Macroeconomics

Question 1

National income

Answer 1

Income obtained by a country’s residents, regardless of where they are

Question 2

National outpu

Answer 2

sum total of all goods and services added together over a period of time

Question 3

National expenditure

Answer 3

aggregate of all spending in an economy over a year

Question 4

GDP

Answer 4

total market value of all goods and services produced in a country over a given period of time

Question 5

GNP

Answer 5

sum total of all final goods and services produced in a country over a given period of time

Question 6

NNP

Answer 6

GNP adjusted for depreciation

Question 7

Depreciation

Answer 7

Wearing out of capital goods

Question 8

Factor prices

Answer 8

cost of all factors of production used in the production process before the adjustment for taxes and subsidies

Question 9

Real national income

Answer 9

adjusted for inflation

Question 10

Per capita

Answer 10

per head

Question 11

Absolute poverty

Answer 11

income falls below that required for minimum consumption

Question 12

Relative poverty

Answer 12

situation where individuals do not have access to the same living standards as enjoyed by the average person

Question 13

Aggregate demand

Answer 13

sum total of all goods and services produced in an economy over a given period

Question 14

Price level

Answer 14

average of all prices

Question 15

Aggregate supply

Answer 15

total supply of goods and services of the economy

Question 16

Short run

Answer 16

prices of final goods and services can change but factor prices do not

Question 17

Long run

Answer 17

factor prices do adjust to final price changes in macro economy

Question 18

Natural rate of employment

Answer 18

no cyclical unemployment

Question 19

Short run aggregate supply

Answer 19

the period of time before factor prices adjust to a change in prices

Question 20

long run aggregate supply

Answer 20

relationship between real output and the price level at full employment

Question 21

business cycle

Answer 21

periodic fluctuations of national output around its long term trend

Question 22

Demand side policies

Answer 22

government policy that attempts to alter the level of AD to complement government policy

Question 23

Fiscal policy

Answer 23

policy regards the size and composition of government spending and revenue to influence the economic activity

Question 24

Expansionary fiscal policy

Answer 24

increases government expenditure, leads to increased AD

Question 25

Contractionary fiscal policy

Answer 25

cutting government spending and/or raising taxes

Question 26

Budget Surplus

Answer 26

excess of central government tax receipts over its spending

Question 27

Budget deficit

Answer 27

the excess of central government spending over its receipts

Question 28

Automatic fiscal stabilizers

Answer 28

progressive tax system that automatically increase the rate of taxation as income rises and thus slows down the potential rise in AD

Question 29

Discretionary fiscal policy

Answer 29

deliberate changes in tax rates and government spending to influence levels of AD

Question 30

Monetary policy

Answer 30

Central banks control the rate of interest and exchange rate to influence AD

Question 31

Supply side policies

Answer 31

improve supply-side potential of an economy

Question 32

Crowding out

Answer 32

a situation where the government spending displaces private spendings

Question 33

Full employment

Answer 33

a situation where everyone in the labour force is employed

Question 34

underemployment

Answer 34

Those employed who are not working at their full potential or part time workers wanting to be full time workers

Question 35

Unemployment

Answer 35

those of working age, actively looking for work but cannot find work

Question 36

Unemployment rate

Answer 36

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

Question 37

Cyclical unemployment

Answer 37

unemployment caused by business cycle where the slowdown of economic activity with falling aggregate demand is the cause of unemployment

Question 38

Frictional unemployment

Answer 38

a result of people inbetween jobs

Question 39

Structural unemployment

Answer 39

change in the demand for skills. Mismatch between qualifications and skills

Question 40

Seasonal unemployment

Answer 40

associated with jobs that have different demands at different times of the year

Question 41

Real-wage unemployment

Answer 41

disequilibrium associated with industries or regions where the demand for labour is lower at certain times of the year

Question 42

Inflation

Answer 42

the sustained upward movement in the average level of prices

Question 43

Deflation

Answer 43

sustained reduction in the general level of prices

Question 44

Price stability

Answer 44

when average level of prices does not move

Question 45

Consumer price index

Answer 45

measures the change in purchasing a fixed basket of goods and services from one time period to another

Question 46

Demand pull inflation

Answer 46

Inflation induced by a persistence of excess AD over AS

Question 47

Cost push inflation

Answer 47

Situation in an economy where there is sustained prices rises because of production costs increasing

Question 48

Phillips curve

Answer 48

strong inverse relationship between wage inflation and unemployment

Question 49

Progressive

Answer 49

system of tax where the percentage paid in tax increase as income increases

Question 50

Regressive

Answer 50

tax regime where the percentage of tax paid is lower