Definitions

Question 1

Accelerator effect

Answer 1

Relationship between changes in national income or demand and the resulting changes in investment.

Question 2

Aggregate Demand

Answer 2

Total amount of goods and services demanded in the economy at a given time and price level.

Question 3

Consumption

Answer 3

Spending by households on goods and services.

Question 4

Consumer Price Index

Answer 4

CPI measures the average change in price over time that consumers pay for a basket of goods and services.

Question 5

Economic cycle

Answer 5

Short run fluctuations of national output (real GDP) around its long term trend.

Question 6

Exports

Answer 6

The act of selling goods and services to another country.

Question 7

Imports

Answer 7

Goods bought from another country

Question 8

Investment

Answer 8

The acquisition of goods that are not consumed in the current period, but are used in future to produce other goods and services.

Question 9

Negative Output Gap

Answer 9

When actual GDP is below potential GDP, indicating under-utilised resources and high employment.

Question 10

Positive Output Gap

Answer 10

Occurs when actual GDP exceeds potential GDP. Indicates that the economy is producing above its sustainable capacity , often leading to inflationary pressures.

Question 11

Recession

Answer 11

2 consecutive quarters of negative economic growth.