Macroeconomics

Question 1

Why are purchasing power parities used

Answer 1

Improve accuracy when comparing data between countries

PPF compares cost of living between different countries

Question 2

Real GDP

Answer 2

Total output of economy

Adjusted for inflation

Question 3

Gross national income

Answer 3

Measures income received by a country both domestically and from assets abroad

Question 4

Index number

Answer 4

Shows percentage change in price from the base year

Question 5

GDP

Answer 5

Total value of goods and services produced in an economy

Question 6

Recession

Answer 6

Negative economic growth for 2 consecutive quarters

Question 7

Characteristics of a recession

Answer 7

Falling inflation - due to reduction in consumer expenditure

Rising unemployment - due to less demand for workers caused by real falling output

Falling profits of firms - possibly leading to high level of business failures

Question 8

Purchasing power parities

Answer 8

Comparison between countries

Taking into account different cost of living

Question 9

Disadvantages of using GDP data to compare living standards

Answer 9

Quality of health issues such as spending on health and education has hard impact to measure

Percentage changes are misleading without any reference to total GDP

Differences in distribution of income

Question 10

Evaluate the macroeconomic effects of an increase in house prices

Answer 10

Increase in householders confidence

Encourage householders to consume more

AD will increase

Increase in real output

Question 11

Under employment

Answer 11

When a worker is working fewer hours than they would like to work

Question 12

Claimant count

Answer 12

Number of people claiming unemployment benefit

Question 13

ILO

Answer 13

Unemployed if they are without a job, want a job and have actively sought work in the last 4 weeks

Question 14

Inflation

Answer 14

Sustained rise in the general price level

Question 15

Causes of inflation

Answer 15

Demand pull with AD

Cost push with SRAS

Question 16

Price level

Answer 16

Average of the current prices of goods and services in the economy

Question 17

Calculating CPI

Answer 17

Household expenditure survey is carried out

Representative basket of goods and services used by average households is recorded

Used to attach weights to products based on proportion of spending

Select base year

Question 18

Deflation

Answer 18

A decrease in the general level of prices

Question 19

Disinflation

Answer 19

Fall in the rate of inflation

Question 20

Economic effects of rising inflation

Answer 20

Real value of personal debt falls

Increase in income inequality

Fall in real wages

Question 21

Direct tax

Answer 21

Tax on income

Question 22

Inflation rate

Answer 22

Cost of borrowing