2.9 Measures of economic performance: economic growth

Question 1

What is macroeconomics?

Answer 1

the study of the interrelationships between economic variables at an aggregate (macroeconomic) level.

Question 2

what is “nominal value”?

Answer 2

the value of an economic variable based on current prices, taking into account of changing prices through time.

Question 3

what is “real value”?

Answer 3

the value of an economic variable, taking account of changing prices through time.

Question 4

what is index number?

Answer 4

a device for comparing the value of a variable in one period or location with a base observation (e.g. the consumer price index).

Question 5

what is potential economic growth?

Answer 5

an expansion in the productive capacity of the economy.

Question 6

what is gross domestic product, (GDP)?

Answer 6

a measure of the economic activity carried out in the domestic economy over a period.

Question 7

what is gross national income, (GNI)?

Answer 7

GDP plus net income from aboard.

Question 8

what is actual economic growth?

Answer 8

the rate of growth of GDP in a period.

Question 9

what is the business cycle?

Answer 9

a phenomenon whereby GDP fluctuates around its underlying trend, following a regular pattern.

Question 10

what is GNI per capita?

Answer 10

the average level of GNI per head of population.

Question 11

what is inflation?

Answer 11

the rate of increase in the average price level in an economy

Question 12

What is consumer price index, (CPI)?

Answer 12

a measure of the general level of prices in the UK, the rate of change of which has been used as the government’s inflation target sine January 2004.

Question 13

What is retail price index, (RPI)?

Answer 13

A measure of the average level of prices in the UK

Question 14

What is deflation?

Answer 14

A fall in the average leek of prices (negative inflation).

Question 15

What is disinflation?

Answer 15

A fall in the rate of inflation

Question 16

What does “in employment” mean?

Answer 16

People who are either working for firms of other organisations, or self-employed.

Question 17

What does economically inactive mean?

Answer 17

Those people of working age who are not looking for work, for a variety of reasons.

Question 18

What does discouraged workers mean?

Answer 18

People who have been unable to find employment and who are no longer looking for work.

Question 19

What does workforce mean?

Answer 19

People who are economically active - either unemployment or employment.

Question 20

What does unemployment mean

Answer 20

People who are economically active but not in employment.

Question 21

What does full employment mean?

Answer 21

A situation where people who are economically active in the workforce and are willing and about to work (at going wage rates) are able to fine employment

Question 22

What does claimant count of unemployment mean

Answer 22

The number of people claiming the Jobseeker’s Allowance each month

Question 23

What is ILO unemployment rate?

Answer 23

A measure of the percentage of the workforce who are without jobs, but are available for work, willing to work and looking for work.

Question 24

What does underemployment mean

Answer 24

Where an individual is employed in a second - choice occupation or is only able to work part-time but would like to work full-time

Question 25

What is frictional unemployment

Answer 25

Unemployment associated with job search (I.e. People are between jobs).

Question 26

What is structural unemployment,

Answer 26

Unemployment arising because of changes in the pattern of economic activity within an economy.

Question 27

What is cyclical unemployment

Answer 27

Unemployment that arises during the downturn of the economic cycle, such as a recession

Question 28

What is demand-deficient unemployment

Answer 28

Unemployment that arises because of a deficiency of aggregate demand in the economy, so that the equilibrium level of output is below full employment

Question 29

What is seasonal unemployment

Answer 29

Unemployment that arises in seasons of the year when demand is relatively low

Question 30

What is voluntary unemployment

Answer 30

Situation arising when an individual chooses not to accept a job at the going wage rate

Question 31

What is involuntary unemployment

Answer 31

Situation arising when an individual who would like to accept a job at the going wage rate is able to fine employment

Question 32

What is balance of payments

Answer 32

A set of accounts showing the transactions conducted between residents of a country and the rest of the world

Question 33

What is exchange rate

Answer 33

The price of one currency in terms of another

Question 34

What is aggregate demand

Answer 34

The to take amount of spending on goods and services produced in an economy during a period of time

Question 35

What is consumption (part of aggregate demand)

Answer 35

Total planned household spending

Question 36

What is disposable income?

Answer 36

The income that households have to devote to consumption and saving, taking into account payments of direct taxes and transfer payments

Question 37

What is a eager propensity to consume?

Answer 37

The proportion of income that households devote to consumption

Question 38

What is marginal propensity to consume, (MPC)?

Answer 38

The proportion of additional income devoted to consumption

Question 39

What is marginal propensity to save (MPS)

Answer 39

The proportion of an increase in disposable income that households would devote to saving

Question 40

What is consumption function

Answer 40

The relationship between consumption and disposable income; its position depends on the other factors that affect how much households spend on consumption