Government and the macroeconomy

Question 1

National champions

Answer 1

industries that are, or have the potential to be, world leaders

Question 2

Strategic industries

Answer 2

industries are important for the economic development and safety of the country

Question 3

Trade blocs

Answer 3

a regional group of countries that remove trade restrictions between them

Question 4

Free international trade

Answer 4

the exchange of goods and services between countries without restriction

Question 5

Economic growth

Answer 5

an increase in the output of an economy in the long run, an increase in the economy’s productive potential

Question 6

Actual economic growth

Answer 6

an increase in the output of an economy

Question 7

Potential economic growth

Answer 7

an increase in an economy’s productive capacity

Question 8

Full employment

Answer 8

the lowest level of unemployment possible

Question 9

Unemployment rate

Answer 9

the percentage of the labour force who are willing and able to work but are without jobs

Question 10

Price stability

Answer 10

the price level in the economy not changing significantly over time

Question 11

Balance of payments

Answer 11

the record of a country’s economic transactions with other countries

Question 12

Budget deficit

Answer 12

government spending is higher than government revenue

Question 13

Budget surplus

Answer 13

government revenue is higher than government spending

Question 14

Inflation

Answer 14

the rise in the price level of goods and services over time

Question 15

Informal economy

Answer 15

that part of the economy that is not regulated, protected or taxed by the government

Question 16

Fiscal policy

Answer 16

decisions on government spending and taxation designed to influence aggregate demand

Question 17

Monetary policy

Answer 17

decisions on the money supply, the rate of interest and the exchange rate taken to influence aggregate demand

Question 18

Supply-side policy

Answer 18

measures designed to increase aggregate supply

Question 19

Deregulation

Answer 19

the removal of rules and regulations

Question 20

Circular flow of income

Answer 20

the movement of expenditure, income and output around the economy

Question 21

Transfer payments

Answer 21

transfers of income from one group to another not in return for providing a good or service

Question 22

Nominal GDP

Answer 22

GDP at current market prices and so, not adjusted for inflation

Question 23

Real GDP

Answer 23

GDP at constant prices and so, adjusted for inflation

Question 24

Recession

Answer 24

a reduction in real GDP over a period of six months or more

Question 25

Employment

Answer 25

being involved in a productive activity for which a payment is received

Question 26

Unemployment

Answer 26

being without a job while willing and able to work

Question 27

Claimant count

Answer 27

a measure of unemployment which counts as unemployed these in receipt of unemployment benefits

Question 28

Labour Force Survey (ILO) Measure

Answer 28

a measure of unemployment which counts as unemployed people who identify as such in a survey

Question 29

Frictional unemployment

Answer 29

temporary unemployment arising from workers being in between jobs

Question 30

Structural unemployment

Answer 30

unemployment caused by long-term changes in the pattern of demand and methods of production

Question 31

Cyclical unemployment

Answer 31

unemployment caused by a lack of aggregate demand

Question 32

Search unemployment

Answer 32

unemployment arising from workers who have lost their jobs, looking for a job they are willing to accept

Question 33

Casual unemployment

Answer 33

unemployment arising from workers regularly being between periods of employment

Question 34

Seasonal unemployment

Answer 34

unemployment caused by a fall in demand at particular times of the year

Question 35

Regional unemployment

Answer 35

unemployment caused by a decline in job opportunities in a particular area of the country

Question 36

Technological unemployment

Answer 36

unemployment caused by workers being replaced by capital equipment

Question 37

Deflation

Answer 37

a sustained fall in the prices of goods and services

Question 38

Disinflation

Answer 38

a fall in the rate of inflation

Question 39

Cost-push inflation

Answer 39

rises in the price level caused by higher costs of production

Question 40

Demand-pull inflation

Answer 40

rises in the price level caused by excess demand

Question 41

Monetary inflation

Answer 41

rises in the price level caused by an excessive growth of the money supply