Deck 1 (A-C)

Question 1

Absolute advantage

Answer 1

A country’s ability to produce a good using less resources than another country

Question 2

Aggregate demand (AD)

Answer 2

The relationship between the level of aggregate demand and the overall price level; it shows planned expenditure at any given possible overall price level

Question 3

Appreciation

Answer 3

A rise in the exchange rate within a floating exchange rate system

Question 4

Automatic stabilisers

Answer 4

Effects by which government expenditure adjusts to offset the effects of a recession and boom without the need for active intervention

Question 5

Average propensity to consume

Answer 5

The proportion of income that households devote to consumer expenditure

Question 6

Balance of payments

Answer 6

A set of accounts showing the transactions conducted between residents of a country and the rest of the world

Question 7

Aggregate supply

Answer 7

The total amount that producers in an economy are willing and able to supply at a given price level in a given time period

Question 8

Bank rate

Answer 8

The interest rate that is set by the Monetary Policy Committee of the Bank of England in order to influence inflation

Question 9

Canons of Taxation

Answer 9

Four maxims devised by Adam Smith, setting out the characteristics of a good tax - equity, certainty, convenience, economy.

Question 10

Capital account of the balance of payments

Answer 10

Account identifying transactions in (physical) capital between residents of a country and the rest of the world

Question 11

Capital productivity

Answer 11

Measure of output per unit of capital

Question 12

Claimant count of unemployment

Answer 12

The number of people claiming the Jobseeker’s Allowance each month

Question 13

Comparative advantage

Answer 13

A country’s ability to produce a good relatively more efficiently (at a lower opportunity cost) than another country

Question 14

Consumer price index (CPI)

Answer 14

A measure of the general level of prices in the UK

Question 15

Consumption function

Answer 15

The relationship between consumer expenditure and disposable income

Question 16

Cost-push inflation

Answer 16

Inflation initiated by an increase in the costs faced by firms, arising on the supply side of the economy

Question 17

Current account of the balance of payments

Answer 17

Account identifying transactions in goods and services between residents of a country and the rest of the world

Question 18

Cyclical unemployment

Answer 18

Unemployment that arises during the downturn of the economic cycle, such as a recession

Question 19

Circular flow of income

Answer 19

The movement of spending and income throughout the economy

Question 20

Current account deficit

Answer 20

When more money is leaving the country than entering it, as a result of sales of its exports, income and transfers from abroad being less than imports, income and current transfers going abroad