topic 1 key terms

Question 1

macroeconomics

Answer 1

a branch of economics that studies the overall performance and behaviour of the economy

Question 2

inflation

Answer 2

a persistent or continuing rise in the average price level

Question 3

economic growth

Answer 3

an increased potential level of real output the economy can produce over a period of time

Question 4

circular flow

Answer 4

contunious movement of money, goods and services between households and firms

Question 5

injections

Answer 5

spending entering the circular flow as a result of investment, government spending and exports

Question 6

withdrawals

Answer 6

a leakage of spending power out of the circular flow into savings, taxation and imports

Question 7

aggregate demand

Answer 7

total planned spending on real outout in the economy at different price levels

Question 8

aggregate supply

Answer 8

the level of real national output that producers are prepared to supply at different average price levels

Question 9

Consumption

Answer 9

Total plan spending by households on consumer goods and services produced within the economy

Question 10

Investment

Answer 10

Total planned spending by firms on capital goods produced within the economy

Question 11

Exports

Answer 11

Domestically produce goods or services sold to residents of other countries

Question 12

Imports

Answer 12

Goods or services produced in other countries sold to residents of this country

Question 13

Trade surplus

Answer 13

Occurs when a country’s exports exceeds its imports

Question 14

Trade deficit

Answer 14

When a country’s imports exceed its exports

Question 15

Budget surplus

Answer 15

Occurs when the government spending is less than the government revenue this represents a net withdrawal from the circular flow

Question 16

Budget deficit

Answer 16

Because when the government spending exceeds government revenue this represents a net injection of demand into the circular flow

Question 17

GDP

Answer 17

Gross domestic product - the sum of all goods and services or the level of output produced in the economy over a period of time

Question 18

GNI

Answer 18

Gross national income - The total income earned by countries residents including income from abroad

Question 19

Savings ratio

Answer 19

The proportion of income that individuals or households save rather than spend

Question 20

Multiplier effect

Answer 20

The relationship between the change in aggregate demand and the resulting generally large change in national income