Chapter 7 - External Economic Influences On Business Activity

Question 1

Market Failure

Answer 1

When markets fail to achieve the most efficient allocation of resources, resulting in under or overproduction of certain goods or services.

Question 2

External Costs

Answer 2

The costs of an economic activity that are not paid for by the producer or consumer, but by the rest of society.

Question 3

Macroeconomic Objectives

Answer 3

The goals of a government is aiming to achieve for the whole economy.

Question 4

Economic Growth

Answer 4

An increase in a country’s productive potential, measured by an increase in its real GDP.

Question 5

Real GDP

Answer 5

Gross domestic product data adjusted for the effects of inflation.

Question 6

Inflation

Answer 6

An increase in the average price level of goods and services resulting in a fall in the value of money.

Question 7

.Unemployment

Answer 7

When members of the working population are willing and able to work but are unable to find a job.

Question 8

Imports

Answer 8

Goods and services purchased from other countries.

Question 9

Exports

Answer 9

Goods and services sold to consumers and businesses in other countries.

Question 10

Exchange Rate

Answer 10

The price of one currency in terms of another.

Question 11

Recession

Answer 11

A decline in real GDP of 2 or more quarters ( at least six months).

Question 12

Business Investment

Answer 12

Expenditure by businesses on capital equipment, new technology and research and development.

Question 13

Labor Productivity

Answer 13

Average Output per employee in a given time period.

Question 14

Business Cycle

Answer 14

The regular swings in output, measured by real GDP, that occur in most economies, varying from boom conditions to recession.

Question 15

Stages Of Business Cycle

Answer 15

1) Boom
2) Recession
3) Slump
4) Recovery and Growth

Question 16

Deflation

Answer 16

A fall in the average price level of goods and services.

Question 17

Hyperinflation

Answer 17

Very high and accelerating inflation, which quickly erodes the real value of the local currency.

Question 18

Working Population

Answer 18

All those in the population of working age who are willing and able to work.

Question 19

Cyclical Unemployment

Answer 19

Unemployment caused by low demand for goods and services during a period of slow economic growth or a recession.

Question 20

Structural Unemployment

Answer 20

Unemployment caused by the decline in important industries, leading to significant job losses in one sector of industry.

Question 21

Frictional Unemployment

Answer 21

Unemployment caused by the workers losing or leaving job and taking a substantial period of time to find alternative employment.

Question 22

Monetary Policy

Answer 22

Decisions about the level of interest rates and the supply of money in the economy.

Question 23

Fiscal Policy

Answer 23

Decisions about government expenditure, tax rates and government borrowing.

Question 24

Budget Deficit

Answer 24

The value of government spending exceeds revenue form taxation.

Question 25

Budget Surplus

Answer 25

The value of taxation revenue exceeds the value of government spending.

Question 26

Supply Side Policy

Answer 26

Government measures that aim to improve the competitiveness of markets and the economy.

Question 27

Exchange Rate Depreciation

Answer 27

A Fall in the external value of a currency as measured by its exchange rate against other currencies.

Question 28

Exchange Rate Appreciation

Answer 28

A rise in the external value of a currency as measured by its exchange against other currencies.

Question 29

Common Currency

Answer 29

A currency that is used by more than one country.

Question 30

Eurozone

Answer 30

Countries in the European Union that all use the euro currency.

Question 31

Gross Domestic Product

Answer 31

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