Measurement Of Macroeconomic Performance

Question 0

What is the definition of AD?

Answer 0

Total demand in the economy made up of consumption, investment, government expenditure and net exports.
C+I+G+(X-M)= AD

Question 1

What is the definition of macroeconomics?

Answer 1

Considering the economy as a whole- the total quantities of goods and services produced by all firms in the economy (aggregate supply and demand).

Question 2

What is the definition of AS?

Answer 2

The total value of goods and services supplied in the economy.

Question 3

What is the definition of the measurement of macroeconomic performance ‘growth’?

Answer 3

The capacity of the economy to produce more goods and services over time.

Question 4

How is the graph for ‘economic growth’ drawn?

Answer 4

• Y axis= GDP
• X axis= Time
• trend growth rate= average performance of the economy over time (positive straight line)
• actual growth rate= represents the cyclical activity of the economy, fluctuating over the trend rate

1. Recession to slump (trough)
2. Recovery to boom (peak)

Question 5

What is a negative output gap?

Answer 5

When actual growth is below trend.
Economy goes into a recession or, if really bad, a slump= lower output and higher unemployment.
Gov try to increase AD.

Question 6

What is a positive output gap?

Answer 6

When actual growth rate is above trend
Higher levels of output and higher employment.
AD>AS= inflation
Gov will try and reduce AD

Question 7

What is GDP?

What is real GDP?

Answer 7

GDP= the total value of goods and services produced in the economy.
Real GDP= ^ minus inflation

Question 8

What are imports and exports?

Answer 8

Imports= goods or services purchased from abroad (buying)
Exports= goods or services sold abroad (selling)

Question 9

What is employment and unemployment?

Answer 9

Employment= where labour is actively engaged in a productive activity, usually in exchange for payments such as wages

Unemployment= those without a job but who are seeking work at current wage rates

Question 10

What is the difference between a measure and an indicator of macroeconomic performance?

Answer 10

Measure= measures the rate of the performance e.g GDP or employment rate

Indicator= statistics that provide info about the expansions and contractions of economic activity e.g inflation (RPI)

Question 11

What are the macroeconomic objectives?

Answer 11

T= trade balance 
I= inflation
G= growth
E= employment 
R= redistribution of income