Booklet 3

Question 1

What is the name of inflation which economic agents are expecting and for which they have planned?

Answer 1

Anticipated Inflation

Question 2

What is the term for when a change in one variable automatically leads to an opposing change in another?

Answer 2

Automatic Stabiliser

Question 3

What is the name for a situation where the government’s spending for a given period equals its receipts?

Answer 3

Balanced Budget

Question 4

What is the name for the interest rate set by the Bank of England which influences other interest rates across the UK economy?

Answer 4

Bank rate or Base rate

Question 5

What is the term that describes a fall in the general-price level which is caused by falling costs and which acts as a boost to real incomes?

Answer 5

Benign deflation

Question 6

What describes a situation where the government’s spending in a given period is greater that the government’s receipts, meaning the government will have to borrow?

Answer 6

Budget Deficit

Question 7

What describes a situation where the government receives more in tax revenue than it spends?

Answer 7

Budget Surplus

Question 8

What type of unemployment is cause by real wages being too high?

Answer 8

Classical or Real-Wage unemployment

Question 9

What is the term describing a government policy designed to reduce aggregate demand (or the rate at which aggregate demand is increasing) usually to combat demand-pull inflation?

Answer 9

Contractionary Policy

Question 10

What is the name for the rate of inflation excluding price changes from more volatile items such as food and fuel?

Answer 10

Core Inflation

Question 11

What is the name for inflation caused by rising costs of production?

Answer 11

Cost-push Inflation

Question 12

What is a macro-economic policy designed to work against the business cycle called?

Answer 12

Counter-cyclical policy

Question 13

What is the name for a low but positive rate of inflation which means that prices are rising, but the increase is barely noticeable?

Answer 13

Creeping Inflation

Question 14

What is it called when the currency outflows from a country’s current account exceed the currency inflows?

Answer 14

Current account deficit

Question 15

What is it called when the currency inflows into a country’s current account exceed the currency inflows?

Answer 15

Current account surplus

Question 16

What is unemployment caused by a lack of aggregate demand called?

Answer 16

Cyclical, Keynesian or demand-deficient unemployment

Question 17

What term describes a sustained decrease in the general level of prices?

Answer 17

Deflation

Question 18

What is inflation caused by an increase in aggregate demand called?

Answer 18

Demand-pull inflation

Question 19

What is a tax on income such as wages/salaries or profit called?

Answer 19

Direct tax

Question 20

What is a conscious decision by the government to change its fiscal policy called?

Answer 20

Discretionary fiscal policy

Question 21

What is a fall in the rate of inflation called?

Answer 21

Disinflation

Question 22

What is the name for people who are willing to work at the current wage rate- those in employment and those who are unemployed?

Answer 22

Economically Active

Question 23

What is the name for people who are unwilling to work at the current wage rate or are unable to?

Answer 23

Economically Inactive

Question 24

What is the term used to describe the value of one currency expressed in terms of another currency?

Answer 24

Exchange Rate

Question 25

What is government policy designed to promote economic growth by increasing aggregate demand called?

Answer 25

Expansionary policy

Question 26

What is the name for an unexpected event with origins outside of a country?

Answer 26

External Shock

Question 27

What is the name of expansionary fiscal policy?

Answer 27

Fiscal Loosening

Question 28

What is macroeconomic policy based on the control of taxation and government spending called?

Answer 28

Fiscal Policy

Question 29

What is a contractionary fiscal policy called?

Answer 29

Fiscal Tightening

Question 30

What is the name for interest rates which do not change for the duration of a loan?

Answer 30

Fixed interest rates

Question 31

What are policies designed to increase the economy's productive capacity by reducing government involvement called?

Answer 31

Free-market supply-side policies

Question 32

What is the kind of unemployment where workers who are currently between jobs due to the time taken to find a suitable vacancy called?

Answer 32

Frictional Unemployment

Question 33

What is it called when workers find it difficult to relocate?

Answer 33

Geographical immobility of labour

Question 34

What is the name for a very high rate of inflation, typically in excess of 100% per year?

Answer 34

Hyperinflation

Question 35

What is the name for a tax on expenditure, levied on goods and services?

Answer 35

Indirect Tax

Question 36

What is the name for a sustained increase in the general level of prices?

Answer 36

Inflation

Question 37

What is the reward for saving and the cost of borrowing?

Answer 37

Interest

Question 38

What is the return on savings or borrowing expressed as a percentage?

Answer 38

Interest Rate

Question 39

What is fairness between generations called?

Answer 39

Inter-generational equity

Question 40

What is an unexpected event with origins within a country called?

Answer 40

Internal Shock

Question 41

What are policies designed to increase the economy's productive capacity through greater government intervention called?

Answer 41

Interventionist supply-side policies

Question 42

What is an increase in an economy's real gross domestic product caused by an increase in productive capacity called?

Answer 42

Long-run economic growth

Question 43

What is a fall in the general price level caused by falling aggregate demand called?

Answer 43

Malign deflation

Question 44

What is a macroeconomic policy based on the control of interest rates, the money supply and exchange rates called?

Answer 44

Monetary policy

Question 45

What is the name for the stock of outstanding debt owed by a country's government?

Answer 45

National debt

Question 46

What is the difficulty workers have in changing jobs due to a lack of transferrable skills called?

Answer 46

Occupational immobility of labour

Question 47

What is the name for macroeconomic policy designed to work in line with the business cycle?

Answer 47

Pro-cyclical policy

Question 48

What is the name for a tax that will take a higher proportion of high earner's income?

Answer 48

Progressive tax

Question 49

What is the name for a tax that will take an equal proportion of everybody's income?

Answer 49

Proportionate tax

Question 50

What is the name for real national output/income per person?

Answer 50

Real G.D.P per capita

Question 51

What is the name for a tax that will take a higher proportion of low earners' income?

Answer 51

Regressive tax

Question 52

What is it called when workers are unemployed only at certain times of the year?

Answer 52

Seasonal unemployment

Question 53

What is an increase in an economy's real gross domestic product caused by increased use of its productive capacity called?

Answer 53

Short-run economic growth

Question 54

What is unemployment cause by a change in the structure of the economy which means that there is no longer demand for a certain type of labour called?

Answer 54

Structural Unemployment

Question 55

What are policies designed to increase long run aggregate supply and increase the productive capacity called?

Answer 55

Supply-side policies

Question 56

What unemployment is often regarded as part of structural unemployment, caused by workers being replaced by machinery?

Answer 56

Technological unemployment

Question 57

What is it called when the value of a country's imports exceeds the value of the country's exports?

Answer 57

Trade deficit

Question 58

What is inflation which economic agents are not expecting and for which they have not planned called?

Answer 58

Unanticipated inflation

Question 59

What is it called when a worker has a job but is working fewer hours than they would like - e.g. someone who wants a full time job but takes a part-time job?

Answer 59

Underemployment

Question 60

What is the number of people who are actively seeking employment at a prevailing wage rate but are unable to find it called?

Answer 60

Unemployment

Question 61

What are interest rates that change, usually in response to changes in Bank Rate, such as some mortgages and most savings accounts, called?

Answer 61

Variable interest rates

Question 62

What is a scenario when rising inflation leads workers to demand increased pay to maintain their standard of living, which in turn increases firms' costs leading to further price rises and more inflation called?

Answer 62

Wage-price spiral

Question 63

What are the two measures of unemployment used in the UK?

Answer 63

Claimant Count LFS - Labour Force Survey

Question 64

Give four sources of demand-pull inflation.

Answer 64

Increasing income/consumer confidence Falling interest rates Increased government spending Increased Exports

Question 65

Give four sources of cost-push inflation.

Answer 65

Rising Wages Increasing Indirect taxes Rising energy/fuel costs Rising raw material prices

Question 66

Give three possible benefits to inflation.

Answer 66

Allowing some inflation means that relative prices can adjust Difficulties in measuring inflation may mean that targeting zero could mean deflation is actually happening Inflation may mean that firms can overcome the problem of prices (especially wages) being sticky-downwards.