Macroeconomics

Question 1

Structural unemployment

Answer 1

unemployment caused by things like changes in demand, increased foreign competition and changes in the methods of production.

Question 2

Consumer price index

Answer 2

measure of the weighted average of prices of a representative basket of goods & services (the typical basket): average prices of goods and services

Question 3

Deflation

Answer 3

sustained fall in the prices of goods and services (or negative inflation or a fall in the CPI)

Question 4

Demand pull inflation

Answer 4

I am inflation caused by excess demand or where AD is growing more quickly than AS

Question 5

Economic growth

Answer 5

an increase in the output of an economy, e.g. a rise in its productive potential over the long run.

Question 6

Full employment

Answer 6

the lowest level of unemployment possible.

Question 7

Balance of payments

Answer 7

record of a country’s transactions with the rest of the world.

Question 8

Unemployment rate

Answer 8

the percentage of the labour force who are willing and able to work but are without jobs.

Question 9

Direct taxes

Answer 9

taxes on incomes and wealth, e.g. income tax, corporate taxes and inheritance tax (on wealth).

Question 10

Labour market reforms

Answer 10

reforms (changes made by the government) to make the labour market work more freely/efficiently.

Question 11

Monetary policy

Answer 11

decisions made by the central bank about the money supply and interest rates in order to influence AD.

Question 12

Money supply

Answer 12

the quantity of notes and coins in circulation in an economy.

Question 13

Indirect tax

Answer 13

I am a tax on goods and services.

Question 14

Regressive taxes

Answer 14

a tax which takes a larger percentage of the income and wealth of the poor.

Question 15

Budget

Answer 15

the relationship between government revenue and government spending.

Question 16

Deregulations

Answer 16

the removal of rules and regulations by the government to help markets work more freely.

Question 17

GDP per capita

Answer 17

the total output of an economy divided by the population.

Question 18

Recession

Answer 18

fall in real GDP over a 6 month period (2 quarters).

Question 19

Unemployment

Answer 19

being without a job while willing and able to work.

Question 20

Frictional unemployment

Answer 20

unemployed because I am between jobs.

Question 21

Progressive tax

Answer 21

I take a larger percentage of the income and wealth of the rich.

Question 22

Inflation

Answer 22

I am the rise in the price level of goods and services over time. I am sustained, not one-off.

Question 23

Fiscal policy

Answer 23

I am decisions about government spending and taxation in order to influence AD.

Question 24

Foreign exchange rate

Answer 24

I am the price of one currency in terms of another currency/currencies.

Question 25

Supply-side policy

Answer 25

measures designed to increase AS.

Question 26

Budget surplus

Answer 26

government revenue being higher than government spending.

Question 27

Income redistribution

Answer 27

I am involved in transferring resources from the rich to the poor.

Question 28

Budget imbalance

Answer 28

where the amount government receives in revenue does not equal the amount government spends.

Question 29

Privatization

Answer 29

the transfer of resources/assets from the government or public sector to the private sector, e.g. the sale of state owned firms.

Question 30

Formal economy

Answer 30

I am the part of an economy where workers have the same access to benefits rights and protection.

Question 31

Budget deficit

Answer 31

government spending in excess of government revenue.

Question 32

Proportional tax/ flat rate

Answer 32

a tax which takes the same percentage of income or wealth of all taxpayers.

Question 33

Government Revenue

Answer 33

the amount of money the government receives from sources such as taxation.

Question 34

Real GDP

Answer 34

nominal GDP (GDP at today’s prices) adjusted for inflation.

Question 35

Informal economy

Answer 35

the part of an economy where workers do not have the same access to benefits/rights and protection.

Question 36

Cost Pull Inflation

Answer 36

inflation caused by a rise in costs.

Question 37

Actual Economic growth

Answer 37

An increase in the output of an economy

Question 38

Potential economic growth

Answer 38

An increase in an economy’s productive capacity

Question 39

Aggregate demand

Answer 39

The total demand of a country’s product at a given price level. It consists of consumer expenditure, investment, government spending and net exports (X-M)

Question 40

Aggregate supply

Answer 40

The total amount of goods and services that domestic firms are willing to supply at a given price level

Question 41

Economically active

Answer 41

Being a member of the labour force

Question 42

Budget

Answer 42

the relationship between government revenue and government spending

Question 43

Budget deficit

Answer 43

Government spending is higher than government revenue