Macroeconomics

Question 1

What are “Index Numbers”?

Answer 1

Index Numbers are a system used to simplify COMPARISONS between years.

Question 2

How do you construct an “Index Number”?

Answer 2

To construct index numbers you must first choose a base year to compare the other years to and set the index number to 100. From then on you work out the % increase and add it to the base year to get the index number of that year.

Question 3

What is “Price”?

Answer 3

Price is how much a product is sold or on the market.

Question 4

What is “Value”?

Answer 4

Value is how much something is worth.

Question 5

What is “Cost”?

Answer 5

Cost is how much was spent on producing that product .

Question 6

What does “GDP” stand for?

Answer 6

GDP stands or gross domestic product.

Question 7

What does “GDP” mean ?

Answer 7

GDP is the total value of goods produced and services provided in a country during one year, disregarding of all equipment used.

Question 8

What is “Wealth”?

Answer 8

Wealth is a STOCK CONCEPT. Wealth is the value of all your assets E.g a property you own, or a savings account.

Question 9

What is “Income”?

Answer 9

Income is a FLOW CONCEPT. Income flows from your wealth E.g rent from a property, or interest from your savings.

Question 10

What are “Economic Agents”?

Answer 10

All the participants in an economy

Question 11

Who are the “Economic Agents”

Answer 11

1) Consumers
2) Firms
3) Governments

Question 12

What are “Injections” in a circular flow economy?

Answer 12

1) Government spending
2) Exports
3) Investments

Question 13

What are “Leakages” in a circular flow economy?

Answer 13

1) Tax
2) Imports
3) Savings

Question 14

What are the 3 methods of working out GDP called?

Answer 14

1) National Output
2) National Expenditure
3) National Income

Question 15

What does “GNP” stand for?

Answer 15

Gross national product

Question 16

What is the difference between “GNP” and “GDP”?

Answer 16

The difference between GNP and gross domestic product (GDP) is that GNP includes the value of products made by a country’s citizens and companies abroad, while GDP only accounts for products made within a country’s borders.

Question 17

What is “GNP”

Answer 17

GNP is the total value of goods produced and services provided by a country during one year, equal to the gross domestic product plus the net income from foreign investments.

Question 18

How do you calculate GNP?

Answer 18

GNP = GDP + Net income from foreign investors

Question 19

Define diminishing marginal utility

Answer 19

decline in the additional satisfaction a person derives

from consuming an additional unit of that product.