Intro to Current Government Macroeconomic Objectives

Question 1

What is Austerity?

Answer 1

Difficult economic conditions created by government measures to reduce public expenditures

Question 2

What does Fiscal mean?

Answer 2

Relating to government revenue (especially taxes)

Question 3

What is the FTSE 100?

Answer 3

An index composed of 100 largest companies listed on the London Stock exchange
Seen as good indication of performance of major companies in UK

Question 4

What is GDP?

Answer 4

Total value of all output in economy over period of time

Question 5

What is Real GDP?

Answer 5

Nominal GDP adjust for inflation, valued at constant prices

Used to measure economic growth because it shows quantity of goods and services

Question 6

What is Nominal GDP?

Answer 6

Monetary value of all goods and services produced within the UK

Question 7

What is economic growth?

Answer 7

Measure of increase in value of goods and services produced by economy over period over time

Question 8

How is economic growth measured?

Answer 8

Percentage rate of increase in Real GDP

Question 9

How often is economic growth measured?

Answer 9

Measured on quarterly basis

Question 10

What is inflation?

Answer 10

General increase in prices

Fall in purchasing value of money

Question 11

Why is Stable Low Inflation desirable?

Answer 11

Value of money more stable
People more likely to continue spending - helps keep economy stable
Give certainty for firms and consumers

Question 12

Why is Inflation above the target of 2% at present?

Answer 12

Brexit = value of pound fallen
Everything we import is more expensive so prices go up to compensate
Oil prices have been rising

Question 13

Why don’t we set a 0% inflation target in UK?

Answer 13

Because there is chance of missing target of 0% and ending up with deflation which causes lack of demand and debts grow
People will wait and not want to spend on large purchases at present because they will wait for prices to go lower if they know deflation is happening

Question 14

What is an Index number?

Answer 14

A way of comparing economic data over time or even different countries
Enables you to see what has happened to data with reference to specific year in past or specific country by setting some data as base year

Question 15

What value is the Base number always?

Answer 15

100

Is the chosen point where you compare the change

Question 16

What is Disinflation?

Answer 16

A fall in the RATE of inflation meaning rate of increase is lower but prices are still rising. Doesn’t mean falling prices

Question 17

What is Deflation?

Answer 17

Fall in average level of prices

Question 18

What is the Consumer Price Index (CPI)?

Answer 18

Measure of price level used in all EU countries and by Bank of England to measure inflation against it’s target

Question 19

How is Inflation rate calculated?

Answer 19

Percentage change in CPI which is calculated relative to base year set equal to 100

Question 20

What is Balance of Trade?

Answer 20

Value of Exports - Value of Imports

Question 21

What is Balance of Payments?

Answer 21

Flow of money into and out of UK

Question 22

When does the Balance of Trade deficit arise?

Answer 22

When the value of imports is greater than the value of exports

Question 23

When does the Balance of Trade surplus arise?

Answer 23

When the value of exports is greater than the value of imports

Question 24

What is the Balance of Trade like for UK?

Answer 24

Trade deficit in goods balance (import more goods than export)
Trade surplus in services balance (export more services than import)
Overall = deficit

Question 25

What is the national debt?

Answer 25

Total stock of debt yet to be repaid by government

Question 26

What is the government budget?

Answer 26

Difference between annual tax revenue and government spending

Question 27

What are the potential problems with not reducing the deficit?

Answer 27

Sharp rise in interest rates Loss of jobs Businesses destroyed

Question 28

What are ways of decreasing the budget deficit?

Answer 28

Tax more Spend less Grow the economy (and then you won't have to do either of the above)

Question 29

What is Income Distribution?

Answer 29

Pattern of Incomes in Economy

Question 30

How is Income Distribution measured?

Answer 30

By looking at percentage of national income earned by different groups within population

Question 31

What are Quintiles?

Answer 31

When data is put into order by size but split into 5 equal groupings

Question 32

What are Deciles?

Answer 32

When data is put into order by size but split into 10 equal groupings

Question 33

What are Supply-side policies?

Answer 33

Government policies designed to promote market forces in order to increase economic growth

Question 34

What is the aim of supply side policies?

Answer 34

Shift PPF for economy outwards | Increase productivity/competition in product or labour markets

Question 35

What are the two types of Demand side policies?

Answer 35

Fiscal Policy | Monetary Policy

Question 36

What is Fiscal Policy?

Answer 36

Manipulation of government spending and taxation to affect total demand in economy

Question 37

What is Monetary Policy?

Answer 37

Use of changes in base rate of interest and money supply to influence the rate of growth of total demand and rate of price inflation

Question 38

What are the current government macroeconomic objectives?

Answer 38

``` Economic Growth Inflation Unemployment Balance of Payments Government Borrowing Income Equality Protection of the Environment ```

Question 39

How do you calculate Real GDP in any year (eg. 2016) in 2013 figures?

Answer 39

Real Value (2016) = (Nominal Value in 2016 / Price Index (2016)) x 100 (Price Index (2013))

Question 40

Who are economically inactive people?

Answer 40

Jobless people who haven't been looking for work in the last 4 weeks and are able to start work within the next 2 weeks

Question 41

Who are people in employment?

Answer 41

All people in paid work including those working part time

Question 42

Who are unemployed people?

Answer 42

People who have been looking for work within the last four weeks and are able to start work in the next two weeks

Question 43

What is the current account of the balance of payments?

Answer 43

Record of country's trade of exports, imports, investment income and current transfers with the rest of the world