Macroeconomics Year 1

Question 1

Circular flow of income

Answer 1

Way in which income, money, goods and services flow in an economy

Question 2

National income

Answer 2

All the incomes that flow to households over a period of time

Question 3

National output

Answer 3

Value of all the output (goods and services) produced in an economy over a period of time

Question 4

National expenditure

Answer 4

All the spending by households, firms and government over a period of time

Question 5

Injections

Answer 5

Routes for money to enter the circular flow of income including through investment, government expenditure and exports

Question 6

Leakages

Answer 6

Routes for money to leave the circular flow of income including through savings, taxation and imports

Question 7

Aggregate demand

Answer 7

The ability and willingness of all economic agents to spend in the economy

Question 8

Consumption

Answer 8

Spending by households on goods and services

Question 9

Investment

Answer 9

Spending by firms on goods and services to be used in future production

Question 10

Government expenditure

Answer 10

Spending by the government on goods and services, such as the NHS

Question 11

Net exports

Answer 11

Exports minus imports

Question 12

Exports

Answer 12

Foods and services that firms sell overseas

Question 13

Imports

Answer 13

Goods and services that households and firms buy from overseas firms

Question 14

Expectation

Answer 14

Views that economic agents have about what will happen to the economy in the future

Question 15

Aggregate supply

Answer 15

Total supply of all goods and services produced within an economy at a given overall price at a given time

Question 16

Short run aggregate supply (SRAS)

Answer 16

Goods and services that firms are willing and bale to produce at a given price level in the short run

Question 17

Long run aggregate supply (LRAS)

Answer 17

The maximum that can be produced with all the factors of production in an economy

Question 18

Neoclassical approach to aggregate supply

Answer 18

Approach to aggregate supply in which there is a short run curve (where output changes with price level) and a long run curve (where output does not change with price level)

Question 19

Keynesian approach to aggregate supply

Answer 19

Approach to aggregate supply in which there is no distinction between SRAS and LRAS. One AS curve can show both the short and the long run

Question 20

Macroeconomic equilibrium

Answer 20

Point at which aggregate demand equals aggregate supply

Question 21

National income multiplier

Answer 21

Ratio of a change in equilibrium real income to the autonomous change that bought it about

Question 22

Accelerator

Answer 22

Theory by which the level of investment depends on the rate of change in national income

Question 23

Economic cycle

Answer 23

Fluctuation of the economy in periods of contraction and expansion around its underlying trend rate, following a regular pattern

Question 24

Output gap

Answer 24

Difference between the actual level of real GDP and the full employment level

Question 25

Economic growth

Answer 25

Change in national output over time as measured by GDP or GNP

Question 26

Nominal GDP

Answer 26

Gross domestic product at current prices. Inflation is not taken into account

Question 27

Real GDP

Answer 27

Gross domestic product at constant prices. Inflation is taken into account

Question 28

GDP per capita

Answer 28

Gross domestic product per head

Question 29

Economic development

Answer 29

Rise in people's economic well-being and quality of life

Question 30

Primary sector

Answer 30

Any industry that is involved in the production or extraction of raw materials, such as farming, logging, fishing and mining

Question 31

Secondary sector

Answer 31

Any industry that is involved in processing the raw materials of the primary sector to create end-products, e.g. manufacturing, construction or assembly

Question 32

Tertiary sector

Answer 32

Production that includes the provision of services, not end-products, e.g. commerce, real estate, finance, administration and education

Question 33

Sustainable development

Answer 33

Economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs

Question 34

GNI per capita

Answer 34

Dollar value of a country's final income in a year, divided by its population

Question 35

Human development index (HDI)

Answer 35

Composite indicator of economic development made up of three parts: GNI per capita, life expectancy at birth, and mean and expected years of schooling. HDI values range from 0 to 1

Question 36

Employment rate

Answer 36

Proportion of the working age population in work

Question 37

Unemployment rate

Answer 37

Proportion of the working age population seeking work (economically active) but who do not have a job

Question 38

Voluntary unemployment

Answer 38

When an individual chooses not to accept a job at the going wage rate

Question 39

Involuntary unemployment

Answer 39

When an individual would like to accept a job at the going wage rate but is unable to find employment

Question 40

Labour market participation rate

Answer 40

Proportion of working age people who are economically active (in employment or actively seeking employment)

Question 41

Economically inactive

Answer 41

Working age people who are neither in employment nor unemployed and so are not part of the labour force

Question 42

Full employment

Answer 42

When all those who are economically active and willing and bale to work (at the going wage rate) have a job

Question 43

Frictional unemployment

Answer 43

Unemployment associated with job search, i.e. those who are between jobs

Question 44

Occupational immobility

Answer 44

Barriers to workers changing occupations

Question 45

Labour force survey

Answer 45

Measure of the percentage of the work force who are without jobs but are available for work, looking for work and willing to work

Question 46

Geographical immobility

Answer 46

Barriers to the movement of workers between different regions

Question 47

Discouraged workers

Answer 47

Those who have been unable to find employment and who are no longer looking for work

Question 48

Inflation

Answer 48

Increase in the average price level measured by a weighted basket of goods

Question 49

Deflation

Answer 49

Decrease in the average price level measured by a weighted basket of goods

Question 50

Disinflation

Answer 50

A fall in the rate of inflation

Question 51

Hyperinflation

Answer 51

Excessively high rate of inflation

Question 52

Real values

Answer 52

Values adjusted for inflation, at constant prices

Question 53

Nominal values

Answer 53

Values unadjusted for inflation, at current prices

Question 54

Balance of payments

Answer 54

Record of the transactions conducted between residents of a country and the rest of the world