MACRO - LS1 - Intro to Macroeconomics

Question 1

Government role

Answer 1

Sets the rules other economic agents must follow
Produces some goods & services
Can provide support to businesses

Question 2

SMEs

Answer 2

Small and medium enterprises - produces goods and services, mainly domestically

Question 3

Consumers

Answer 3

Buyers of goods and services - confidence can impact economy performance

Question 4

Central bank

Answer 4

Each country has one - sets interest rates and banker to banks

Question 5

Civil society

Answer 5

Groups outside of gov & firms - e.g. trade unions, NGO’s, charities & academics

Question 6

4 ways to finance/expand businesses

Answer 6

Retained profit
Borrowing
Issuing shares
Issuing bonds

Question 7

Retained profit

Answer 7

Can be used to reward shareholders - dividends
Fund investment

Question 8

Investment

Answer 8

Spending on capital goods

Question 9

Capital goods

Answer 9

Goods used to produce other goods/services e.g. machine

Question 10

Borrowing

Answer 10

If firms lack money - may borrow from financial institutions like banks through loans
Also used to fund investment

Question 11

Issuing shares

Answer 11

Financial asset - gives part ownership, pay to get share

Question 12

Shares advantages

Answer 12

• capital gains can be made
• dividends provide income stream
• way of taking over company

Question 13

Primary markets (shares)

Answer 13

Investors pay directly to companies - source of finance for them

Question 14

Secondary market (shares)

Answer 14

Buying shares from investors

Question 15

Issuing bonds

Answer 15

Loan between investor and firm for period of time
Receive interest payments till bond matures then collects cash

Question 16

Issues for gov and economy x4

Answer 16

Economic growth
Employment
Inflation
Trade

Question 17

Economic growth

Answer 17

Governments want to expand economy
Size determines amount of goods and services available and the quality of infrastructure and public services

Question 18

Employment

Answer 18

People rely on it for income

Question 19

Lots of unemployment leads to

Answer 19

Social unrest

Question 20

Inflation is

Answer 20

Rise in general price level for goods and services

Question 21

What does high inflation do

Answer 21

Decreases living standards (assuming wages don’t keep up)

Question 22

Trade

Answer 22

Economies produce limited goods and services - international trade is needed to obtain goods

Question 23

Why do national economies produce limited range of goods

Answer 23

Some Natural resources are unavailable
Some can’t due to weak technological capabilities