Chapter 8 - Economic performance

Question 1

ECONOMIC PERFORMANCE

Answer 1

success or failure in achieving policy objectives

Question 2

ECONOMIC RECOVERY

Answer 2

when SR economic growth happens after a recession

Question 3

DEMAND-SIDE

Answer 3

impact of changes in aggregate demand on the economy

Question 4

SUPPLY-SIDE

Answer 4

changes in potential output affected by the available factors of production e.g. productivity

Question 5

TREND GROWTH RATE

Answer 5

rate at which output can grow without inflationary pressures

Question 6

SEASONAL FLUCTUATION

Answer 6

variation in economic activity due to a change in season

Question 7

ECONOMIC CYCLE

Answer 7

ups and downs in economic activity over a period of 4-12 years

Question 8

ACTUAL OUTPUT

Answer 8

level of real output in the economy in a particular year

Question 9

TREND OUTPUT

Answer 9

what the economy is capable of producing when working at full capacity

Question 10

POSITIVE OUTPUT GAP

Answer 10

the level of actual real output is GREATER than the trend output

Question 11

NEGATIVE OUTPUT GAP

Answer 11

the level of actual real output is LOWER than the trend output

Question 12

FRICTIONAL UNEMPLOYMENT (transitional unemployment)

Answer 12

short term unemployment due to workers that are in-between jobs

Question 13

GEOGRAPHICAL IMMOBILITY OF LABOUR

Answer 13

workers are unwilling or unable to move location in search of work

Question 14

OCCUPATIONAL IMMOBILITY OF LABOUR

Answer 14

workers are unwilling or unable to move jobs due to their skills

Question 15

STRUCTUAL UNEMPLOYMENT

Answer 15

long term unemployment due to declining industries or growing and replacing labour with technology

Question 16

CYCLICAL UNEMPLOYMENT

Answer 16

unemployment due to a lack of AD because of recession or depression

Question 17

SEASONAL UNEMPLOYMENT

Answer 17

unemployment arising due to different seasons

Question 18

REAL WAGE

Answer 18

purchasing power of the nominal wage

Question 19

REAL-WAGE UNEMPLOYMENT

Answer 19

unemployment due to real wages being stuck above the equilibrium real wage

Question 20

VOLUNTARY UNEMPLOYMENT

Answer 20

when workers don’t work as they’re looking for a higher paid job

Question 21

INVOLUNTARY UNEMPLOYMENT

Answer 21

when their are no jobs available

Question 22

EQUILIBRIUM UNEMPLOYMENT

Answer 22

when the economy’s aggregate labour market is in equilibrium

Question 23

NATURAL RATE OF UNEMPLOYMENT (NRU)

Answer 23

rate of unemployment when the labour market is in equilibrium

Question 24

DEMAND-PULL INFLATION

Answer 24

rising price level caused by a shift in demand

Question 25

COST-PUSH INFLATION

Answer 25

rising price level due to an increase in costs, shown by a shift in the SRAS curve

Question 26

WAGE-COST INFLATION

Answer 26

rising price level caused by an increase in wages and salaries (movement in SRAS curve)

Question 27

IMPORT-COST INFLATION

Answer 27

rising price level due to an increase in import spending (movement in SRAS curve)

Question 28

EMERGING-MARKET COUNTRY

Answer 28

country thats progressing to becoming more economically advanced by rapid growth and industrialisation

Question 29

DISINFLATION

Answer 29

when the rate of inflation is falling

Question 30

MONETARISTS

Answer 30

economists who argue that a prior increase in the money supply is the cause of inflation

Question 31

QUANTITY THEORY OF MONEY

Answer 31

inflation is caused by an increase in the money supply

Question 32

EQUATION OF EXCHANGE

Answer 32

stock of money x velocity of circulation=price level x quantity of real output

Question 33

CURRENT ACCOUNT DEFICIT

Answer 33

exports less than imports

Question 34

CURRENT ACCOUNT SURPLUS

Answer 34

exports greater than imports

Question 35

BALANCE OF TRADE IN GOODS

Answer 35

part of the current account measuring difference in payments for exports and imports of goods

Question 36

BALANCE OF TRADE IN SERVICES

Answer 36

part of the current account measuring difference in payments for exports and imports of services

Question 37

NET INVESTMENT INCOME

Answer 37

difference between inward and outward flows in investment income

Question 38

TRANSFERS

Answer 38

payments flowing between countries in forms of aid, grants, private transfers and gifts

Question 39

EXPORT-LED GROWTH

Answer 39

economic growth due to an increase in exports in the short run, and increased national competitiveness of exporting industries in the long run

Question 40

REINDUSTIRIALISE

Answer 40

growth of industries which will replace industries which have disappeared or shrunk

Question 41

PHILLIPS CURVE

Answer 41

shows relationship between rate of inflation and rate of unemployment

Question 42

LR PHILLIPS CURVE

Answer 42

vertical line showing the NRU