National economy

Question 1

What is national economy

Answer 1

The national economy is a historically shaped complex of production sectors in a given country, interrelated through the division of labour. The national economy includes the sectors of the production sphere, where material goods are produced, and sectors of the nonproduction sphere, where non-material services are performed. The socioeconomic nature of any national economy, as well as its structure and rate of development, is determined by the character of the dominant production relationships in society.

Question 2

Description of the national economy

Answer 2

The national economy is the economy of a nation as a whole. The national economy is the subject of macroeconomics. Companies, households and states represented by the governments are the main subjects of the national economy.

Question 3

Main tasks of the national economy

Answer 3

producing goods and services to satisfy needs,
taking care of the environment of the country,
ensuring the development of the country and co-operation with other countries.

Question 4

Economic integration

Answer 4

Economic integration is the process of connecting the economies of individual countries to larger units based on common interests and aims

Question 5

microeconomic integration

Answer 5

connecting the companies (joint market, consulting, transnational corporations, etc.);

Question 6

macroeconomic integration

Answer 6

connecting the national economies to transnational economic complex (free trade zone, customs union, joint market, economic union, monetary union)

Question 7

free trade zone

Answer 7

free of customs duties and quotas (NAFTA, EFTA, EU)

Question 8

customs union

Answer 8

free of customs duties and quotas with a joint tariff to non-member countries, (EU)

Question 9

joint market

Answer 9

free flow of goods, services, capital and labour,

Question 10

economic union

Answer 10

joint economic policy,

Question 11

monetary union

Answer 11

joint currency to replace national currencies. (European monetary union)

Question 12

World economy

Answer 12

The world economy is a complex of all national economies in the world. It includes the system of international economic relations based on the international division of a labour and the world market.

Question 13

Structure of the national economy

Answer 13

The national economy consists of several parts and units with common and different characteristics. Parts and units with common characteristics huddle up to make their activities easier to manage.

Question 14

Structure of the national economy according to the industries:

Answer 14

production industry (industrial production, agriculture, forestry and aquaculture, construction, freight, etc.),
non-production industry (education, healthcare, financial intermediation, trade, etc.).

Question 15

Structure of the national economy according to the sectors:

Answer 15

primary sector (agriculture, forestry and aquaculture, mining, etc.),
secondary sector (processing industry, construction, etc.),
tertiary sector (services),
quaternary sector (education, healthcare, science and research, etc.).

Question 16

Structure of the national economy according to the territory:

Answer 16

territorial units (municipality, town, higher territorial unit), administrative units (region, district).

Question 17

Industry

Answer 17

The industry is part of the national economy consisting of companies with the same or similar focus. The output of these companies is identical or similar products (goods and services). In Slovakia, the industries are managed by individual ministries. Common features of companies in the same industry (inputs, activities, outputs, work focus, production technologies and processes.)

Question 18

Statistical classification of economic activities in the European Community (NACE)

Answer 18

NACE is the classification of economic activities in the European Union NACE is a four-digit classification providing the framework for collecting and presenting a large range of statistical data according to economic activity in the fields of economic statistics and other statistical domains developed within the European statistical system. SK NACE Rev. 2 is used in Slovakia since 2007 (www.statistics.sk).

Question 19

Sector

Answer 19

The sector is an area of economic activity which has similar characteristics. The sectors are formed by the grouping of the industries:

Question 20

primary sector:

Answer 20

the low rate of scientific and technological progress,
minimal automation,
slow growth in labour productivity;

Question 21

secondary sector:

Answer 21

modern technologies,
narrow specialisation,
high labour productivity,
demanding inputs;

Question 22

tertiary sector:

Answer 22

modern technologies,
rapid growth in labour productivity,
less demanding inputs;

Question 23

quaternary sector:

Answer 23

not oriented to making a profit,
the state is involved in its development.

Question 24

Reproduction process

Answer 24

People’s needs are not just one-off, but some of them are repeated. That is why the production process must be repetitive, as well. The reproduction process is the continuous repetition of the four basic phases, which are production, distribution, exchange, consumption.

Question 25

Phases of the reproduction process:

Answer 25

production - transformation of inputs into outputs,
distribution-determination of how the individuals have contributed to the created products (e.g. wage),
exchange - purchasing products for money obtained during the distribution,
consumption - satisfying needs through product consumption.

Question 26

Types of reproduction:

Answer 26

simple reproduction - the reproduction process is repeated to the same extent (product volume does not change),
expanded reproduction - the reproduction process is repeated to the greater extent (product volume increases),
narrowed reproduction the reproduction process is repeated to the lesser extent (product volume decreases).

Question 27

Measuring the performance of the national
economy

Answer 27

To assess whether a country’s national economy is developed or underdeveloped, it is necessary to have data on which it is possible to assess it. Traditionally, the key performance measures of the national economy include:
economic growth (GDP/GNP/NEW),
inflation (CPI),
economic health (unemployment).

Question 28

Gross domestic product

Answer 28

The GDP is a monetary measure of the value of all final goods and services legally produced in an economy in a certain period of time (quarterly or yearly).
The distinction between final goods and intermediate goods is very important. A tomato sold to a ketchup manufacturer would not be included in the GDP number, while a tomato sold in a store as a product would be included, as it represents the final use of that good. Trade of illegal goods and services is also excluded from GDP figures.

Question 29

The expenditure method of GDP calculating

Answer 29

GDP = Consumer spending + Investment + Government spending + (Exports - Imports)

Question 30

The income method of GDP calculating

Answer 30

The GDP is measured and expressed through income, such as wages, net interest, net profit, amortisation (amortisation is similar to depreciation, it represents the value of consumed and wear-and-teared non-current assets while it affects the price of products), indirect taxes.

Question 31

The production (output) method of GDP calculating

Answer 31

This method of calculating GDP leads to counting the value added during production. To avoid double counting, the value added is measured to a product or service as it passes through each phase of its production.

Question 32

Net domestic product

Answer 32

NDP = GDP - amortisation

Question 33

Gross national product

Answer 33

Gross national product (GNP) is an estimate of total value of all the final products and services produced in a certain period of time by means of production owned by a country’s residents (even in the territory of a foreign country).

Question 34

Net national product:

Answer 34

NNP = GNP - amortisation

Question 36

Inflation

Answer 36

Inflation is the rate at which the overall price of goods and services within an economy increases over a certain period of time. It is a measure for the devaluation of the currency of a country.

Question 37

The impact of inflation on an economy:

Answer 37

As the price of goods and service increases within an economy, the national currency can purchase less and so the purchasing power of money is reduced:

Question 38

Cause of inflation

Answer 38

inflation is generally caused by an imbalance between the growth of the money supply
and the growth of an economy (if the money supply expands faster than the economy, it results in high levels of inflation);
inflation can also be caused by an imbalance between the supply and demand for goods
(if there is a high demand for scarce products, their price rises and this can cause inflation).

Question 39

Inflation calculating:

Answer 39

The consumer price index (CPI) is a common way of measuring inflation and gives the rate of price change for a consumer basket (basket of goods and services). The basket tries to resemble the structure of items that are usually bought and used by consumers (housing, clothing, electricity, water, electronic devices, etc.). The CPI does not include any investments and is only focused on general consumer purchases. The CPI is usually calculated monthly or quarterly

Question 40

Deflation

Answer 40

The opposite of inflation is called deflation (negative inflation). In a deflation, money becomes more valuable, and goods become cheaper.

Question 41

Unemployment

Answer 41

Unemployment is a phenomenon that occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy.

Question 42

Unemployment calculating:

Answer 42

The most frequently used measure of unemployment is the unemployment rate, which is the number of unemployed people divided by the number of people in the labour force (people who are able to work).

Question 43

Labour force

Answer 43

Employed people (working, vacation, illness)
Unemployed people

Question 44

Economically inactive people

Answer 44

People who can’t work
People who don’t want to work

Question 45

How do we measure unemployment

Answer 45

unemployment rate
UR=( unemploymed/number in labour force) x 100

Question 46

Unemployemnt rate in SR

Answer 46

5,2%

Question 47

Inflation rate SR

Answer 47

10,5%

Question 48

Inflation rate SR

Answer 48

10,5%

Question 49

Final good and intermediate good

Answer 49

Final good - sold to final costumer
Intermediate good - sold for further production

Question 50

What office is responsible for calculating GDP and which method do they use

Answer 50

Statistical office of SR
production method

Question 51

GDP in nominal vs real price

Answer 51

Nominal - Total value of all products and services produced in an economy in current market price, it does not adjust for inflation
Real - adjust for inflation