GDP

Question 1

Define unemployment

Answer 1

When people are willing and able to work but are unable to find a job.

Question 2

Balance of payments definition

Answer 2

A record if the money flows into and out of a country in a year.

Question 3

Exchange rate definition

Answer 3

The price of a currency expressed in terms of a foreign currency.

Question 4

Economic growth

Answer 4

An expansion the productive capacity of the economy and hence an increase in real national output.

Question 5

Inflation definition

Answer 5

A sustained rise in the general price level.

Question 6

Gross domestic product GDP

Answer 6

The value of total output produced in a country in a year.

Question 7

Income redistribution

Answer 7

The transfer of income from rich to poor to ensure everyone have access to necessities.

Question 8

Economic stability

Answer 8

Avoiding volatilising in economic growth rates, inflation, employment and exchange rates. (Avoiding boom/busy with a stable economic cycle).

Question 9

Richest countries top 5

Answer 9

1. United States
2. China
3. Japan
4. Germany
5. United Kingdom

Question 10

Objectives of governments

Answer 10

Economic growth 
Inflation 
Employment / Unemployment 
Economic stability 
Income redistribution 
The balance of payments

Question 11

Three ways country measures GDP

Answer 11

Income method
Expenditure method
Output method

Question 12

Income method definition

Answer 12

Add up all the factor incomes earned in the country in a year.

Question 13

Expenditure method

Definition

Answer 13

Add up all the spending on goods produced in the economy in a year.

Question 14

Output method

Definition

Answer 14

Add up the total value added or final value of goods and services produced a year.

Question 15

Value added meaning

Answer 15

The selling price of a good minus the cost of raw materials

Question 16

Sectors of the macro-economy

Answer 16

Households
Firms
Government
International sector

Question 17

Circular flow of income

Define

Answer 17

A model of the movements of spending and income throughout the economy, which shows the impact of injections and withdrawals on real GDP.

Question 18

Leakages

Answer 18

Savings
Taxation
Imports

Question 19

Injections

Answer 19

Government spending
Investment
Exports

Question 20

Factor incomes

Answer 20

Rent
Wage
Profit
Dividends

Question 21

Factor services

Answer 21

Capital
Enterprise
Land
Labour

Question 22

Leakages/withdrawals define

Answer 22

Withdrawals of possible spending from the circular flow of income.

Question 23

Injections define

Answer 23

Additions of extra spending into circular flow of income.

Question 24

Injections > leakages

Answer 24

GPD will increase

Question 25

Injections = leakages

Answer 25

GPD will stay equal / stay constant

Question 26

Injections

Answer 26

GPD will decrease

Question 27

Define average propensity to consume

Answer 27

The proportion of disposable income spent in an economy. It is consumer expenditure divided by disposable income.

Question 28

Average propensity to save

Answer 28

The proportion of disposable income saved in an economy. It is savings divided by disposable income.

Question 29

Marginal propensity to consume

Answer 29

The proportion of an increase in disposable income that households would devote to consumer expenditure.

Question 30

Marginal propensity to save Define

Answer 30

The proportion of an increase in disposable income that households would devote to saving.

Question 31

What is the multiplier effect?

Answer 31

The process by which any change in a component of aggregate demand results in a greater final change in real GDP.

Question 32

Multiplier

Answer 32

Multiplier = K = 1 / MPW

Question 33

The size of the multiplier depends on

Answer 33

Marginal propensity savings Marginal propensity taxation Marginal propensity import

Question 34

Marginal propensity savings define

Answer 34

The proportion of additional income that is saved by households

Question 35

Marginal propensity taxation define

Answer 35

The proportion of additional income that is taxed

Question 36

Marginal propensity import

Answer 36

The proportion of additional income that is spend on imports of goods and services.