Y1 Economic performance

Question 1

Economic growth

Answer 1

An increase in the productive potential of an economy. Measured as an increase in real GDP.

Question 2

The business cycle

Answer 2

Fluctuations in economic growth over time

Question 3

The multiplier effect

Answer 3

A change in spending brings about a more than proportional change in national income

Question 4

Sustainable growth

Answer 4

Long-term, non-inflationary growth

Question 5

Trend rate growth

Answer 5

The long-term expected growth of an economy

Question 6

Actual growth

Answer 6

Demand-led growth

Question 7

Factors that shift SRAS

Answer 7

Cost of production
Exchange rates
Taxation and subsidies

Question 8

Factors that shift LRAS

Answer 8

New technology
FDI
Migration/population growth
Education/training
Supply-side policy

Question 9

Supply-side policies

Answer 9

Improve the quantity and/or quality of factors of production. Or they address market failure.

Question 10

Hysteresis

Answer 10

The productive potential of an economy is damaged in deep recession, so that the economy struggles to bounce back,

Question 11

Production possibility frontier

Answer 11

The max production of an economy given resources & tech

Question 12

Pros of economic growth

Answer 12

Better standards of living
Less unemployment
Better public services
Lower gov borrowing
Accelerator effect

Question 13

Cons of economic growth

Answer 13

Inflation
Environmental damage
Scarce resources run out
Inequality of growth
Potentially worse trade balance
Boom-bust cycle

Question 14

Leverage

Answer 14

The use of borrowed money to amplify the results of an investment

Question 15

Measuring unemployment

Answer 15

Claimant count- People claiming benefits
International labour organisations- Surveys

Question 16

Costs of unemployment

Answer 16

Opportunity cost
Waste of FoP
Poverty
Hysteresis

Question 17

Types of unemployment

Answer 17

Frictional
Structural
Cyclical
Technological (avoid)
Regional
Seasonal (avoid)
Voluntary
Classical

Question 18

Policies to reduce youth unemployment

Answer 18

Reduce min wage for youth
Vocational skills training
Apprenticeships
Reduce national insurance for employers to employ youth

Question 19

Long-term unemployment

Answer 19

12+ months
De-skilled and de-motivated
Increasingly difficult to find work

Question 20

Inflation

Answer 20

Sustained increase in general price level

Question 21

CPIH

Answer 21

Consumer Price Index including Housing.
Price change of certain necessities each year.

Question 22

Causes of demand-pull inflation

Answer 22

Availability of credit
Lower interest rates
Wealth effect
Gov spending
Booming foreign economies
Depreciation

Question 23

Causes of cost-push inflation

Answer 23

More expensive raw materials
Rising wages
Increased tax

Question 24

Monetary policy

Answer 24

Use of interest rates and money supply to influence AD

Question 25

Fiscal policy

Answer 25

Use of gov spending and taxation to control the economy

Question 26

A tax

Answer 26

A compulsory payment to the government in order to raise money

Question 27

Fiscal multiplier

Answer 27

An initial change in spending will bring about a more than proportional change in GDP.

Question 28

Public sector net borrowing

Answer 28

The amount the gov needs to borrow in a year

Question 29

Uses of fiscal policy

Answer 29

Influence allocation of resources (tax/subsidy) Address market failure (duty) Demand management (income tax) Supply management (tax breaks)

Question 30

Automatic stabilisers

Answer 30

Features of the fiscal system that lessen the impact of change

Question 31

Tax burden

Answer 31

Tax as a % of GDP

Question 32

Stealth tax

Answer 32

When increasing earnings and inflation mean that tax revenue increases

Question 33

Fiscal drag

Answer 33

When wage growth & inflation means that people are pushed into higher tax brackets (but their real wage hasn't increased)

Question 34

Roy Jenkins

Answer 34

1965-67 136% income tax

Question 35

Pro austerity

Answer 35

Decrease national debt Future gens aren't burdened Benefit cuts to reduce voluntary unemployment

Question 36

Anti austerity

Answer 36

NHS waiting lists Social care at breaking point Less police = more crime Less economic growth

Question 37

Reasons for low investment in UK

Answer 37

Uncertainty of economy Volatile interest rates Labour relatively cheap Lack of gov encouragement Short-termism of shareholders and businesses

Question 38

The accelerator

Answer 38

Increase in growth results in increases investment, which results in increased growth. So a change in GDP brings a more than proportional change in investment.

Question 39

Marginal efficiency of capital MEC

Answer 39

Rate of return on each additional unit of capital