EXAM

Question 1

aggregate demand (AD)

Answer 1

the total quantity of goods and services that all buyers in an economy want to buy over a particular time period ceteris paribus

Question 2

aggregate supply (AS)

Answer 2

the total quantity of goods and services produced in an economy over a particular time period, at different price levels, ceteris paribus

Question 3

allocative efficiency

Answer 3

allocation of resources that results in producing the combination and quantity of goods and services mostly preferred by consumers

Question 4

balance of payments

Answer 4

a record (usually a year of all transactions between the residents of a country and their residents of all other countries, showing all payments received from other countries (credits) and all payments made to other countries (debits)

Question 5

bilateral trade agreement

Answer 5

any trade agreement involving two trading partners, usually two countries (or another group like EU)

Question 6

central bank

Answer 6

a financial institution responsible for regulating the countries financial system and and commercial banks, and carrying out monetary policy

Question 7

collusion

Answer 7

agreement among firms to fix prices or divide the market between them, as to limit competition and maximise profit (oligopoly)

Question 8

current account

Answer 8

part of the current account and includes the balance of goods and services and net income and current transfers

Question 9

customs union

Answer 9

a type of trading bloc, consisting of a group of countries that fulfil the requirements of a free trade area and adopts common policy to all non-member countries

Question 10

economic development

Answer 10

broad-based rises in standards of living and well-being of a population, particularly in developing countries. It involves increasing incomes and reducing poverty, reducing income inequalities and unemployment and increasing provision of basic goods

Question 11

economic growth

Answer 11

increases in total real output produced by an economy over a fixed time period (usually a year) and adjusted for inflation

Question 11

economic growth

Answer 11

increases in total real output produced by an economy over a fixed time period (usually a year) and adjusted for inflation

Question 12

free trade area

Answer 12

type of trading bloc consisting of a group of countries that agree to eliminate trade barriers between themselves

Question 13

interventionist supply side

Answer 13

any policy based on government intervention in the market intended to affect the supply side of the economy usually by shifting the LRAS to the right

Question 14

long run aggregate supply

Answer 14

total quantity of goods and services produced in the long run, ceteris paribus

Question 15

market power

Answer 15

refer to the control that a seller may have over the price of a product it sells (ability for price to be bigger the AC)

Question 16

monetary policy

Answer 16

policy carried out by the central bank, aiming to change interest ration in order to influence aggregate remand

Question 17

fiscal policy

Answer 17

manipulations by the government of its own expenditures and taxes in order to influence the level of aggregate demand

Question 18

market-based supply side policy

Answer 18

any policy on promoting well-functioning, competitive markets in order to influence the supply side of the economy

Question 19

merit goods

Answer 19

goods that are held to be desirable for consumers, but which are under provided by the market

Question 20

monetary union

Answer 20

a high form of economic integration involving the adoption by a group of countries of a single currency

Question 21

natural monopolies

Answer 21

a single firm that can produce for the entire market at a lower average cost than two or more smaller firms

Question 22

non - price competition

Answer 22

occurs when firms compete with each other on the basis of methods other than price - product differentiation, advertising, branding

Question 23

poverty

Answer 23

the inability of an individual or family to afford an adequate standard of goods and services

Question 24

price elasticity of demand

Answer 24

the responsiveness of the quantity of a product demanded to changes in its price

Question 25

quantitative easing

Answer 25

a tool used by central banks to increase the money in the economy and facilitate commercial bank lending as part of expansionary monetary policy

Question 26

regional trade agreement

Answer 26

trade agreement between several countries in the same geographical area

Question 27

preferential trade agreement

Answer 27

agreement between two or more countries to lower trade barriers between them on particular products

Question 28

theory of comparative advantage

Answer 28

as long as the opportunity costs in two or more countries differ, it is possible for all countries to gain from specialisation and trade according to their comparative advantages. it results in an improvement in the global allocation of goods