#12-16 Macroeconomies II (A) - Macroeconomics Issues

Question 1

Actual growth

Answer 1

the expansion or increase in an economy’s level of output or real GDP over time.

Question 2

Potential growth

Answer 2

increase in the productive capacity of the economy, aka the maximum output the economy is capable of producing given available resources and state of technology.

Question 3

Sustained growth

Answer 3

refers to an economy producing at its maximum possible or potential output. Occurs when both the growth in actual and potential output coincides.

Question 4

Sustainable growth

Answer 4

indicates a rate if growth that can be maintained without creating other significant economic problems, particularly for future generations. It implies a positive and stable growth rate over an extended period of time.

Question 5

Inclusive growth

Answer 5

indicates a rate of growth that is sustained over a period of time. It is broad-based across economic sectors and creates productive employment opportunities for the majority of the country’s population.

Question 6

Unemployment

Answer 6

refers to the situation where people in the labour force, who are willing and able to work, are unable to find employment.

Rate = (No. of unemployed / Labour force) x 100%

Question 7

Price stability

Answer 7

the general price level in an economy increases at a low, stable and expected rate. There is an absence of high inflation and deflation.

Question 8

Inflation

Answer 8

the sustained increase in the general price level of an economy over time

Question 9

Deflation

Answer 9

sustained decrease in the general price level of an economy over time

Question 10

Demand-pull inflation

Answer 10

arises when there is excessive aggregate demand in an economy that outpaces aggregate supply, hence leading to a rise in general price levels with little or no increase in real output

Question 11

Cost-push inflation

Answer 11

arises when the short-run aggregate supply in an economy rises due to persistent increase in costs of production, for reasons not associated with increase in aggregate demand, hence leading to a rise in general price level.

Question 12

Balance of payments (BOP)

Answer 12

record or overall statement of all economic transactions in between residents of a country with the rest of the world, usually over a year.

Question 13

Depreciation

Answer 13

when the market forces operate freely such that the external value of a currency decreases

Question 14

Devaluation

Answer 14

when the government unilaterally declared the lowering of the fixed exchange rate