Macro key terms

Question 1

Actual output

Answer 1

Level of real output produced in the economy in a particular year

Question 2

GDP

Answer 2

the sum of all goods and services produced in the economy over a period of time

Question 3

Real GDP

Answer 3

A measure of all the goods and services produced in an economy, adjusted for inflation

Question 4

Nominal GDP

Answer 4

Measures the current market prices, removing the effects of inflation

Question 5

Economic cycle

Answer 5

Upswing and downswing in aggregate economic activity taking place over 4 to 12 years

Question 6

Negative Output Gap

Answer 6

The level of actual real output in the economy is lower than the trend output level

Question 7

Positive Output Gap

Answer 7

The level of actual real output in the economy is greater than the trend output level

Question 8

Recession

Answer 8

6 months or more of negative economic growth or declining real national output

Question 9

Saving

Answer 9

Income which is not spent

Question 10

Inflation

Answer 10

The persistent or continuing rise in the avg. price level

Question 11

Trend growth rate (Potential growth rate)

Answer 11

The rate at which output can grow, on a sustained basis, without putting upward or downward pressure on inflation. It reflects the annual average percentage increase in the productive capacity of the economy

Question 12

Short-run economic growth

Answer 12

Growth of real output resulting from using idle resources, including labour, thereby taking up the slack in the economy

Question 13

Long run economic growth

Answer 13

An increase in the economy’s potential level of real output, and an outward movement of the economy’s production possibility frontier

Question 14

Investment

Answer 14

Total planned spending by firms on capital goods produced within the economy

Question 15

Consumption

Answer 15

Total planned spending by households on consumer goods and services produced within the economy

Question 16

Index number

Answer 16

A number used in an index to enable accurate comparisons over time to be made

Question 17

Injection

Answer 17

Spending entering the circular flow of income as a result of investment, government spending and exports

Question 18

Withdrawals

Answer 18

A leakage of spending power out of the circular flow of income into savings, taxation and imports

Question 19

Output gaps

Answer 19

Show the level of actual and real output in the economy either higher or lower than the trend output level

Question 20

Keynesian economists

Answer 20

Followers of John Maynard Keynes, who generally believe that governments should manage the economy, particularly through the use of fiscal policy.