Inflation

Question 1

Inflation

Answer 1

An on-going rise in the general price level

Question 2

Deflation

Answer 2

A fall in the general price level

Question 3

Disinflation

Answer 3

A fall in the rate of inflation

Question 4

Rate of Inflation

Answer 4

Percentage change in CPI (Consumer Price Index)

Question 5

Nominal

Answer 5

E.g. Nominal wage or GDP. Actual or face value. Measured in current year dollar

Question 6

Real

Answer 6

E.g. Real wages or RGDP. Value adjusted for changes in the price level. Measured in constant-year dollars. In the case of real wages = purchasing power of wages.

Question 7

Investment

Answer 7

Increases in man-made resources

Question 8

Aggregate Demand

Answer 8

The total demand of all sectors that make up the economy

Question 9

Aggregate Supply

Answer 9

The total supply of all goods and services in the economy

Question 10

Cost-Push Inflation

Answer 10

Inflation caused by decreases in AS (Aggregate Supply)

Question 11

Demand-Pull Inflation

Answer 11

Inflation caused by increases in AD (Aggregate Demand)

Question 12

Quantity Theory of Money

Answer 12

MV = PQ

Question 13

Quantity Theory of Money
(M)

Answer 13

Money Supply

Question 14

Quantity Theory of Money
(V)

Answer 14

Velocity of Circulation (Refers to how many times money changes hands in a year - the number of transactions financed by a single dollar)

Question 15

Quantity Theory of Money
(P)

Answer 15

Price level

Question 16

Quantity Theory of Money
(Q)

Answer 16

Level of national output

Question 17

Operating Surplus

Answer 17

(The government) Operating surplus = tax revenue without government spending

Question 18

Productivity

Answer 18

Output per / inputs per unit of time

Question 19

Disposable Income

Answer 19

The amount of money that a person or family has left after paying their taxes

Question 20

Discretionary Income

Answer 20

The money left over after a person pays their taxes and for essential goods and services like housing and food

Question 21

Explain why the consumer price index is a weighted index

Answer 21

Price increases of some goods and services are more important than others. For example, an increase in housing costs will have more impact on the average household than an increase in clothing costs.

Question 22

What does PAYE mean?

Answer 22

Pay As You Earn : Employees earning a wage or salary are taxed directly from their pay.

Question 23

Overall Operating Balance

Answer 23

Operating Balance: Revenue less expenses, plus net gains and losses. It shows whether the government sector has generated enough revenues to cover its expenses in any given year.