Chapter 19, Economic factors, economic policy

Question 1

Inflation

Answer 1

the persistent general tendency of prices in the economy to rise

Question 2

‘In real terms’

Answer 2

earnings adjusted for the effects of price rises. Price rise reduces the purchasing power of earnings.

Question 3

Economic growth

Answer 3

an increase in the volume of goods and services (GPD) Produced every year

Question 4

Balance of trade

Answer 4

difference between the value of exports and imports.

Question 5

Monetary policy

Answer 5

manipulation of the level of demand in the economy using the rate of interest

Question 6

Monetary Policy committee

Answer 6

MPC, department of the bank of England who meet monthly to decide whether to change rate of interest

Question 7

Effects of a rise in interest rates for a business

Answer 7

• Investment will fall

- Consumer spending will fall

Question 8

Effects of a fall in the rate of interest for a business

Answer 8

• the investment will increase

- consumer spending will increase

Question 9

Public Spending

Answer 9

welfare, housing, health, education, the environment, transport, and defence

Question 10

The Multiplier

Answer 10

the effects of change in economic activity of one sector on other sectors

Question 11

TED

Answer 11

Trend in variable
Extent of the change
Duration of the change