Key terms

Question 1

living standards

Answer 1

Living standards refers to the material wellbeing (purchasing power of income) and the non material well being of a consumer (such as healthcare and education)

Question 2

what does GDP or national income mean

Answer 2

the total value of goods and services produced in an economy

Question 3

Aid

Answer 3

money, goods or services given by the government to another

Question 4

balance of payments

Answer 4

a record of all money flows or transactions between residents of a country and the rest of the world

Question 5

balancing the budget

Answer 5

when the government aims for government spending to equal government tax revenue

Question 6

Broad money (M4)

Answer 6

the part of the stock of money made up of cash or other liquid assets

Question 7

capital markets

Answer 7

where securities such as shares and bonds are issued.

they are then traded second had on a stock exchange (LSE)

Question 8

capital raion

Answer 8

the amount of capital on a banks balance as a proportion of its loans

Question 9

comparative advantage

Answer 9

occurs when a country can produce a good at a lower opportunity cost

Question 10

corruption

Answer 10

deals with the misuse of public power for private benefit and its negative economic impact on society

Question 11

coupon

Answer 11

a fixed annual interest payments

Question 12

currency union

Answer 12

when a group of countries share a common currency

Question 13

current account.

Answer 13

measure all currency flows in and out of a country in a particular time period in payment for imports and exports

Question 14

custom union

Answer 14

a trading bloc in which member countries enjoy internal free trade.

these members are protected by a common external tariff

Question 15

cyclical budget deficit

Answer 15

when the budget deficit increases as a result of a fall in AD

Question 16

deflation

Answer 16

the persistent fall in price levels over time and the increase in the value of money

Question 17

disinflation

Answer 17

a fall in the rate of inflation but inflation still remains positive

Question 18

economic growth

Answer 18

an increase in real GDP overtime

Question 19

Eurozone

Answer 19

the name for the countries that replace their national currencies with the euro

Question 20

exchange rate

Answer 20

the price of one currency in terms of another

Question 21

expenditure reducing policy

Answer 21

a government policy which aims to reduce a current account deficit by reducing the demand for imports by reducing AD

Question 22

expenditure switching policy

Answer 22

a government policy which aims to reduce a current account deficit by making domestic product more attractive

Question 23

export subsidies

Answer 23

government grant given to firms to encourage the sale of their products abroad

Question 24

financial account

Answer 24

the part of the balance of payments that records capital flows into and out of the economy

Question 25

financial markets

Answer 25

markets in which financial assets and securities are traded

Question 26

Financial policy committee

Answer 26

the part of the Bank of England that is charged with the primary objective to identify, monitor and take action to remove the systemic sin to improve the resilience of the UK financial system.

Question 27

fiscal policy

Answer 27

the use of government spending and taxation to achieve governments policy objectives

Question 28

fixed exchange rate

Answer 28

when the value of a currency in terms of another is fixed by the government

Question 29

Foreign direct investment

Answer 29

investment into domestic capital done by an economic agent that operates abroad

Question 30

forward guidance

Answer 30

when a BOE attempt to send signals to the public sector about the interest rate policy in the coming years

Question 31

free floating exchange rate

Answer 31

when the value of a currency in terms of another is solely determined by market forces

Question 32

frictional unemployment

Answer 32

unemployment that occurs when people are in between jobs

Question 33

full employment

Answer 33

when the number of people wishing to work equals the number of workers who employees wish to hire

Question 34

globalisation

Answer 34

the process of growing economic integration of the worlds economies

Question 35

what is economic development

Answer 35

The process of improving people economic wellbeing and quality of life

Question 36

how is economic development measured

Answer 36

Uses HDI which takes into account: 1. life expectancy 2. mean and expected years of schooling 3. Gross national income per capita.

Question 37

injections

Answer 37

(G). Government spending (I). investment spending by firm son capital goods (X). Exports

Question 38

liquidity

Answer 38

refers to the assets which can be turned into cash in short period of time without loss of value

Question 39

liquidity ration

Answer 39

ration of a banks cash and other liquid assets to its deposits

Question 40

Long run AS

Answer 40

the real output that can be supplied when the economy is on its production possibility frontier.

Question 41

what happens when an economy operates on its production possibility frontier

Answer 41

when all available factors of production are employed and producing at their normal capacity level of output

Question 42

long run (potential) economic growth

Answer 42

occurs when productive capacity increases

Question 43

monetary policy

Answer 43

implemented by the government (BOE) in order to achieve economic objective s such as controlling inflation

Question 44

moral hazard

Answer 44

the tendency of individuals or firms, once protected against a contingency are likely to act carelessly to make the contingency more likely

Question 45

QE

Answer 45

the Bank of England rebuying bonds from the private sector

Question 46

macro economics performance

Answer 46

achievement of key macroeconomic indicators

Question 47

purchasing power parity

Answer 47

The exchange rate that equalizes the purchasing power in two economies It is calculated by comparing how much it costs to buy a common basket of goods in the two countries.

Question 48

development

Answer 48

improvement in quality of life (non material and material well being)

Question 49

how is HDI measured

Answer 49

mean years of schooling, expected years of schooling, life expectancy at birth, and gross national income (GNI) per capita.

Question 50

aggregate demand

Answer 50

total amount of money spent on those goods and services at a specific price level and point in time