Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Economics > Macroeconomic Objectives > Flashcards

Macroeconomic Objectives Flashcards

(75 cards)

Start Studying
1
Q

a) What is the definition of economic growth?

A

Economic growth is the increase in a country’s real GDP over time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

a) How is economic growth measured using GDP?

A

It is measured by increases in gross domestic product (GDP), representing the value of all goods and services produced.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

a) What are the limitations of GDP as a measure of growth?

A

GDP omits non-market activities, ignores income distribution, environmental costs, and may not reflect actual living standards.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

a) How can the economic cycle be shown using diagrams?

A

Using a diagram with GDP/time, annotating stages: boom, downturn, recession, and recovery.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

a) What is the effect of each stage of the economic cycle on economic growth, inflation, and unemployment?

A

Boom: high growth, inflationary pressure, low unemployment; Downturn: slowing growth, stabilising inflation, rising unemployment; Recession: negative growth, low inflation, high unemployment; Recovery: increasing growth, stable inflation, falling unemployment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

a) What is the impact of economic growth on employment?

A

Growth usually increases employment opportunities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

a) What is the impact of economic growth on standards of living?

A

Growth can improve standards of living through higher incomes and better public services.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

a) What is the impact of economic growth on poverty?

A

Sustained growth helps to reduce poverty by creating jobs and increasing incomes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

a) What is the impact of economic growth on productive potential?

A

Growth can increase a nation’s productive potential through capital investment and innovation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

a) What is the impact of economic growth on inflation?

A

Rapid growth may lead to demand-pull inflation if output cannot keep pace with demand.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

a) What is the impact of economic growth on the environment?

A

Economic growth can cause environmental degradation through resource depletion and pollution.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

b) What is the definition of inflation?

A

Inflation is a sustained increase in the general price level of goods and services.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

b) What is the definition of deflation?

A

Deflation is a sustained decrease in the general price level of goods and services.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

b) How is inflation measured using CPI?

A

Inflation is measured by changes in the Consumer Price Index (CPI), which tracks the price changes of a basket of goods and services.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

b) What is demand-pull inflation?

A

Demand-pull inflation occurs when aggregate demand exceeds aggregate supply, driving prices up.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

b) What is cost-push inflation?

A

Cost-push inflation occurs when rising costs of production lead to higher prices.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

b) What is the relationship between inflation and interest rates?

A

Higher interest rates are used to control inflation by reducing spending and borrowing.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

b) What is the impact of inflation on prices?

A

Inflation causes prices of goods and services to rise.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

b) What is the impact of inflation on wages?

A

Inflation may lead to higher wage demands to maintain real incomes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

b) What is the impact of inflation on exports?

A

Higher domestic prices reduce competitiveness, potentially lowering export demand.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

b) What is the impact of inflation on unemployment?

A

Mild inflation can stimulate demand and reduce unemployment, but excessive inflation may create uncertainty and discourage investment, harming employment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

b) What are menu costs in the context of inflation?

A

Menu costs are the costs incurred by firms when they change their prices frequently due to inflation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

b) What are shoe leather costs in the context of inflation?

A

Shoe leather costs refer to the increased costs of managing cash holdings during inflation, such as more frequent bank visits.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

b) How does inflation create uncertainty?

A

Unpredictable inflation makes it difficult for firms and consumers to plan for the future.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
b) What is the impact of inflation on business and consumer confidence?
High inflation reduces confidence as purchasing power is eroded and planning becomes harder.
26
b) What is the impact of inflation on investment?
Uncertainty and rising costs due to inflation may discourage business investment.
27
c) What is the definition of unemployment?
Unemployment is the proportion of the labour force that is willing and able to work but unable to find employment.
28
c) How is unemployment measured using the ILO measure?
Unemployment is measured by the International Labour Organization (ILO) standard: individuals actively seeking and available for work.
29
c) What is cyclical unemployment?
Cyclical unemployment occurs during periods of low economic activity, such as recessions.
30
c) What is structural unemployment?
Structural unemployment arises from changes in the economy, such as declining industries and skills mismatches.
31
c) What is seasonal unemployment?
Seasonal unemployment occurs when industries slow or shut down for a season.
32
c) What is voluntary unemployment?
Voluntary unemployment occurs when individuals choose not to work at the current wage rate.
33
c) What is frictional unemployment?
Frictional unemployment is short-term unemployment occurring when people move between jobs.
34
c) What is the impact of unemployment on output?
Unemployment reduces total output as fewer workers contribute to production.
35
c) What is the impact of unemployment on the use of scarce resources?
Unemployment results in underutilisation of labour, a scarce resource.
36
c) What is the impact of unemployment on poverty?
Unemployment increases poverty by reducing income levels.
37
c) What is the impact of unemployment on government spending on benefits?
Unemployment raises government spending on unemployment benefits and welfare programs.
38
c) What is the impact of unemployment on tax revenue?
Unemployment lowers tax revenue as fewer people are earning taxable income.
39
c) What is the impact of unemployment on consumer confidence?
High unemployment erodes consumer confidence and reduces spending.
40
c) What is the impact of unemployment on business confidence?
Businesses may delay investment or expansion when unemployment is high.
41
c) What is the impact of unemployment on society?
Unemployment can lead to social problems such as crime, poor health, and lower community well-being.
42
d) What is the definition of the current account on the balance of payments?
The current account records a country’s transactions in goods, services, income, and current transfers.
43
d) What are current account deficits and surpluses?
A deficit occurs when imports exceed exports; a surplus occurs when exports exceed imports.
44
d) What is trade in goods and services?
Trade in goods (visibles) includes physical products; trade in services (invisibles) includes financial, travel, insurance, and intellectual services.
45
d) What is the relationship between the current account and exchange rates?
Exchange rates influence the cost of exports and imports, affecting the current account balance.
46
d) Give examples of real-world exchange rates.
Examples include USD/EUR, GBP/USD, USD/JPY; these rates fluctuate due to market forces.
47
d) What are reasons for deficits and surpluses based on quality of domestic goods?
High quality domestic goods improve exports; poor quality leads to fewer sales abroad.
48
d) What are reasons for deficits and surpluses based on quality of foreign goods?
High quality foreign goods can increase imports, leading to deficits.
49
d) What are reasons for deficits and surpluses based on price of domestic goods?
Competitive domestic prices encourage exports and help reduce deficits.
50
d) What are reasons for deficits and surpluses based on price of foreign goods?
Low foreign prices can increase imports, worsening the current account.
51
d) What are reasons for deficits and surpluses based on exchange rates?
Strong domestic currency makes imports cheaper and exports more expensive; weak currency has the opposite effect.
52
d) What is the impact of a current account deficit on leakage from the economy?
A deficit leads to a net outflow of income from the economy.
53
d) How can a current account deficit be inflationary?
If prices rise abroad, imported goods become more expensive, contributing to domestic inflation.
54
d) How does low demand for exports impact the current account?
Low demand for exports reduces export revenue, worsening the current account balance.
55
d) What problems can occur in finding foreign reserves to fund the deficit?
Countries with large deficits may struggle to obtain enough foreign currency to pay for imports, risking currency depreciation.
56
e) How does business activity damage the environment?
Business activity can cause pollution and deplete natural resources.
57
e) What is visual pollution caused by businesses?
Visual pollution includes litter and unattractive industrial structures.
58
e) What is noise pollution caused by businesses?
Noise pollution comes from machinery, transport, and industrial processes.
59
e) What is air pollution caused by businesses?
Air pollution includes emissions of harmful gases and particulates.
60
e) What is water pollution caused by businesses?
Water pollution results from waste being dumped into rivers, lakes, and seas.
61
e) How can the government use taxation to protect the environment?
Governments can tax activities that cause pollution to discourage them.
62
e) How can subsidies be used to protect the environment?
Subsidies can encourage businesses to adopt environmentally friendly practices.
63
e) How can regulation protect the environment?
Regulations set legal limits on pollution and environmental harm.
64
e) How can fines protect the environment?
Fines penalise businesses that violate environmental standards.
65
e) What are pollution permits?
Pollution permits allow a limited amount of pollution and can be traded among businesses.
66
e) How can government provision of parks help protect the environment?
Governments create parks to preserve natural areas and provide public green spaces.
67
f) What is the definition of income inequality?
Income inequality refers to the uneven distribution of income within a population.
68
f) What is the definition of absolute poverty?
Absolute poverty is when people cannot meet basic needs for survival, such as food, shelter, and clothing.
69
f) What is the definition of relative poverty?
Relative poverty occurs when people are poor compared to others in their society.
70
f) What are the reasons to reduce poverty and inequality to meet basic needs?
Reducing poverty ensures that all people can meet essential needs like food, shelter, and healthcare.
71
f) What are the reasons to reduce poverty and inequality to raise living standards?
Reducing poverty improves overall well-being, health, and economic participation.
72
f) What are the ethical reasons to reduce poverty and inequality?
Reducing inequality promotes fairness, social justice, and societal cohesion.
73
f) How does progressive taxation reduce inequality and poverty?
Progressive taxation takes a larger percentage of income from higher earners to fund public services and benefits.
74
f) How does redistribution through benefit payments reduce inequality and poverty?
Benefit payments provide financial support to low-income individuals and families.
75
f) How does investment in education and healthcare reduce inequality and poverty?
Investments improve human capital, providing better opportunities and outcomes for disadvantaged groups.

Economics (12 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions