Deck 4 (M-Q)

Question 1

Marginal propensity to consume

Answer 1

The proportion of additional income devoted to consumer expenditure

Question 2

Marginal propensity to import

Answer 2

The proportion of additional income that is spent on imports of goods and services

Question 3

Marginal propensity to save

Answer 3

The proportion of additional income that is saved by households

Question 4

Marginal propensity to tax

Answer 4

The proportion of additional income that is taxed

Question 5

Marginal propensity to withdraw

Answer 5

The proportion of additional income that is withdrawn from the circular flow of income (the sum of the marginal propensities to save, import and tax)

Question 6

Monetarist School

Answer 6

Economists who think that the macroeconomy always adjusts rapidly to the full employment level of output

Question 7

Monetary policy

Answer 7

The decisions made by government regarding monetary variables such as the money supply and the interest rate

Question 8

Monetary Policy Committee

Answer 8

A body within the Bank of England responsible for the conduct of monetary policy

Question 9

Money stock

Answer 9

The quantity of money in the economy

Question 10

Multinational corporation (MNC)

Answer 10

A company whose production activities are carried out in more than one country

Question 11

Multiplier

Answer 11

A ratio of change in equilibrium real income to the autonomous change that brought it about, defined as 1 divided by the marginal propensity to withdraw

Question 12

Natural rate of output

Answer 12

The long-run equilibrium level of output to which monetarists believe the macroeconomy will always tend; corresponds to full employment

Question 13

Net investment

Answer 13

Gross investment minus depreciation

Question 14

Nominal value

Answer 14

Value of an economic variable based on current prices, taking no account of changing prices through time

Question 15

Productivity

Answer 15

Measure of the efficiency of a factor of production

Question 16

Purchasing power parity theory of exchange rates

Answer 16

In the long-run floating exchange rates are determined by relative inflation rates in different countries

Question 17

Quantitative easing

Answer 17

A process by which the central bank purchases assets, such as government and corporate bonds, in order to release additional money into the financial system

Question 18

Mixed economy

Answer 18

An economic system in which resources are allocated through a mixture of the market and direct public sector involvement

Question 19

Net exports

Answer 19

The value of exports minus the value of imports

Question 20

Nominal GDP

Answer 20

Output of a country measured in current prices and so not adjusted for inflation

Question 21

Occupational immobility of labour

Answer 21

The difficulty in moving from one job to another

Question 22

Output gap

Answer 22

The difference between and economy’s actual and potential real GDP

Question 23

Overheating

Answer 23

When the growth in aggregate demand outstrips the growth in aggregate supply resulting in demand-pull inflation

Question 24

Price level

Answer 24

The average of the prices of all the goods and services produced in an economy

Question 25

Privatistation

Answer 25

Transfer of assets from the public sector to the private sector

Question 26

Progressive tax

Answer 26

A tax that takes a higher percentage from the income of the rich

Question 27

Protectionism

Answer 27

The protection of domestic industries from foreign competition

Question 28

Quota

Answer 28

A limit on the number of imports