Macro Exam knowledge Flashcards
Why does the balance of trade change?
exchange rates
efficiency and productivity
competitiveness
innovation and design
Why does investment change?
interest rates
expectations
efficiency of capital
technological change
Why does government spending change?
Government policy
Economic cycle
Elections
Define inflation
Increase in the general price level
Define deflation
Fall in the general price level
Define hyperinflation
Very high rate of inflation
Define unemployment
People who are willing and able to work but unable to find employment
Why is weighting used for the inflation basket?
Because people spend different proportions of their income on different goods.
Define Claimant Count
Measure includes people who claim the Job Seeker’s Allowance
Define Labour Force Survey
Counts those who are without any kind of work including part time work but who have looked for work in the past month and are able to start work immediately
Name the 5 types of unemployment
Cyclical
Classical (real-wage)
Structural
Seasonal
Frictional
Define cyclical unemployment
Caused by a downturn in the economy
Define classical unemployment
Caused by the fact that wages are too high that a company can afford the job due to national minimum wage and machinery (replacing human workers)
Define structural unemployment
Structural change in the economy (decline of industry/ region) leads to unemployment leaving people with the wrong skills
Define seasonal unemployment
Caused by the changing of the seasons
Define frictional unemployment
Short-term: where people are between jobs
Define sustainability
Sustainability means using resources so as not to
compromise future generations’ standard of living.
e.g. Sustainability means minimising negative externalities on future generations, e.g. by using more environmentally friendly forms of farming such as organic farming.
Define debt
cumulative deficit
Budget deficit
Year- on- year difference in government spending and tax revenues
Under which conditions is government debt not bad?
When affordable (low interest rate)
When spent on the right things (capital expenditure and supply side policies)
When it can be controlled
When proportion of GDP is not too big
When is fiscal policy useful?
capital expenditure better
useful when MPC high (depends on economic climate and income of people that are targeted)
when not crowding out/ crowding in is good
monetary policy should be tried before
government debt affordable and maneable
good if it solves market failure, supply side policies
Define Crowding Out
When government spending replaces private sector spending that would have taken place
