Definitions

Question 1

ceteris paribus -

Answer 1

ceteris paribus - this means all other things equal when talking about a situation or concept in economics

Question 2

Positive statements -

Answer 2

Positive statements -this is based of facts that can be tested and proven

Question 3

Normative statement -

Answer 3

Normative statement - based on opinions and therefore can be disagreed with

Question 4

Opportunity cost

Answer 4

Opportunity cost is the next best alternative foregone. For example if the government spends money on health care it cannot spend that money on military funding.

Question 5

Consumer goods -

Answer 5

Consumer goods - goods that we use to enjoy or to supply needs such as food, clothes etc.

Question 6

Capital goods -

Answer 6

Capital goods - These are goods that are used in the productive process for example a machine to improve productivity and increase output for a firm. These good involve investment in inc productive capacity

Question 7

Specialisation

Answer 7

Specialisation - This is when a country or firm focus’ on producing one good or service. They will specialise when they have comparative advantage on the product/service. For example Japan specialises in high tech cars.

Question 8

Comparative advantage

Answer 8

Comparative advantage occurs when one country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than other countries

Question 9

Division of labour -

Answer 9

Division of labour - This is when each worker focus’ on a different part of production so rather than master all aspects of production they can master one each.

Question 10

Free market economy-

Answer 10

Free market economy- no government intervention

Question 11

Command economy -

Answer 11

Command economy - where the government owns the means for production and controls what and how to produce ( old soviet union)

Question 12

Mixed economy -

Answer 12

Mixed economy - this is a free economy with a degree of government intervention involved

Question 13

Fiscal policy

Answer 13

Fiscal policy - The government changing levels of taxation and spending

Question 14

Monetary policy -

Answer 14

Monetary policy - changing interest rates done by the BoE and other methods such as quantitative easin

Question 15

Expansionary fiscal policy -

Answer 15

Expansionary fiscal policy - This is high tax rates and higher government spending with the aim to increase AD

Question 16

Deflationary fiscal policy-

Answer 16

Deflationary fiscal policy- Higher tax and lower gov spending, aim to decrease AD and deflation, improve budget deficit