Macro Stuff

Question 0

Negative consequences of economic growth (5)

Answer 0

• Pollution arising from increased levels of production
• resource depletion and a lack of sustainability
• potential in increase in income inequality
• the need to change lifestyle to suit a fast growing economy can be very stressful for individuals
• may be inflationary if growth is too rapid

Question 1

Positive consequences of economic growth (5)

Answer 1

• increased employment and higher levels of income
• better material living standards
• increased tax revenue for the government
• higher spending on merit goods and public goods
• reduction in poverty

Question 2

Causes of economic growth (short run)

Answer 2

Increases in any of the four components

• Consumer Expenditure (C)
• Investment (I)
• Government spending (G)
• Exports -Imports (X-M)

Question 3

Causes of long run economic growth

Answer 3

Increase in quantity or quality of any of the factors of production

Question 4

Causes of unemployment (5)

Answer 4

Cyclical or demand deficient 
Structural unemployment 
Frictional unemployment 
Technological unemployment 
Disequilibrium unemployment

Question 5

Cyclical or demand deficient unemployment

Answer 5

Unemployment caused by a lack of aggregate demand in the economy in accordance with changes in the economic cycle

Question 6

Structural unemployment

Answer 6

Is caused by changes in the pattern of global supply and demand that mean labour in a particular industry is no longer required, also a mismatch caused by occupational and geographical immobility
Of labour.

Question 7

Frictional unemployment

Answer 7

Short term unemployment that occurs when workers are between jobs

Question 8

Technological unemployment

Answer 8

Is caused by capital replacing labour in a particular industry or occupation

Question 9

Disequilibrium unemployment

Answer 9

Occurs when a minimum wage is imposed that is above the market clearing level. Demand for labour contracts while supply of labour expands.

Question 10

Costs of unemployment (4)

Answer 10

• individuals may lose skills, income and self esteem
• firms may see a fall in wage levels as a result of unemployment and find that a workforce’s skills decline the longer that they stay out of work
• government loses tax revenue and has to pay more in JSA
• societies may suffer increases in poverty related problems

Question 11

Causes of inflation (2)

Answer 11

• Demand pull inflation

- Cost push inflation

Question 12

Consequences of inflation

Answer 12

• Reduction in real value of money
• shoe-leather costs
• menu costs
• uncertainty, less consumer confidence
• fiscal drag
• reduction in international competitiveness
• can favor those in stronger bargaining positions who can increase their nominal income. Redistributes income

Question 13

Components of balance of payments (4)

Answer 13

Trade in goods
Trade in services
Net investment income
Current transfers

Question 14

Investment income

Answer 14

(Inflows of profit, interest and dividends from UK investment overseas) - (outflows of the same items from overseas investment in the UK)

Question 15

Current transfers

Answer 15

Remittances, aid and contributions to and from world institutions such as the EU