U3 AOS2 - Domestic Macroeconomic Goals

Question 1

Material Living Standards refer to

Answer 1

The tangible aspects that impact on our wellbeing (eg. money, assets, wealth)

Question 2

Non-material living standards refer to:

Answer 2

The non-tangible aspect that impact our quality of life. Eg. crime rates, education levels, leisure time, stress

Question 3

The difference between material and non-material living standards is:

Answer 3

Tangibility

Question 4

Aggregate demand refers to

Answer 4

The total value of all spending/expenditure in an economy over a period of time.

Question 5

AD =

Answer 5

C + I + G + (X - M)

Question 6

An increase in disposable income would

Answer 6

Increase private consumption spending and increase aggregate demand.

Question 7

Factors which impact AD are

Answer 7

Disposable income, interest rates, business confidence, consumer confidence, exchange rates, economic growth overseas

Question 8

An increase in interest rates would

Answer 8

Decrease C and AD
Decrease I and AD

Question 9

An increase in consumer confidence would

Answer 9

Increase C and AD

Question 10

An increase in business confidence would

Answer 10

Increase I and AD

Question 11

An appreciation of the exchange rate would

Answer 11

Increase M and Decrease X, decreasing AD overall.

Question 12

An increase in overseas economic growth would

Answer 12

Increase exports and aggregate demand.

Question 13

Leakages refer to

Answer 13

Private savings, tax revenue and imports

Question 14

Injections refer to

Answer 14

Private investment, government spending and exports

Question 15

Households provide businesses with (Flow 1)

Answer 15

Resources

Question 16

Businesses provide households with (flow 2)

Answer 16

Income

Question 17

Aggregate supply refers to

Answer 17

The total value of production for all goods and services in an economy over a period of time.

Question 18

The two main factors which impact aggregate supply are

Answer 18

Cost of production and efficiency.

Question 19

If there was an increase in wage costs this would

Answer 19

Increase the cost of production and decrease aggregate supply

Question 20

The four phases of the business cycle are:

Answer 20

Expansion, contraction, peak and trough

Question 21

An expansion in the business cycle is consistent with

Answer 21

Rising inflation, rising economic growth, falling unemployment.

Question 22

A contraction in the business cycle is consistent with

Answer 22

Easing inflation, declining rates of economic growth, rising unemployment.

Question 23

The goal of strong and sustainable economic growth refers to:

Answer 23

The highest growth rate possible without causing unnecessary environmental, external or inflationary pressures.

Question 24

Economic growth is measured by

Answer 24

Change in real GDP

Question 25

Economic growth below the target range can

Answer 25

Lead to higher rates of unemployment, lower average incomes and worsened living standards.

Question 26

Economic growth above the target range can lead to

Answer 26

Environmental damage from unsustainable use of resources. Inflationary pressures due to shortages.

Question 27

Economic growth can be calculated by

Answer 27

Year 2 - Year 1 / Year 1x 100

Question 28

If economic growth in Year 1 was 100 and in year 2 it was 104, what is the rate of GDP growth?

Answer 28

4% 104 - 100 __________ 100 X100

Question 29

Inflation refers to

Answer 29

A rise in the general level of prices over time.

Question 30

Disinflation refers to

Answer 30

When prices are rising at a slower rate than the previous period.

Question 31

Deflation refers to

Answer 31

The general level of prices falling

Question 32

The goal of low inflation refers to

Answer 32

The general level of prices increasing at 2-3% on average over time.

Question 33

If the rate of inflation is 4% in one quarter and 3% in the next quarter is inflation, disinflation or deflation occurring?

Answer 33

Disinflation

Question 34

A consequence of the inflation rate being too low is:

Answer 34

Delayed consumption Businesses slowing production due to less profit motive

Question 35

A consequence of the inflation rate being too high is:

Answer 35

Erosion of purchasing power. Increased unemployment due to increased cost of production. Lower living standards. A wage price spiral.

Question 36

Demand inflation refers to

Answer 36

When AD increases faster than AS which leads to widespread shortages and upward pressure on prices.

Question 37

Cost inflation refers to

Answer 37

When increases in cost of production or adverse AS conditions are passed on to consumers through higher prices.

Question 38

Headline inflation refers to

Answer 38

The standard rate of inflation measured by changes in the consumer price index (CPI)

Question 39

The underlying rate of inflation refers to

Answer 39

The headline rate of inflation with the removal of any volatile price changes to gain a more accurate indication of price changes in the economy.

Question 40

The goal of low inflation is

Answer 40

For the general level of prices to be rising at a rate of 2-3% on average over time.

Question 41

The current rate of inflation as of March 2025 is:

Answer 41

2.4%

Question 42

If inflation measures within the target range does that mean that the goal of low inflation is achieved?

Answer 42

Not necessarily as it has to be in the target range, on average over time.

Question 43

If CPI is 100 in Year 1 and 104 in Year 2, what is the inflation rate?

Answer 43

4% 104 - 100 _________ x100 100

Question 44

Unemployment refers to

Answer 44

Someone who is over 15 and actively looking for work in the survey week.

Question 45

Employed means

Answer 45

That someone is 15 years and over and worked at least 1 hour in the survey week.

Question 46

Underemployed means

Answer 46

That someone has a job but is working less than they'd prefer.

Question 47

Long term unemployment refers to

Answer 47

Someone who has been looking for work for over 52 weeks.

Question 48

Structural unemployment refers to

Answer 48

When adverse supply side conditions lead to unemployment via changes in business structure.

Question 49

Cyclical unemployment refers to

Answer 49

Changes in the unemployment rate due to the fluctuations in AD and the business cycle.

Question 50

The unemployment rate =

Answer 50

Unemployed _______________ x 100 Labour force

Question 51

The labour force is

Answer 51

All employed + unemployed people

Question 52

The underutilisation rate is

Answer 52

Unemployed + Underemp ______________________ x100 Labour force

Question 53

The Labour Force Participation Rate is

Answer 53

Labour Force ________________ x 100 Population over 15

Question 54

Consequences of unemployment being too high include

Answer 54

Worsened living standards Decreases in GDP

Question 55

Consequences of unemployment being too low include

Answer 55

Higher rates of inflation Lower living standards.

Question 56

The goal of full employment is

Answer 56

To maintain the lowest unemployment rate possible without causing unnecessary inflationary or external pressures.