Macro knowledge

Question 1

Fiscal policy

Answer 1

the use of government spending and tax policies to influence economic conditions

Question 2

Monetary policy

Answer 2

action that a country’s central bank or government can take to influence how much money is in the economy and how much it costs to borrow

Question 3

Crowding out stages

Question 4

Quantitative easing stages

Question 5

Transmission mechanism stages

Question 6

Current account

Answer 6

The part of the balance of payments which records the exchange of goods and services between the UK and the rest of the world

Question 7

Deferred payment

Answer 7

Agreement between the lender and borrower allowing the borrower to pay for goods immediately and make payments in the future

Question 8

Balance of payments (current account) deficit

Answer 8

X > M

Question 9

Balance of payments (current account) surplus

Answer 9

X > M

Question 10

Base rate

Answer 10

The interest rate set by the bank of England that influences market interest rates

Question 11

Claimant account

Answer 11

Measures unemployment by the number of individuals claiming unemployment benefit that week

Question 12

Consumer price index (CPI)

Answer 12

Measuring inflation by taking the average weighted price level of a basket of goods and comparing it between years

Question 13

How to calculate CPI

Answer 13

1. Gather prices for common products or services in the past
2. Collect prices for current products or services
3. Add the product prices together
4. Divide the current product price total by the past price total
5. Multiply the total by 100
6. Convert this number into a percentage

Question 14

De-merit goods

Answer 14

Goods which are worse for the consumer than they perceive and so are over consumed by the market

Question 15

Merits goods

Answer 15

Goods which are better for then consumer than they perceive and so there is under consumption within the market

Question 16

Deregulation

Answer 16

The removal of regulations or restrictions on a particular business or industry

Question 17

Indirect taxation

Answer 17

Taxes on spending, examples of these would be excise duty and value added tax

Question 18

Interdependence

Answer 18

The reliance of countries on each other resulting from specialization and free trade

Question 19

Labour force survey

Answer 19

A survey conducted in order to measure unemployment. It asks if individuals without work, actively seeking work and would be available to start in the next two week

Question 20

Market failure

Answer 20

Where the market system fails to allocate resources efficiently

Question 21

GDP equation

Answer 21

GDP = C + G + I + (X-M)

Question 22

Unemployment Rate

Answer 22

Unemployment Rate= Total number of Unemployed / Total number of employed individuals

Question 23

Money Multiplier Rate

Answer 23

1/1-mpc OR 1/mps

Question 24

Real GDP

Answer 24

Real GDP = GDP on Nominal Terms / Deflator of GDP

Question 25

Real Interest Rate

Answer 25

Real Interest Rate = (1 + Nominal Rate) / (1 + rate of inflation) – 1

Question 26

Negative externality

Answer 26

A cost to a third party outside of an economic transaction

Question 27

Automatic stabilisers

Answer 27

automatic fiscal changes as the economy moves through stages of the business cycle – e.g. a fall in tax revenues from the circular flow during a recession or an increase in state welfare benefits when unemployment is rising

Question 28

Microfinance

Answer 28

a type of banking that provides financial services to low income individuals or groups of people who would otherwise have no access to finance