11 - economic growth and the economic cycle

Question 1

recession

Answer 1

negative economic growth over two successive quarters

Question 2

economic growth

Answer 2

an increase in the real output of the economy

Question 3

long term growth rate

Answer 3

the average rate of economic growth sustained over a period of time

Question 4

real gross domestic product (gdp) per capita

Answer 4

the total output of the economy in a year, divided by the size of the population adjusted for inflation

Question 5

production possibility boundary (PPB)

Answer 5

diagram of a simplified economy showing the maximum combination of products that can be produced given maximum productive efficiency

Question 6

actual growth

Answer 6

an increase in the productive potential of the economy matched by an increase in demand

Question 7

potential growth

Answer 7

an increase in the productive potential of the economy, not necessarily matched by an increase in demand

Question 8

output gap

Answer 8

the difference between the actual level of GDP and the productive potential of the economy

Question 9

trend rate of economic growth

Answer 9

the long run average increase in GDP

Question 10

Economic cycle

Answer 10

the cyclical pattern of short term fluctuations in GDP from year to year

Question 11

supply side policies

Answer 11

a range of measures designed to increase aggregate supply

Question 12

activity rate/participation rate

Answer 12

the proportion of the population of working age in a job or actively seeking work

Question 13

occupational immobility

Answer 13

the difficulties faced by workers wishing to change occupations due to not having the required skills or qualifications

Question 14

labour productivity

Answer 14

output per worker per hour

Question 15

gross domestic product (GDP)

Answer 15

output produced by resources within the UK

Question 16

Gross national product (GNP)

Answer 16

output produced by resources within the UK plus net property income from abroad

Question 17

national income

Answer 17

output produced by resources within the UK plus net property income from abroad minus depreciation of the nations capital equipment

Question 18

human development index

Answer 18

a measure of economic welfare based on the average of 3 indicators-standard of living, life expectancy and educational attainment

Question 19

human poverty index

Answer 19

a measure of economic welfare based on 4 basic dimensions of human life- longevity, knowledge, economic provisioning and social inclusion

Question 20

measure of domestic progress

Answer 20

a measure of economic welfare designed to reflect progress in quality of life and progress towards a sustainable economy by factoring in the social and environmental costs of growth and benefits of unpaid work such as household labour

Question 21

misery index

Answer 21

a measure of economic welfare constructed by adding the unemployment rate to the inflation rate

Question 22

sustainability (of economic growth)

Answer 22

economic growth which does not impose costs on future generations

Question 23

balance of payments

Answer 23

a record of the financial transactions over a period of time between a country and its trading partners

Question 24

inventory investment/stock building

Answer 24

investment by firms in stocks of raw materials and stocks of finished goods ready to be sold

Question 25

demand pull inflation

Answer 25

inflation resulting from too much demand in the economy, relative to supply capacity

Question 26

accelerator theory

Answer 26

the theory that the level of investment is related to past changes in national income

Question 27

multiplier effect

Answer 27

a change in one of the components of aggregate demand leads to a greater overall change in national income

Question 28

multiplier/accelerator model

Answer 28

a model which describes how the interaction of the accelerator theory and multiplier effect leads to changes in national income