exam paper 2 6B late

Question 1

define the term national income

Answer 1

total spending on goods and services

Question 2

injections

Answer 2

investment
exports
government spending

Question 3

define the term purchasing power parities

Answer 3

comparison between countries taking into account different cost of living

Question 4

overvalued and undervalued

Answer 4

overvalued vs undervalued the big mac index

so for example pound is undervalued to the Swiss franc

Question 5

what does an extension along the ad curve show

Answer 5

it shows actual economic growth

Question 6

define the term clamiant count

Answer 6

number of people clamming unemployment benefit

Question 7

explain one likely reason for the reduction in the total uk trade deficit in janauray 2015

Answer 7

depreciation of the exchange rate
trade deficit was approximately 1 billion in January 2015
fall in the value of the pound makes exports cheaper and imports more expensive

Question 8

rise in the value of the pound is called

Answer 8

appreciation

Question 9

benefits of deflation

Answer 9

deflation from increased efficiency and lower costs of production
improved international competitiveness

Question 10

deflation from increased effiecnecy and lower costs if production

Answer 10

the righty kind of deflation involves lower prices through increased porductitivity and better technology.

LRAS supply shifts to the right - which both lowers price levels and increases real gdp

Question 11

improved international competitiveness

Answer 11

if one country has deflation, and others have inflation, then that country will become more internally competitive leading to a rise in exports.

Question 12

problems of deflation

Answer 12

discourages consumer spending
increase real value of debt
increased real interest rates
real wage unemployment
more difficulty for real;atuve price and wages to adjust
deflation can become entrenched and difficult to end

Question 13

delation can become entrenched and difficult to end

Answer 13

the experience of Japan in the late 90s and 00s was that when deflation became the new norm it was very hard to change inflation expectation and regain normal growth

Question 14

real wage unemployment

Answer 14

labour markets often exhibit “sticky wages” in particular workers resist nominal wage cuts. therefore in period of deladftion real wages rise which could cause real wage unemployment.