The measurement of the macroeconomic performance

Question 1

What is aggregate demand?

Answer 1

Total demand in the economy

Question 2

What is the equation for aggregate demand?

Answer 2

C + I + G + (X-M)

Question 3

What is aggregate supply?

Answer 3

The total value of goods and services supplied in an economy

Question 4

What is equilibrium?

Answer 4

Aggregate demand = aggregate supply

Question 5

What is the main aim for any government?

Answer 5

To improve the wellbeing of citizens

Question 6

What is economic growth?

Answer 6

The capacity of the economy to produce more goods and services over time

Question 7

What is GDP?

Answer 7

The total value of goods and services produced in an economy

Question 8

How can you measure output in an economy?

Answer 8

GDP

Question 9

What is actual growth?

Answer 9

The performance of an economy at a particular point in time

Question 10

What is trend growth?

Answer 10

The average performance of an economy over time

Question 11

What is a negative output gap?

Answer 11

Where the economy is producing less than its trend output

Question 12

What is a positive output gap?

Answer 12

When actual GDP exceeds trend GDP increasing inflationary pressure

Question 13

In a positive output gap, what is employment likely to be?

Answer 13

High

Question 14

What is a trade off?

Answer 14

Where one macroeconomic objective has to be curtailed in favour of another objective

Question 15

What are imports?

Answer 15

Goods or services purchased from abroad

Question 16

What are exports?

Answer 16

Goods or services sold abroad

Question 17

What is employment?`

Answer 17

Where labour is actively engaged in a productive activity usually in exchange for payments such as wages

Question 18

What is unemployment?

Answer 18

Those without a job but who are seeking work at the current wage rates

Question 19

What does unemployment represent?

Answer 19

A waste of human capital

Question 20

What are the consequences of unemployment? (CILGB) (5)

Answer 20

A fall in consumer confidence
A fall in income 
Lower standard of living 
Falling government tax revenue 
Increased spending on benefits

Question 21

What is inflation?

Answer 21

A sustained increase in the general price level

Question 22

When actual growth exceeds trend, what happens to labour?

Answer 22

It becomes scarce, leads to higher wage rates

Question 23

Why is inflation an important measure of performance?

Answer 23

It indicates whether the UK price is competitive internationally

Question 24

Will high inflation make the UK more or less internationally competitive? Why>?

Answer 24

Less, because our prices are too high therefore consumers will go to other cheaper countries

Question 25

What is exporting?

Answer 25

The sale of goods and services to a foreign country - generates income for the home country

Question 26

What is importing?

Answer 26

The purchase of goods and services from abroad - leads to expenditure for the home country

Question 27

What are economic indicators?

Answer 27

Economic statistics that provide information about the expansions and contractions of business cycles

Question 28

What is nominal GDP?

Answer 28

GDP not adjusted for inflation

Question 29

What is real GDP?

Answer 29

GDP that is adjusted for inflation

Question 30

What is GDP per capita?

Answer 30

GDP/ population

Question 31

What are index numbers?

Answer 31

A weighted average of a group of items compared to a given base value

Question 32

What is GDP used for? Why?

Answer 32

To measure living standards

They show by how much the income of the average person has risen over time

Question 33

What are the methods to measure inflation? (2)

Answer 33

CPI

RPI

Question 34

Which inflation measurement includes house prices?

Answer 34

RPI

Question 35

Why did CPI replace RPI?

Answer 35

It is easier to compare with that of the EU’s countries