Chapter 27

Question 1

Business cycle

Answer 1

The four stages an economy goes through over a period of time, as an economy does not grow at a steady rate.

Question 2

Inflation

Answer 2

Increase in the average price level of goods and services over time.

Question 3

Unemployment

Answer 3

This exists when people who are willing and able to work cannot find a job

Question 4

Gross Domestic Product (GDP)

Answer 4

The total value of output of goods and services in a country in one year.

Question 5

Economic growth

Answer 5

A country’s GDP increases, i.e. more goods and services are produced than in the previous year.

Question 6

Balance of payments

Answer 6

This records the difference between a country’s exports and imports.

Question 7

Real income

Answer 7

The value of income or what the income will buy - it falls if prices rise faster than money income

Question 8

Recession

Answer 8

A period of falling GDP.

Question 9

Exports

Answer 9

Goods and services sold from one country to other countries. .

Question 10

Imports

Answer 10

goods and services bought in by one country from other countries.

Question 11

Exchange rate

Answer 11

The price of one currency in terms of another, eg. £1 = $1.50.

Question 12

Exchange rate appreciation

Answer 12

A rise in the value of a currency compared to other currencies.

Question 13

Exchange rate depreciation

Answer 13

The fall in the value of a currency compared with other currencies.

Question 14

Monetary policy

Answer 14

A change in interest rates by the government or central bank, e.g. the European Central Bank.

Question 15

Supply-side policies

Answer 15

Policies to increase the competitiveness of industries in an economy against those from other countries. Policies to make the economy more efficient.

Question 16

Fiscal policy

Answer 16

Any change by the government in tax rates or public sector spending.

Question 17

Direct taxes

Answer 17

Paid directly from incomes, e.g. income tax or profit tax.

Question 18

Indirect taxes

Answer 18

This is added to the prices of goods and taxpayers pay the tax as they purchase the goods. e.g. VAT.

Question 19

Disposable income

Answer 19

The level of income left after a taxpayer has paid income tax and any other taxes on income plus any money benefits from the government.

Question 20

Import tariff

Answer 20

Tax on an imported product.

Question 21

Import quota

Answer 21

A physical limit to the quantity of a product that can be imported.