Summer work

Question 1

The invisible hand

Answer 1

A metaphor in economics used to describe how peoples self-interested actions can lead to beneficial social and economic outcomes. First introduced by Adam Smith in 1759

Question 2

The Phillips Curve

Answer 2

An economic model that shows an inverse relationship between inflation and unemployment. created by New Zealand Economist A.W. Phillips

Question 3

The Paradox of Thrift

Answer 3

An economic theory that states when people save more during a recession, the overall savings in an economy may actually decrease

Question 4

Rational Choice Theory

Answer 4

A theoretical framework that suggests people make decisions by weighing the costs and benefits and of different options to maximise their benefits and minimize their costs

Question 5

The Impossible Trinity

Answer 5

An economic theory that suggests its impossible for a country to achieve three policy objectives simultaneously; fixed exchange rate; free capital movement and independent monetary policy

Question 6

Comparative Advantage

Answer 6

An economic theory that explains how individuals, firms and countries can benefit from trade by focussing on what they’re best at and buying what they’re not