topic 2 key terms

Question 2

Interest rate

Answer 2

Cost of borrowing money or the return on savings/investment

Question 3

Transfer payments

Answer 3

Payments made by the government to individuals or groups without expecting any goods or services in return for example welfare payments

Question 4

Productive capacity

Answer 4

Maximum level of output that an economy can produce using its available resources and technology

Question 5

Capital spending

Answer 5

Expenditure made by businesses or governments on acquiring or improving physical assets such as machinery

Question 6

Current spending

Answer 6

Expenditure made by individuals or businesses or governments on goods and services for immediate consumption including wages utilities and Day to day operations

Question 7

net trade

Answer 7

Difference between a country’s exports and imports of goods and services

Question 8

External shocks

Answer 8

Unexpected events from outside of the economic system that have a significant impact on it

Question 9

Foreign direct investment

Answer 9

Investment in capital assets in a foreign country by business with headquarters in another country

Question 10

Human capital

Answer 10

Skills and knowledge and experience Possessed by the population which individuals contribute to the economy through work

Question 11

Hysterics

Answer 11

Situation where the effects of a temporary shock that carry on after the initial cause has been removed

Question 12

Infrastructure

Answer 12

Result of past investment common buildings, roads, bridges (Fixed capital), Needed for the economy to operate efficiently

Question 13

Net inward migration

Answer 13

The difference between the number of people imigrating into a country and the number of people emigrating from the country

Question 14

Positive output gap*

Answer 14

The level of actual real output in the economy is greater than the trend output level

Question 15

Negative output gap*

Answer 15

Level of actual rule output in the economy is lower than the Trend output level

Question 16

Productivity

Answer 16

Measure of output produced per unit of input

Question 17

Research and development

Answer 17

Activities by firms to innovate and create new ideas or improve

Question 18

Stagflation

Answer 18

Situation where there is both high inflation and high unemployment

Question 19

Sustainable growth

Answer 19

Steady and balanced increase in economic activity over a long period of time

Question 20

short run growth

Answer 20

growth of real output resulting from using scarce resources including Labour thereby taking up the slack in the economy

Question 21

long run growth

Answer 21

An increase in the economy’s potential level of rare output and outward movement of the economy’s ppf

Question 22

Productive capacity

Answer 22

Maximum level of output that an economy is capable of producing with resources available

Question 23

Economic cycle

Answer 23

Fluctuations of Economic activity in an economy over time

Question 24

boom

Answer 24

A period of rapid economic growth and expansion of real output rising faster than the trend rate of growth

Question 25

slowdown

Answer 25

The right of growth day accelerates reducing economic activity after a boom

Question 26

Recession

Answer 26

six months or more of negative economic growth or declining real national output

Question 27

Recovery*

Answer 27

A period of economic Improvement following a recession

Question 28

Trend growth rate

Answer 28

Right at which output can grow on a sustained basis without inflationary Pressures