Macroeconomic environment

Question 1

What is a macroeconomic policy ?

Answer 1

A policy used by governments ti try to influence overall economic policy

Question 2

What is GDP ?

Answer 2

the total value of goods and services produced

Question 3

How to measure economic growth ?

Answer 3

GDP

Question 4

How is GDP measured ?

Answer 4

the income method
the expenditure method
the output method

Question 5

What is the income method ?

Answer 5

adding together all of the incomes paid - GNP which is final goods and services produced by domestically owned factors of production

Question 6

What is the expenditure method ?

Answer 6

Market price - measures GDP at market price (the cost that final goods and services are)

Question 7

What is the output method ?

Answer 7

Factor cost - aggregating the value of final output of new goods and services
Value added in production process - value of finished product minus value of resources used

Question 8

What are injections ?

Answer 8

1. export sales
2. government expenditure - current and capital
3. private sector investment expenditure

Question 9

What are withdrawals ?

Answer 9

1. imported goods and services
2. taxes
3. savings

Question 10

what is nominal GDP

Answer 10

GDP at current prices

Question 11

What is real GDP ?

Answer 11

GDP at constant prices

Question 12

What is full employment ?

Answer 12

Situation where all unemployment is structural and frictional

Question 13

How is inflation measured ?

Answer 13

a price index

Question 14

what is perfectly anticipated inflation ?

Answer 14

this arises when the actual rate of inflation is equal ro the expected rate of inflation

Question 15

What is imperfectly anticipated inflation ?

Answer 15

this arises when the actual rate of inflation differs from the anticipated rate of inflation

Question 16

what is hyperinflation ?

Answer 16

this arises when the rate of inflation is extremely high

Question 17

What is the balance of payments ?

Answer 17

this is a record of the transactions which take place between the residents of one country and the rest of the world over a given periosd usually a year

Question 18

What are the three possibilities that arise for the balance of payments ?

Answer 18

1. deficit - where the total value of imports exceeds the value of exports
2. surplus - where export revenues are greater than the total import bill
3. balance - where the values of exports and imports are roughly equal

Question 19

What is austerity ?

Answer 19

This is a programme of public expenditure

Question 20

What is classical economics ?

Answer 20

This is a pre-keynesian approach based on the assumption that wages and prices adjust to clear the markets. Also, monetary policy doesnot influence for example, output and employment

Question 21

What is aggregate demand ?

Answer 21

the total planned expenditures of all buyers of final goods and services ; comprises consumer expenditure , investment expenditure, investment expenditure, government expenditure and net exports

Question 22

what is keynesian approach?

Answer 22

An approach based on the belief that capitalist economies are unstable and can come to rest at less than full employment. They favour the use of discretionary aggregate demand policies to stabilise the economy at or near fully employment

Question 23

What is stagflation ?

Answer 23

A situation where high unemployment and high inflation occur simultaneously ; a combination of stagnation and inflation

Question 24

What is monetarism ?

Answer 24

An approach based on the belief that capitalist economies are inherently stable unless disturbed by erratic monetary growth, and will return fairly rapidly to the neighbourhood of the natural level of output and employment when subjected to some disturbance