The Measurement of Macro Economic Performance

Question 1

Macro Economics

Answer 1

The study of the whole economy at the aggregate level

Question 2

Policy Objective

Answer 2

A target or goal that policymakers aim to hit

Question 3

Short-run Economic Growth

Answer 3

The growth of real output resulting from using idle resources, including labour, thereby taking up the slack in the economy

Question 4

Long-run Economic Growth

Answer 4

An increase in the economy’s potential level of Real Output, and an outward shift of the economy’s production possibility frontier

Question 5

GDP

Answer 5

The sum of all goods and services, or level of output, produced in the economy over a period of time

Question 6

Real GDP

Answer 6

A measure of all the goods and services produced in an economy, adjusted for inflation. The adjustment transforms changes in nominal GDP, which is measured in money terms, into a measure that reflects changes in the total output of the economy

Question 7

Nominal GDP

Answer 7

GDP measured at the current market prices, without removing the effects of inflation

Question 8

Recession

Answer 8

A fall in GDP for 2 consecutive quartiles

Question 9

Full Employment

Answer 9

The level of employment occurring at the market-clearing real-wage rate, where the number of workers whom employers wish to hire equals the number of workers wanting to work

Question 10

Claimant Count

Answer 10

The method of measuring unemployment according to those people who are claiming unemployment-related benefits e.g. Jobseekers allowance

Question 11

Labour Force Survey

Answer 11

A quarterly sample survey of households in the UK. Its purpose is to provide information on the UK labour market. The survey seeks information on respondents’ personal circumstances and their labour market status during a period of 1 - 4 weeks

Question 12

Inflation

Answer 12

A persistent or continuing rise in the average price level

Question 13

Deflation

Answer 13

A persistent or continuing fall in the average price level

Question 14

Disinflation

Answer 14

When the rate of inflation is falling, but is still positive

Question 15

Price index

Answer 15

An index number showing the extent to which a price, or a ‘basket’ of prices, has changed over a month, quarter or year, in comparison to the prices in a base year

Question 16

Consumer Price index (CPI)

Answer 16

The official measure used to calculate the rate of consumer price inflation in the UK. The CPI calculates the average price increase of a basket of 700 different consumer goods and services

Question 17

Retail Prices Index (RPI)

Answer 17

The RPI is an older measure used to calculate the rate of consumer price inflation in the UK

Question 18

What does the UK use CPI for?

Answer 18

Indexation of state pensions, welfare benefits and for setting a monetary policy target

Question 19

What does the UK use RPI for?

Answer 19

The updating of the cost of TV and motor vehicle licences, together sometimes with taxes on goods such as alcoholic drinks

Question 20

Indexation

Answer 20

The automatic adjustment of items such as pensions and welfare benefits to changes in the price level, through the use of a price index

Question 21

Balance of Payments

Answer 21

A record of all the currency flows into and out of a country in a particular time period

Question 22

Current Account of the Balance of Payments

Answer 22

Measures all the currency flows into and out of a country in a particular time period in payment for exports and imports, together with income and transfer flows

Question 23

Exports

Answer 23

Domestically produced goods or services sold to residents of other countries

Question 24

Imports

Answer 24

Goods or services produced in other countries and sold to residents of this country

Question 25

Balance of Trade

Answer 25

The difference between the money value of a country’s imports and it’s exports. Balance of trade is the largest component of a countries balance of payments on current account

Question 26

Balance of Trade Deficit

Answer 26

The money value of a country’s imports exeeds the money value of its exports

Question 27

Balance of Trade Surplus

Answer 27

The money value of a country’s exports exeeds the money value of its imports

Question 28

Balanced Budget

Answer 28

when government spending equals governemnt revenue, which is most likely tax revenue

Question 29

Budget Deficit

Answer 29

When government spending greater than governement revenue

Question 30

Policy Conflict

Answer 30

Occurs when two policy objectives cannoyt both be achieved at the same time: the better the performance of achieving one objective, the worse the performance in achieving the other