Study Work

Question 1

What is the multiplier?

Answer 1

This refers to an economic factor that causes changes in other factors when increased or changed.

Question 2

What is the MPC?

Answer 2

Marginal Propensity to Consume, this determines the size of the multiplier.

Question 3

Calculate the multiplier.

Answer 3

Divide change in consumption by the change in income.

Then say, K= 1 over (1-MPC)

Question 4

What is the importance of the multiplier and how can the government utilize?

Answer 4

The multiplier allows for government spending to stimulate the economy and the government can use it to increase private spending and to further stimulate the economy.

Question 5

What is public sector failure?

Answer 5

This is when government intervention in the economy leads to the inefficient allocation of resources.

Question 6

How can accountability and self-interest lead to public sector failure?

Answer 6

The government is accountable for different aspects of the economy which allow it run efficiently. If the government is not accountable for these aspects, then the economy will not run efficiently and this will lead to public sector failure. If the government has their own self-interests involved, this may lead to corruption which will lead to public sector failure.

Question 7

Name 2 reasons for demand for foreign currency.

Answer 7

Tourism

Imports of goods and services

Question 8

What is the balance of payments?

Answer 8

A financial record of all export and import transactions for a period of time.

Question 9

Types of transactions in the current account?

Answer 9

Merchandise exports
Income receipts
Service receipts

Question 10

What is current account surplus?

Answer 10

This is when an economy exports a greater value of goods and services than it imports.

Question 11

What does the Capital Account record?

Answer 11

Net Capital Transfers

Non Financial Assets

Question 12

(3)?

Answer 12

Directs Investment

Question 13

What is SDR?

Answer 13

Special Drawing Right, is a reserve asset which is international bearing

Question 14

The 2 policies?

Answer 14

Monetary Policy

Fiscal Policy

Question 15

What are the macroeconomic objectives in the public sector?

Answer 15

To maintain price stability
To maintain exchange rate stability
To improve economic growth
To achieve FULL EMPLOYMENT OR TO REDUCE UNEMPLOYMENT
To achieve fair income distribution