Our Economy - Introduction

Question 1

Scarcity

Answer 1

Economic question of how to satisfy unlimited wants with limited resources

Question 2

Economic Resources

Answer 2

Land, Labour, Capital, Enterprise

Question 3

What is GDP?

Answer 3

Gross Domestic Product is the total value of all goods and services produced in the economy in a single year. GDP per capita is GDP per person.

Question 4

Calculating government budget

Answer 4

Taxes (T) - Government Spending (G) = deficit or surplus.

Question 5

What is the importance of the balance of trade?

Answer 5

Calculated as Net Exports (NX) = Exports (X) - Imports (M). A trade deficit occurs if there are more imports then exports as more money leaks from the circular flow of the economy to the overseas sector, slowing the economy .

Question 6

What are the key features of a contraction in the business cycle?

Answer 6

• Falling levels of production (output)
• Decreasing consumer spending
• Rate of inflation may fall
• Wage rates generally fall
• Interest rates eventually fall
• Levels of unemployment rises

Question 7

What are the key features of a boom in the business cycle?

Answer 7

• Rising levels of production (output)
• Increasing consumer spending
• Rate of inflation may rise
• Wage rates generally rise
• Interest rates eventually rise
• Levels of unemployment falls