Macroeconomic key terms

Question 1

Government Objectives

Answer 1

Trade balance
Inflation (low and stable)
Growth
Government budget
Employment
Redistribution of income (greater income equality)
Sustainable growth (protection of env.)

Question 2

Trade balance

Answer 2

X-M

Question 3

Inflation

Answer 3

A sustained increase in price level (CPI)

Question 4

Inflation rate

Answer 4

% increase in PL

Question 5

(LR) Economic growth

Answer 5

An increase in the productive potential of an economy

Question 6

GDP

Answer 6

The total market value of all goods and services produced annually in an economy

Question 7

GNP

Answer 7

The total income earned by a country’s FOP wherever those assets are located
(GDP+ net property income from abroad including dividends, interest and profit)

Question 8

unemployment

Answer 8

Measures the number of people who willing, able and actively seeking work but are not in work

Question 9

Circular flow of income

Answer 9

An economic model showing the flow of income (g/s, FOP) between households and firms within an economy

Question 10

Multiplier effect

Answer 10

when an initial injection into the circular flow leads to a proportionately greater increase in aggregate demand and GDP

Question 11

Recession

Answer 11

A fall in GDP for 2 consecutive economic quarters

Question 12

Accelerator effect

Answer 12

When an increase in national output (GDP) results in a proportionately larger rise in capital investment spending because businesses are confident about the future and purchase capital goods to meet expected future demand–> this further increases AD cos investment and productive capacity of the economy increases

Question 13

AD

Answer 13

Total planned spending in an economy over a period of time

Question 14

Consumption

Answer 14

total planned spending by households on goods and services for their own private use

Question 15

Investment

Answer 15

Firms spending on capital goods

Question 16

Savings

Answer 16

the proportion of income not spent over a period of time

Question 17

Disposable income

Answer 17

income left after tax deductions

Question 18

discretionary expenditure

Answer 18

Voluntary spending on products and services that people want now, and savings towards items they aspire to buy in the future.

Question 19

essential expenditure

Answer 19

Spending on items required to live

Question 20

Marginal propensity to consume

Answer 20

proportion of a change in income devoted to C (proportion of an addition unit of income spent on C)

Question 21

Average propensity to consume

Answer 21

proportion of total income spent

Question 22

fiscal policy

Answer 22

the deliberate adjustment of govt spending borrowinng or taxation in order to iinfluence AD/ economic activity

Question 23

Protectionism

Answer 23

Any action a country takes to prevent trade in the form of a barrier

Question 24

Aggregate Supply

Answer 24

total supply of goods and services in an economy that firms plan on selling in a given time period

Question 25

Short run

Answer 25

A period where at least one factor input is fixed

Question 26

short run aggregate supply

Answer 26

Total planned output when prices can change but the prices and productivity of factor inputs are kept constant

Question 27

LR

Answer 27

where all FOP are fully adjustable

Question 28

Full employment

Answer 28

The maximumn amount of output that an economy can produce sustainably using the FOP

Question 29

Marginal propensity to withdraw(MPW)

Answer 29

proportion of an additional unit of income that is withdrawn from the circular flow

Question 30

SR economic growth

Answer 30

where and economy utilises idle resources/spare capacity to increase production

Question 31

GNI

Answer 31

Gross national income- includes value of all goods and services produced by nationals, in the country or abroad

Question 32

Nominal GDP

Answer 32

GDP measured in current prices

Question 33

Real GDP

Answer 33

GDP adjusted for inflation

Question 34

Actual economic growth

Answer 34

Increase in real GDP

Question 35

Potential/trend economic growth

Answer 35

Increase in productive capacity of an economy

Question 36

SOL

Answer 36

how well off an individual, household or economy is in terms of income, health, environment and political freedom

Question 37

Unsustainable economic growth

Answer 37

when an increase in the productive potential of an economy today leads to a fall in the productive potential for future generations

Question 38

PPP (Purchasing Power Parity)

Answer 38

A way of adjusting exchange rates to take into account different costs of living in different countries

Question 39

Employed

Answer 39

Being in paid work for yourself or somebody else

Question 40

underemployed

Answer 40

People who would prefer to work more hrs or full time but cannot OR are working in jobs that do not reflect their skill level

Question 41

employment rate

Answer 41

pop. in work/ pop. of working age

Question 42

unemployment rate

Answer 42

not in work but actively seeking/ labour force

Question 43

activity rate

Answer 43

labour force/ pop. of working age