Macro

Question 1

4 macroeconomic goals

Answer 1

Stable low inflation
Sustainable growth of GDP
High employment
Satisfactory current account on balance of payments - i.e. Avoid big current account deficit; UK imports more than export

Question 2

Macroeconomics

Answer 2

Considers the economy as a whole
Studies relationships and connections between countries
E.g. How a slowdown in the Brazilian economy can affect UK business or
How change in exchange rate affect British firms exporting to countries around the world

Question 3

Households

Answer 3

Receive incomes through wages and salaries from their jobs and from their investments and then buy the output of firms (this aka consumer spending)

Question 4

Firms

Answer 4

Businesses hire land, labour and capital inputs when making products for which they pay wages and rent (income)
Firms receive payments from consumers and profitable businesses may invest a % of profits in new produced goods such as technology

Question 5

Government

Answer 5

Collect taxes to fun spending in public services such as education, healthcare and defence
Government spending is given label G

Question 6

International sector

Answer 6

UK imports from other countries and overseas businesses
Consumers buy UK products aka exports
International trade is important for the UK
Millions of jobs depend directly/indirectly on the UK remaining competitive in the overseas markets

Question 7

What macroeconomics looks at

Answer 7

Success/ failure of government policies

Question 8

Objectives

Answer 8

Goals of government policy

Question 9

Instruments

Answer 9

Means by which aims might be achieved

Question 10

Stable low inflation

Answer 10

Government’s inflation target is 2% for the consumer price index

Question 11

Sustainable growth of GDP

Answer 11

Growth of real gross domestic product

Sustainable in keeping inflation low and reducing environmental impact of growth

Question 12

Improvements in productivity

Answer 12

Designed to improve competitiveness and global trade performance

Question 13

High employment

Answer 13

Government wants to achieve an increase in employment and eventually a situation where all those able and available can find meaningful work

Question 14

Rise in living standards and fall in relative poverty

Answer 14

Cutting child poverty and reducing pensioner poverty

Question 15

Sound government finances

Answer 15

Including control over state borrowing and the total national debt

Question 16

Monetary policy

Answer 16

Changes to interest rates, supply of money and credit and changes to the value of exchange rate

Question 17

Fiscal policy

Answer 17

Changes to government taxation, government spending and borrowing

Question 18

Supply side policies

Answer 18

Designed to make markets work more efficiently

Question 19

Macroeconomic stability

Answer 19

Occurs when there is low volatility in key indicators
E.g. jobs, economic growth, interest rates, investment and trade
All countries experience an economic cycle which tracks the fluctuations in rate of growth of a country’s GDP- some countries have a more volatile cycle than others
Macro stability is shown in particular by the volatility of a country’s economic cycle

Question 20

Current VAT %

Answer 20

20%

Question 21

Unemployment in UK (millions)

Answer 21

1.6

Question 22

Current inflation rate

Answer 22

1.6%

Question 23

Inflation

Answer 23

Growth in prices
E.g. On average prices may increase 5% during 2001
If prices increase by 5% it also means that money can buy 5% fewer goods than in the previous year
Therefore inflation leads to a fall in the buying power of money

Question 24

Current interest rate

Answer 24

0.25%

Question 25

Macroeconomic indicators

Answer 25

Consumer price index
Inflation level
GDP
Unemployment figures 
Imports and exports 
The price of crude oil

Question 26

Controlling inflation through quantitative easing

Answer 26

Bank of England is injecting money directly into economy to meet the inflation target

Question 27

Economic growth

Answer 27

Measure of total output or income of an economy after adjusting for changes in the price level
Growth of real GDP is the percentage change in output often measured over a year