Learning Sequence 1+11+2 Macro

Question 1

Retained profit

Answer 1

Is used to fund investment, is the difference between the firms revenue and its costs

Question 2

Why are shares attractive to investors

Answer 2

Capital gains can be made, they provide a means of taking over a company, dividends an income stream.

Question 3

What is issuing a bond

Answer 3

It’s an instrument the gov can use to raise money from people.

Question 4

What are the 4 main macroeconomic objectives

Answer 4

Economic growth, unemployment, inflation, current account of balance of payments.

Question 5

Objective for economic growth

Answer 5

For low and middle income countries, annual growth rates could be around 10 percent, for higher income, the growth rate of 2.5 percent may be possible.
Lower income countries can increase growth by moving workers into higher productivity manufacturing and using modern technology.
Higher income countries are at the forefront of tech developments, so they have already done all that

Question 6

Objective for unemployment

Answer 6

It is impossible for unemployment rates to be zero, bc there is always frictional (search period after job) and seasonal (only working for certain times of the year) unemployment.
5% is a natural okay rate of unemployment.
High employment is good as it increases tax revenues and reduces welfare benefits to the unemployed.

Question 7

Objective for inflation

Answer 7

High inflation is seen as bad bc of th endear that it’ll increase even more
Deflation is seen as being linked to a recession.
If inflation is bad, wages will decrease and quality of life will decrease

Question 8

Objective for balance of payments on current account

Answer 8

Balance of payments is used to record all financial information happening between countries, takes in inflows a and outflows.
Economies where the accounts are always in surplus are seen as strong, those who are in deficit are seen as weak.

Question 9

What are the 3 other objectives

Answer 9

Gov budgets, environment, income distribution

Question 10

Objective for gov budgets

Answer 10

Budget is how much money the gov has and what their plans are to allocate the money they have.
Balanced budget is when revenue = expenses
Deficit budget is when spending > revenue (increases national debt)
Surplus budget is when spending < revenue (saves money)

Question 11

Objective for environment

Answer 11

Gov have a wide range of objectives in relation to the environment.
There are arguments whether economic growth is good for the environment.
Environmentalists tend to be anti-growth as they think economic growth will damage planet

Question 12

Objective for income distribution

Answer 12

Gov needs to intervene to reduce inequality, they can for example set minimum wages, provide goods such as healthcare.

Question 13

Economic growth in %

Answer 13

It’s always positive

Question 14

Aggregate meaning

Answer 14

Totals

Question 15

CPI

Answer 15

Consumer price index
is used to measure inflation

Question 16

Calculate index number

Answer 16

Raw number in period/raw number in base period * 100
Choose a base month (mostly always the first month)
Always to 1dp

Question 17

Nominal prices

Answer 17

Prices without inflation taken into account

Question 18

Real prices

Answer 18

Prices after it has been adjusted for inflation

Question 19

Calculate price index

Answer 19

100* nominal GDP/real GDP

Question 20

How would society improve well-being of citizens

Answer 20

Resources available should expand

Question 21

Potential growth on the PPF

Answer 21

When economy improves resources and moves to the right.

Question 22

How to improve potential growth vs how to see actual growth

Answer 22

Improve potential growth by having an outward economic shift, improving countries resources. Actual growth is when GDP changes

Question 23

Exact definition of GDP

Answer 23

gross domestic product, total output of an economy during a period of time

Question 24

GNI

Answer 24

gdp focuses on domestic economy, but some income is sent and received via abroad. GNI (gross National income) takes into account the income flows between countries, and is more helpful.

Question 25

How is actual economic growth measured

Answer 25

Percentage rate of growth of GDP or GNI This can be different to potential economic growth as the economy is not always operating at full capacity.

Question 26

What is used when measuring the standard of living

Answer 26

GNI, as it closely measures the income and inflows between countries

Question 27

Advantages of GNI

Answer 27

It is straightforward and relatively understood, used in many countries well-establishes

Question 28

To compare between countries we need w different populations

Answer 28

GNI per capita Total GNI/total population

Question 29

Inflation

Answer 29

Increase in overall level of prices in an economy

Question 30

Steps to calculate inflation

Answer 30

Measure average level of prices in economy, then calculate a percentage change of prices over time.

Question 31

What do index numbers show

Answer 31

Monitors how prices change thru time

Question 32

Deflation

Answer 32

Negative inflation Number is in minus, not increasing

Question 33

Disinflation

Answer 33

Inflation is less compared to previous period Still positive but it’s less compared to another

Question 34

Why is deflation bad

Answer 34

It’s bad bc economic agents will see this as a sign that it’s in terminal decline. This then means people would expect prices to fall, postponing purchases, leads to a fall in demand.

Question 35

Unemployed

Answer 35

In the workforce but without a job

Question 36

Economically inactive

Answer 36

Includes students, those who have retired, discouraged workers, includes all those in the age range that aren’t active in workforce

Question 37

Why is the number of employed important

Answer 37

They contribute to the production process in their role as a factor of production (Labour).

Question 38

Claimant count of unemployment.

Answer 38

Unemployment was measured by the number of people registered as unemployed and claiming u employment benefit

Question 39

JSA

Answer 39

Jobseeker’s Allowance, paid to those who are unemployed and actively seeking work

Question 40

Problem with claimant count

Answer 40

The problem with claimant count is that some may apply for JSA but aren’t available to work. It also excludes some people who would like to work.

Question 41

Difficulty in measuring unemployment

Answer 41

The c,aim at count is unreliable as it only captures those who are eligible for JSA, excludes others such as mothers after maternity keave

Question 42

Why is measuring unemployment in developing countries hard

Answer 42

There is no social security system, unemployed workers have no incentive to register as unemployed,

Question 43

Underemployment

Answer 43

Where qualified people find themselves working for something less

Question 44

Hyperinflation

Answer 44

Very high rates of inflation, price level more than 50% increases per month.

Question 45

How is hyperinflation caused

Answer 45

Increases in the supply of money, this directly impacts the price level. It occurs when the gov prints money, increasing supply of money.

Question 46

What are the negative consequences of Hyperinflation

Answer 46

Money loses its value very quick, consumers increase their spending, increases aggregate demand. Workers demand higher nominal wages, to have the same value of pay they were getting before, increasing inflation. Inflation spiral is caused, worsens over time.

Question 47

Consequence of serious hyperinflation

Answer 47

Causes a massive disruption, businesses stop investing in productive activities, incest in assets that is said to keep their value such as gold. Firms also keep hold of goods and sell them later on to sell at higher prices. Lenders suffer losses, as the value of debts fall. In extreme cases, money loses value altogether, people resort to barter, can lead to social unrest.

Question 48

Current account

Answer 48

Where payments for the purchase of goods and services are recorded

Question 49

Capital and financial accounts

Answer 49

Where flows of money associated with saving and investment is recorded

Question 50

Flow of money signs

Answer 50

Into country + Out of country -

Question 51

What is the current account split into

Answer 51

Trade in goods Trade in services Primary and secondary income

Question 52

Trade in goods

Answer 52

Called trade with visibles, Trade with raw materials such as copper and oil and finished manufactured goods like cars. Visible exports result in an inward flow of money so + for the country. Visible imports are bought by domestic people from outside people.

Question 53

Balance of trade

Answer 53

The difference between value of visible imports and visible exports

Question 54

Trade in service

Answer 54

Imports and exports of intangible services. Intangible is those that cannot be held, such as services like insurance, shopping and air Travel. Trade is a big example along with tourism Exports of invisibles are bought by outside people, leading to inflow of money +

Question 55

Primary and secondary incomes

Answer 55

Primary is the loan of factors of production abroad. For thr UK, this is interest profits on assets owned abroad. Secondary income is the range of gov transfers abroad overseas, Primary and secondary income are ex alles of invisibles and trade with services

Question 56

Current balance

Answer 56

Difference between value of exports and total imports

Question 57

Current account being in deficit or surplus

Answer 57

In surplus - exports are greater than imports (money flowing into country from trade in goods, trade in services and primary/secondary income is greater than the money flowing out) In deficit - imports are greater than exports (money flowing into country from trade in goods, trade in services and primary/secondary income is less than the money flowing out)