Definitions And Odd Bits

Question 1

Principal Agent Problem

Answer 1

When the priorities of the owner are different to the manager leading to conflict
MANAGERS MAY ACT IN THEIR OWN SELF INTEREST INSTEAD OF FOR BUSINESS - MAY LEAD TO HIGHER COSTS EG from company cars + higher wages
Eg profit max (bring in profit for further investment)
Rev max (bring in cash to pay off costs + have profit)
Sales max (sell lots of physical items to increase market share)

Question 2

ILO vs Claimant Count

Answer 2

ILO:
-survey done by 60,000 people
-used in Europe
-without work for 4 weeks
-ages 16-70
-can be working but under employed

Claimant Count:
-must have less than £16,000 in savings
-ages 18-66
-must be out of work
-for those actively searching

Question 3

Subsidies

Answer 3

Direct payment provided by the government to offset operating costs
Supply curve shifts right - P drops to P1 at new equilibrium (that shift is benefit to comsumer)

Question 4

Price discrimination def

Answer 4

Charging different prices to different groups of people for the same good

Question 5

Capital spending

Answer 5

New public infrastructure (roads and bridges)

Question 6

Current spending

Answer 6

providing public services (salaries for the NHS/ road maintenance)

Question 7

Transfer payments

Answer 7

Child benefits/unemployment benefit

Question 8

Multiplier effect def + calc

Answer 8

1/ 1 - MPC
1/ MPS
1/ MPW (MPM + MPS + MPT [imports, savings, tax])
An initial injection into the economy can have a greater final impact on the level of aggregate demand changed

Question 9

Accelerator theory

Answer 9

As demand increases the rate of investment increases at a faster rate ( likely to buy more than needed as demand is expected to rise even further