Unit 3

Question 1

3.1-The study of economic activity from a whole economy perspective.

Answer 1

Macroeconomics

Question 2

3.1-The way the economic rate of growth of a country rises and falls over time.

Answer 2

Business cycle

Question 3

3.1-An economic model that illustrates the flow of money between firms and households at a macroeconomic level.

Answer 3

Circular flow of income

Question 4

3.1- Where scarce resources are allocated to produce goods and services to satisfy human wants.

Answer 4

Economic activity

Question 5

3.1-The total income generated by a country and is calculated by adding net property income from abroad to the GDP.

Answer 5

Gross national income (GNI)

Question 6

3.1-The average rate of growth over a number of years.

Answer 6

Trend rate of economic growth

Question 7

3.1-The increase in a country’s real GDP over time.

Answer 7

Economic growth

Question 8

3.1-The money value of a country’s output of final goods and services produced in one year.

Answer 8

National income

Question 9

3.2-Household spending on final goods and services.

Answer 9

Consumption

Question 10

3.2-Household expectations of their future economic prospects.

Answer 10

Consumer confidence

Question 11

3.2-The cost borrowers pay for borrowed funds and the reward lenders receive for lending funds.

Answer 11

Interest rate

Question 12

3.2- The day-to-day running of the government sector such as paying the wages of teachers, doctors and military personnel.

Answer 12

Current government expenditure

Question 13

3.2- The value of assets households own.

Answer 13

Househould wealth

Question 14

3.2- The relationship between the average price level of an economy and the demand for the real output.

Answer 14

Aggregate demand curve

Question 15

3.2- Welfare payments such as unemployment and housing benefits.

Answer 15

Government transfer payments

Question 16

3.2-Goods and services produced overseas and sold in the domestic economy generate an outflow of funds from the domestic economy.

Answer 16

Imports

Question 17

3.2-Total expenditure on all final goods and services produced in the economy at a given price level and at a given point in time.

Answer 17

Aggregate demand

Question 18

3.2-Business expenditure on capital goods.

Answer 18

Investment

Question 19

3.2-Total government borrowing over time.

Answer 19

National debt

Question 19

3.2-Government borrowing over one year.

Answer 19

Budget deficit

Question 19

3.2-Investment projects financed by the government such as roads, bridges and schools.

Answer 19

Government capital expenditure

Question 19

3.2-Value of its exports (X) less the value of its exports and imports (M).

Answer 19

Net exports

Question 20

3.2-Domestically produced goods and services sold in overseas markets generate an inflow of funds into the domestic economy.

Answer 20

Exports

Question 21

3.2-Government expenditure and taxation are used to achieve a government’s economic objectives such as inflation, growth and unemployment.

Answer 21

Fiscal policy

Question 22

3.2-Manager’s expectations of future profits and sales.

Answer 22

Business confidence

Question 23

3.2-The output the economy can achieve if its resources are fully employed.

Answer 23

Potential output

Question 24

3.2-The increase in a country’s real GDP over a given time period.

Answer 24

Economic growth

Question 25

3.2-The output the economy achieves with current resource utilisation.

Answer 25

Actual output

Question 26

3.3-The output the economy achieves with current resource utilisation.

Answer 26

Actual output

Question 27

3.3-The output the economy can achieve if its resources are fully employed.

Answer 27

Potential output

Question 28

3.3-The increase in a country’s real GDP over a given time period.

Answer 28

Economic growth

Question 29

3.3-Unemployment that occurs when the demand for goods and services decreases at different times of the year and this causes a fall in the demand for labour.

Answer 29

Seasonal unemployment

Question 30

3.3-Unemployment becomes concentrated in a particular area of a country.

Answer 30

Regional unemployment

Question 31

3.3-The lowest legal wage rate employers can pay in the labour market.

Answer 31

Minimum wage

Question 31

3.3-Unemployment that occurs when there is imperfect communication in the labour market between potential employers and unemployed workers.

Answer 31

Frictional unemployment

Question 31

3.3-The total number of people in work and people who are unemployed.

Answer 31

Labour force

Question 32

3.3-The total number of unemployed is expressed as the percentage of the labour force.

Answer 32

Unemployment rate

Question 32

3.3-The rate of unemployment that exists in the long run in the economy and is made up of frictional and structural unemployment.

Answer 32

The natural rate of unemployment

Question 32

3.3-The count of jobless people in a country who are seeking work but who do not have a job

Answer 32

Unemployment

Question 33

3.3-Unemployment that occurs when the economy is going through a period of slow economic growth or a recession.

Answer 33

Demand-deficient unemployment

Question 33

3.3-Workers find it difficult to find new jobs because their skills are not easily transferable to new employment.

Answer 33

Structural unemployment

Question 33

3.3-Rising prices lead to higher wage demands from workers which in turn leads to higher prices and higher wage demands.

Answer 33

Wage-price spiral

Question 34

3.3-A fall in the rate of inflation in an economy.

Answer 34

Disinflation

Question 34

3.3-When a rise in aggregate demand in the economy causes (pulls) the price level in the economy to increase.

Answer 34

Demand-pull inflation

Question 34

3.3-When there is a fall in short-run aggregate supply and the price level is pushed up by rising costs.

Answer 34

Cost-push inflation

Question 35

3.3-The sustained decrease in the general level of prices in an economy

Answer 35

Deflation

Question 36

3.3-The sustained increase in the general level of prices in an economy.

Answer 36

Inflation

Question 37

3.3-The rate of inflation that removes one-off price changes that distort the index to forecast future inflation.

Answer 37

Core rate of inflation

Question 38

3.3-HL-Falling national income and rising inflation.

Answer 38

Stagflation

Question 39

3.3-HL- Non-accelerating inflation rate of unemployment.

Answer 39

National Rate of Unemployment

Question 40

3.3-HL- The relationship between the rate of inflation and the rate of unemployment.

Answer 40

Phillips Curve

Question 41

3.4-Where households in a country lack the income needed to achieve a basic standard of living.

Answer 41

Poverty

Question 42

3.4-Unfairness in society prevents individuals from achieving a particular economic outcome.

Answer 42

Inequity

Question 43

3.4-A greater proportion of income is earned by the richest households compared to the rest of the population.

Answer 43

Unequal distribution of income

Question 44

3.4-A greater proportion of the value of assets in a country is owned by the richest households compared to the rest of the population.

Answer 44

Unequal distribution of wealth

Question 44

3.4-A weighted index used to measure poverty in a country based on a survey of households.

Answer 44

Multidimensional Poverty Index (MPI)

Question 44

3.4-When household income is below the level needed to meet a person’s basic needs of life including housing, food, safe drinking water, education and healthcare, etc.

Answer 44

Absolute poverty

Question 44

3.4-The way the income generated by the economic activity of a country is shared amongst the country’s population.

Answer 44

Distribution of income

Question 44

3.4-Fairness in terms of everyone in society having an equal opportunity to achieve an economic outcome.

Answer 44

Equity

Question 44

3.4-The economic outcomes for different people in society are the same.

Answer 44

Equality

Question 44

3.4-A graph that shows the distribution of income in a country.

Answer 44

Lorenz curve

Question 45

3.4-The minimum level of income needed for a basic standard of living in a country.

Answer 45

A poverty line

Question 45

3.4-Is a value used to measure the size of a country’s income inequality.

Answer 45

Gini coefficient

Question 45

3.4-The percentage of tax paid on each extra $ of income someone earns.

Answer 45

Marginal rate of tax

Question 46

3.4-Where a household’s income is significantly below a country’s average income.

Answer 46

Relative poverty

Question 47

3.4-Where a government makes an unconditional, regular payment to everyone in a country.

Answer 47

Universal Basic Income

Question 48

3.4-Tax on household income and business profits.

Answer 48

Direct tax

Question 48

3.4-The percentage of tax paid on an individual’s total income.

Answer 48

Average rate of tax

Question 49

3.4-A tax on expenditure on goods and services such as VAT.

Answer 49

Indirect tax

Question 50

3.4-A direct tax system where the average rate of tax remains constant as income increases.

Answer 50

A proportional tax

Question 50

3.4-The rate of tax rises as an individual’s income rises which means their marginal rate of tax increases with income.

Answer 50

Progressive tax

Question 51

3.4-People on lower incomes spend a higher proportion of their income on goods where they have to pay indirect tax compared to people on higher incomes.

Answer 51

Regressive tax

Question 52

3.5-A monetary tool used by the central bank to regulate the money supply by buying and selling government bonds.

Answer 52

Open market operations

Question 53

3.5-The quantity of cash banks must hold as a reserve or keep in deposit at the central bank.

Answer 53

Minimum reserve requirement

Question 53

3.5-Where the government uses interest rates and the supply of money to achieve its macroeconomic objectives.

Answer 53

Monetary policy

Question 53

3.5-The interest rate charged by the central bank to the commercial banking sector.

Answer 53

Basic interest rate

Question 53

3.6- This is the proportionate change in imports brought about by a changing income.

Answer 53

Marginal propensity to import (MPM)

Question 53

3.5- Where the government through the central banks reduces interest rates and increases the supply of money to increase consumption and investment to increase aggregate demand.

Answer 53

Expansionary monetary policy

Question 53

3.5-An interest rate that makes an allowance for inflation.

Answer 53

Real interest rate

Question 54

3.6-Where the government decreases taxation and increases government spending to increase aggregate demand.

Answer 54

Expansionary fiscal policy

Question 54

3.5-Where the government through the central bank increases interest rates and decreases the supply of money to reduce the rate of inflation.

Answer 54

Contractionary monetary policy

Question 55

3.6-The ratio of a change in government expenditure to a change in national income.

Answer 55

Government expenditure multiplier

Question 56

3.6-Where the government increases taxation and decreases government spending to decrease aggregate demand.

Answer 56

Contractionary fiscal policy

Question 57

3.6-This is the proportionate change in consumption brought about by a change in income.

Answer 57

Marginal propensity to consume (MPC)

Question 58

3.6- This is the proportionate change in tax brought about by a changing income.

Answer 58

Marginal propensity to tax (MPT)

Question 59

3.6-Where the government uses taxation and government expenditure to achieve its economic objectives.

Answer 59

Fiscal policy

Question 60

3.6-Accumulated government borrowing over time.

Answer 60

National debt

Question 61

3.6-A change in injections brings about a greater proportionate change in national income.

Answer 61

The multipier

Question 62

3.7-Where the government creates the conditions in the economy for the free market to achieve macroeconomic objectives.

Answer 62

market-based policies

Question 63

3.7-Reducing or removing rules and laws that reduce business costs and increase productive efficiency.

Answer 63

Deregulation of markets

Question 63

3.7-Selling government-owned assets to private ownership.

Answer 63

Privatisation

Question 63

3.7-Where the government is actively involved in the supply side of the economy to achieve its macroeconomic objectives.

Answer 63

Interventionist supply-side policy

Question 63

3.7-Organisations set up to represent the interest of workers in a particular occupation or industry.

Answer 63

Trade union

Question 64

3.7-The capital that supports the overall functioning of a country's economy such as roads, rail transport and ports.

Answer 64

Infrastructure

Question 64

3.7-Where a government puts an upper limit on the price of certain goods in the economy such as energy and food.

Answer 64

Price controls

Question 64

3.7-Where the government sets a limit on wage increases to try and break a wage-price spiral.

Answer 64

Incomes policy

Question 65

3.7- Barriers such as tariffs and quotas can be used to reduce foreign competition for domestic firms and protect domestic employment.

Answer 65

Trade protectionism