macro economics chapter 40-50

Question 1

deflation

Answer 1

rate of decrease of the general price level and the corresponding raise in value of money, it has become more common recently as a number of countries have experinacd falls in their general price levels

Question 2

disinflation

Answer 2

occures when prices are rising but at a decreasing rate

Question 3

who is deinflation bad for

Answer 3

borrowers

Question 4

deinflationairy policy

Answer 4

action by government or other authorizes implemented with the intention of reducing aggregate demand

Question 5

demand pull inflation

Answer 5

is a rise in the genrel price level that reults from an incrase in aggragate demarnd

Question 6

cost push inflation

Answer 6

arisses from firms facing increased costs of production and originates in the supply side of the economy

Question 7

depreciation

Answer 7

is a fall in the value of a countrys currancy against other currancys

Question 8

international trade

Answer 8

is the sale of goods and services across the national frontiers

Question 9

the theory of comparative advantage

Answer 9

states that even relatively innificant economies can benefit from international trade

Question 10

an emerging market

Answer 10

describes an economy that has a low income per capita but is enjoying high rates of economic growth

Question 11

deflation

Answer 11

the decrease in the general price level, for deflation to occur the average level of price must be falling

Question 12

when does deflation occur

Answer 12

periods of very low or stagnent growth

Question 13

an open economy

Answer 13

one in witch international trade represents a high proportion of its GDP, the UK is an increasingly open economy

Question 14

imports

Answer 14

imports are products brought by households, firms and the government in one country that are produced in another country

Question 15

exports

Answer 15

products produced in the ‘home’ economy and sold to customers overseas.

Question 16

3. benefits of international trade

Answer 16

1. more competitive industries
2. innovation
3. benefits of scale

Question 17

balance of payments

Answer 17

records the finnancial and reading transactions of the UK, with the rest of the world. these transactions are recorded in three main accounts in the balance of payments
- current account
-capital account
-finnanical account

Question 18

the current account

Answer 18

the current account comprises the trade in goods and services as well as flows of primary income and secondary income. the difference in the monetary value of inflows and outflows on these accounts is known as the current account balance.

Question 19

the capital account

Answer 19

the capital account compromises two components, capital transfure between countries and the sale and purchase of certain assess such as franchises, leases and copyrights.

Question 20

the financial account

Answer 20

records transactions that result in a change in ownership of financial assets between uk residence and non residence. exampels include the sale and purchase of shares in foreign business by people who live in the UK.

Question 21

what are the four components of the current account balance of payments

Answer 21

1. trade in goods
2. trade in services
3. investment income
4. total current transfures

Question 22

the current account surplus

Answer 22

exists when inflows of currency recorded on the current account exceeds outflows over some period of time

Question 23

the current account deficit

Answer 23

exists when inflows of a currency recorded on the current account are smaller then out flows over some period of time

Question 24

inflows of currency

Answer 24

-exports of goods and services
-income from investments overseas
-transfures into the uk

Question 25

outflows of currency

Answer 25

-imports of goods and services - investment income paid overseas -transfures out of the uk

Question 26

influences on the current account of the balance of payments

Answer 26

internal factors 1. productivity 2.macroeconomic performance external factors 1. level of economic activity in other countries 2. high rates of economic growth can stimulate a countries export sales 3. polices of foreign governments with regarded to trade can influence the current account balance of other countries

Question 27

import penetration

Answer 27

measures the value of imports as a persentage of consumption

Question 28

a positive output gap

Answer 28

occurs when actual GDP exceeds the long term trend of GDP, for example durin the peak stages of the economic cycle, this is associated with high levels of employment and inflationary pressure

Question 29

negative output gap

Answer 29

exists when the actual level of GDP is lower then the long term trend, this type of output gap can be seen to exits in the trough phase and is normal accompanies by rising levels of unemployment

Question 30

fiscal

Answer 30

-government and tax

Question 31

monetary

Answer 31

- bank and intrest

Question 32

the balance of trade

Answer 32

is the part of the current account of the balance of payments and measures the earnings from exports minus the expenditure on imports

Question 33

monetary policy

Answer 33

actions taken by the government (or the central bank acting on its behalf) to manipulate intrets rates, the supply of money and credit and the exchange rate to achieve its macro economic objectives

Question 34

central bank

Answer 34

responsible for managing the monetary system in the economy

Question 35

the bank rate

Answer 35

is the rate of intrest at which the bank of England is willing to lend money short term to other financial institutions

Question 36

monetary policy instruments

Answer 36

tools available to a central bank to influence money market and the credit conditions in the economy, such as charging intrest rates

Question 37

credit

Answer 37

general term for borrowing, it is money that is a bank or other organization allows a person or Organization to use and repay at a later date.

Question 38

three main elements of monetary policy

Answer 38

1. changing the bank rate of intrest, which influence the level of intrest rates throughout the economy 2. controlling the supply of money within the economy 3. influencing the value of the pound stearling in terms of other currencies

Question 39

how many members do the monetary policy commiti have

Answer 39

9

Question 40

quantitive easing

Answer 40

the bank of England has created money by buying government bonds, from banks and other financial instutions with electronic cash that did not exist before

Question 41

main of quantitive easing

Answer 41

to increase bank leanding and the levels of consumption and investment

Question 42

monetary policy committee

Answer 42

is a group of nine experts in Monterey issues who meet monthly to make descions about the UK bak rate

Question 43

liquidity

Answer 43

measures the proportion of a business assets that are held in a form that can easily be converted into cash

Question 44

the real interest rate

Answer 44

the rate of interest adjusted for inflation to show the true cost of borrowing money

Question 45

discretionary income

Answer 45

equal to a households disposable income minus expenditure on essentail terms including housing costs e/g mortgage, rent, food

Question 46

hot money

Answer 46

refuses to fund that flow between financial markets as investors attempt to earn the highest short term intrest rate possible

Question 47

fiscal policy

Answer 47

government manipulation of expenditure, taxation, and budget balance to manage the economy

Question 48

budget balance

Answer 48

difference between government spending and revenue over the financial year.

Question 49

the treasury

Answer 49

is the UK government economic and finance ministry responsible for public spending and setting the direction of the UK's economic policy.

Question 50

Austerity

Answer 50

describes government polices to reduce expenditure and increase revenue from taxation durin periods of budget deficit.

Question 51

taxation

Answer 51

payment that is to be made to the government or other authorities by households, firms or other organisations.

Question 52

fiscal drag

Answer 52

occurs when inflation results in taxpayers receiving higher incomes and moving into higher income tax bands, hence paying a higher persentage of income as tax.

Question 53

national debt

Answer 53

is the total of all past government borrowing that has never been repaid.

Question 54

discretionary fiscal policy

Answer 54

policy is the deliberate manipulation of the budget to achieve macro economic aims

Question 55

automatic stabilisers

Answer 55

are elements of fiscal policy that occur independently as the economy moves through its economic cycle

Question 56

demand management

Answer 56

is the use of macroeconomic policies to manipulate an economies level of aggregate demand

Question 57

supply side policy

Answer 57

micro-economic policies aimed at making markets and industries operate more efficiently and contribute to a faster underlying-rate of growth of real national output.

Question 58

supply side approvments

Answer 58

actions taken primarily by firms to increase the efficiency of their operations and thereby raises output

Question 59

occupational immobility of labour

Answer 59

exists when workers cannot transfure easily to employment in a diffrent type of job

Question 60

geographical immobility of labour

Answer 60

occurs when workers cannot move freely to take employment in a new location

Question 61

trade union

Answer 61

A trade union is an organisation made up of members (a membership-based organisation) and its membership must be made up mainly of workers. One of a trade union's main aims is to protect and advance the interests of its members in the workplace. Most trade unions are independent of any employer.

Question 62

industrial policy

Answer 62

refutes to government intervention that seeks to support or develop some industies to enhance economic growth

Question 63

privatisation

Answer 63

transfure of state owned organisation to the private sector where they are owned by individuals and private firms

Question 64

deregulation

Answer 64

reduction of the extent of state or government controll over a business activity