibrium

Answer 1

A situation where AD = AS and GDP is constant. Or where injections = withdrawals in the circular flow, leaving GDP unchanged

Question 2

Economic stability

Answer 2

A situation in which the main macro-economic variables are not changing rapidly

Question 3

Unemployment

Answer 3

Occurs when labour is out of work, willing and able to work and actively seeking work

Question 4

Unemployment rate

Answer 4

The percentage of the labour force that is willing and able to work, actively seeking work but not currently in work

Question 5

Labour force survey

Answer 5

The internationally recognised method of calculating the unemployment rate, measured by sampling the number of workers who are unemployed

Question 6

Claimant count

Answer 6

The narrow measure of calculating the unemployment total that includes only those who are out of work, willing and able to work, actively seeking work and in rece of unemployment benefits

Question 7

Inflation

Answer 7

A sustained rise in the price level over time as measured by changes in the consumer price index

Question 8

Inflation rate

Answer 8

The percentage increase in the price level measured over the course of 1 year when prices are rising on a sustained basis

Question 9

Injections

Answer 9

Any money that adds to consumer spending in the circular flow in the form of investment, government spending and exports

Question 10

Leakages

Answer 10

Any money that is withdraw from the circular flow in the form of tax, saving or imports

Question 11

Consumer spending

Answer 11

Spending by households or individuals on goods and services in order to get utility

Question 12

Investment

Answer 12

Spending by firms on capital in the form of plants, equipment or machinery

Question 13

Government Spending

Answer 13

Any injection of funds into the circular flow by the public sector

Question 14

Net exports

Answer 14

The difference between the value of exports and imports

Question 15

AD

Answer 15

Total expenditure on goods and services at any given price level

Question 16

AS

Answer 16

The total output of all goods and services at any given price level

Question 17

GDP

Answer 17

The total value of output produced by an economy in a year

Question 18

GDP per capita

Answer 18

The total value of output produced by an economy in 1 year divided by the population

Question 19

Exports

Answer 19

Any goods or services sold to other nations that results in an inflow of income into the circular flow

Question 20

Imports

Answer 20

Any purchase of foreign goods or services that leads to an outflow of money from the domestic economy

Question 21

Balance of payments/ Balance of Trade/ Current account balance

Answer 21

The record of the inflows and outflows of currency that results from the international trading of exports and imports

Question 22

Current account surplus

Answer 22

When there is a net inflow of earnings resulting from international trade

Question 23

Current account deficit

Answer 23

When there is a net outflow of money resulting from international trade

Question 24

Protectionism

Answer 24

Any attempt to restrict the free trade of goods an d services across international borders

Question 25

Free trade

Answer 25

The unrestricted movement of goods and services across international borders due to an absence of any protectionism

Question 26

Tariffs

Answer 26

Taxes placed on foreign imports as they enter the home country that are designed to raise their market price

Question 27

Export subsidies

Answer 27

Grants given to UK firms by the government designed to lower the cost and the price of the ggods/services sold abroad

Question 28

Quota

Answer 28

A physical limit on the quantity of imports allowed into a country in a given period of time

Question 29

Economic growth

Answer 29

An increase in the value of GDP over 1 year

Question 30

Economic growth rate

Answer 30

The percentage increase in the value of GDP over time

Question 31

Recession

Answer 31

When there are 2 consecutive quarters of falling GDP

Question 32

Budget surplus

Answer 32

When the government collect more tax revenue than it spends enabling it to repay part of the national debt

Question 33

National debt

Answer 33

The running total of all previous budget deficiets that have not yet been repaid

Question 34

Budget Deficit

Answer 34

When the government is spending more than it collects in tax revenue therby adding to the national debt

Question 35

Government borrowing

Answer 35

The amount of money required by the government when it has a budget deficit, financed by selling bonds

Question 36

Fiscal policy

Answer 36

The manipulation of tax rates, government spending and borrowing to achieve macro-economic objectives

Question 37

Monetary policy

Answer 37

The manipulation of interest rates, the exchange rate or the money supply in order to achieve macro-economic objectives

Question 38

Supply side policies

Answer 38

Any policy designed to increase the productive potential of an economy often by boosting AD

Question 39

Contractionary policy

Answer 39

Any measure designed to reduce the level of economic activity in an economy by reducing AD

Question 40

Expansionary policy

Answer 40

Any measure Designed to increase the level of economic activity in an economy often by boosting AD

Question 41

Deflation

Answer 41

A fall in the price level over time

Question 42

Dis-inflation

Answer 42

A fall in the rate of increase of prices

Question 43

Rate of interest

Answer 43

The cost of borrowing money or reward for saving

Question 44

Exchange rate

Answer 44

The price of 1 currency expressed in terms of another

Question 45

Currency appreciation

Answer 45

A rise in the value of 1 currency against another

Question 46

Currency depreciation

Answer 46

A fall in the value of 1 currency against another

Question 47

De regulation

Answer 47

A supply side policy that abolishes rules or laws that force firms to behave in a particular way

Question 48

Corporation tax

Answer 48

A direct tax levied on a firms profits by the government

Question 49

Real income

Answer 49

Income that has been adjusted for inflation

Question 50

Disposable income

Answer 50

The remaining income of a person after tax

Question 51

Wealth

Answer 51

A measure of stock accumulated assets owned by an individual

Question 52

Saving

Answer 52

The part of disposable income that is not spent

Question 53

Price level

Answer 53

The average of current prices across all goods and services produced in an economy