macro economics EXAM REVISION

Question 1

GDP

Answer 1

This is the total value of goods and services that a country produces throughout a year

Question 2

Economic Growth

Answer 2

increase in the production of goods and services compared to previous periods in time of the economy

Question 3

Economic Cycle

Answer 3

this shows the stages of economic growth that an economy is in , this can be from booms to slumps

Question 4

Recession

Answer 4

negative economic growth in an economy over 2 consecutive quarters(6months)

Question 5

Unemployement

Answer 5

people are willing and able to work but cannot find a job

Question 6

Claimant Count

Answer 6

records the number of people claiming unemployement related benefits

Question 7

Inflation

Answer 7

the increase in the average prices

Question 8

Balance of Payements

Answer 8

this is a record of a country’s transactions with the rest of the world (exports and imports)

Question 9

Balance of trade Deficit

Answer 9

imports > exports

Question 10

Balance of trade Surplus

Answer 10

exports > imports

Question 11

The Circular Flow of Income

Answer 11

shows how money moves from producers to households and vice versa

Question 12

Withdrawal

Answer 12

Money leaving the economy(savings , taxes and imports)

Question 13

Injection

Answer 13

Money entering the economy (government spending , exports and investment)

Question 14

Aggregate Demand

Answer 14

the total demand for goods and services in an economy at a given time and price levels

Question 15

Aggregate Supply

Answer 15

the total amount of goods and services produced in an Economy at a given time and price levels

Question 16

what is the equation for AD

Answer 16

C + I + G (X - M)

Question 17

what are factors that affect consumer spending

Answer 17

Interest rates
consumer confidence
MPC and MPS

Question 18

what are factors that affect investment

Answer 18

rate of economic growth
confidence of consumers
demand for exports
interest rates
influence of government regulations

Question 19

what are the two movement along a curve called

Answer 19

contraction and expansion

Question 20

what is the wealth effect

Answer 20

when the asset prices rise so the consumers feel wealthier so their confidence rises

Question 21

what are factors which affect the SRAS to shift

Answer 21

wages , taxes , labour productivity , cost of raw materials

Question 22

what does the horizontal line show on the LRAS

Answer 22

this shows spare capacity in the economy and that resources are not being used to reach output potential

Question 23

what does the vertical line show on the LRAS

Answer 23

this shows that the economy is at full employement therefore there is no spare capacity so prices rise

Question 24

what is excess supply

Answer 24

when the prices are above equilibrium

Question 25

why would AS shift in an equilibrium

Answer 25

increase in productivity , this lowers the average price level and increases RNO

Question 26

why would AD shift in an equilibrium

Answer 26

firms have les confidence in a recession so prices and RNO falls

Question 27

what is the multiplier effect

Answer 27

when an initial input into the economy(government spending) causes a larger output rate (GDP)

Question 28

what are the 4 macroeconomic objectives

Answer 28

sustainable Economic growth
Low unemployment
low and stable inflation
keeping balance of payments in equilibrium

Question 29

what is inflation

Answer 29

the general increase of prices in the economy which erodes the purchasing power of money

Question 30

what are the causes of demand pull inflation

Answer 30

reduced taxation
lower interest rates
general rise in consumer spending
a weak exchange rate

Question 31

causes of cost(of production) push inflation

Answer 31

wage increase
high price of raw materials
higher taxes
higher import prices(weak exchange rate)

Question 32

what is frictional unemployment

Answer 32

this is the period of time that people are unemployed because they are moving jobs

Question 33

what is structural unemployment

Answer 33

changes in technology which leads to a loss of jobs

Question 34

what is cyclical/demand deficient unemployment

Answer 34

this is when there is a general decrease in the demand of goods in the country due to a decrease in consumer confidence

Question 35

what is regional unemployment

Answer 35

when there is a lack of job in an area due to business closure. the cause of this is mainly industrialisation

Question 36

what are the disadvantages of migration

Answer 36

supply of labour is increased therefore the price equilibrium of labour is reduced

Question 37

what are the characteristics of a recession

Answer 37

high unemployement
low confidence
low consumer spending
low inflation

Question 38

what are the characteristics of a boom

Answer 38

gdp is high
low unemployement
rise in inflation(demand)
confidence is high

Question 39

what is the PPF

Answer 39

a graph which shows all the possible combinations of the output of 2 goods using all available resources(CELL)

Question 40

gross national income

Answer 40

income received by a country both domestically and from assets abroad

Question 41

what is investment

Answer 41

money spent on capital goods in order to improve factors of production increasing productivity

Question 42

what are the limitations of using GDP

Answer 42

differences in distribution in income across the country
population growth may account for the main reason to why GDP is high
doesnt account for environmental costs to achieve high production

Question 43

what are evaluation points for limitations of GDP

Answer 43

other measures maybe better such as GDP per capita
standard of living may be difficult to measure by a figure an it is subjective

Question 44

what are some determinants to investment

Answer 44

government policies
demand for exports
economic growth