MACRO L1 - Fundamentals

Question 1

what does macroeconomics study

Answer 1

Total level of spending in the economy and the total level of production, i.e. AD, AS
- National output and its growth, national employment and unemployment, and inflation

Question 2

define rate to economic growth

Answer 2

The percentage increase in national output, normally expressed over a 12-month or 3-month period.

Question 3

define business cycle

Answer 3

periodic fluctuations of national output.

Periods of rapid output growth are followed by periods of low growth or even decline.

Question 4

define recession

Answer 4

when an economy experiences falling real GDP (negative growth) for two or more successive quarters.

Question 5

define number unemployed

Answer 5

Those of working age who are without work, but who are available for work at current wage rates.

Question 6

define labour force

Answer 6

The number employed plus the number unemployed.

Question 7

define unemployment rate

Answer 7

The number unemployed expressed as a percentage of the labour force.

Question 8

define rate of inflation

Answer 8

The percentage increase in prices over a 12-month period.

Gov policy is to keep inflation low and stable (2%)

Question 9

What are the main macroeconomic policy objectives

Answer 9

• high and stable economic growth
• low unemployment
• low rate of inflation
• avoidance of excessive exchange rate fluctuations