Theme 2

Question 1

What are 4 factors that cause Economic Growth

Answer 1

• Increased Productivity
• Increased Consumer Spending
• increased government Spending
• increased investments
• increased exports

Question 2

What are 3 Benefits of Economic Growth

Answer 2

• Greater Living Standards
• Increased Levels Of income
• Better education
• Reduced Poverty

Question 3

What are 2 Drawback of Economic Growth

Answer 3

• Can lead to higher levels of Inflation
• Inequality

Question 4

What is Inflation

Answer 4

A rise in prices

Question 5

What is deflation

Answer 5

A fall in prices

Question 6

What is Disinflation

Answer 6

A rise in Prices but at a slower rate than before

Question 7

What is a limitation of using CPI as a measure of inflation

Answer 7

-It can be outdated

Question 8

What is the difference between CPI and RPI

Answer 8

CPI measure price changes RPI measures the inflation

Question 9

What is Demand Pull Inflation

Answer 9

This is where increased levels of demand for a product cause the price to rise

Question 10

What is Cost Push Inflation

Answer 10

Cost of production increases cause firms to increase their prices

Question 11

What are the 3 causes of inflation

Answer 11

• Demand Pull
• Cosh Push
• Growth of Money

Question 12

What is the Claimant Count

Answer 12

It measures the number of people that are claiming Job Seekers Allowance

Question 13

What is the Labour Force Survey

Answer 13

A survey that finds people who are out of work but willing to work

Question 14

What is Structural Unemployment

Answer 14

Unemployment due to a mismatch of skills in an economy

Question 15

What is Cyclical Unemployment

Answer 15

Unemployment due to the businsses cycle

Question 16

What is Frictional Unemployment

Answer 16

People who are unemployed as they are looking for a new job

Question 17

What is Seasonal Unemployment

Answer 17

People are unemployed due to demand for the labour decreasing

Question 18

What are 2 benefits of being an Export Led economy

Answer 18

• Economic Growth
• Reduced current account deficit

Question 19

Define the Current Account

Answer 19

The record of payments for transactions between countries

Question 20

What can affect the level of Investment

Answer 20

• Spare Capacity
• Business Confidence
• Availability of Credit
• Government Regulations
• Interest Rates

Question 21

What factors can affect SRAS

Answer 21

• Raw Materials
• Exchange Rates
• Tax Rate

Question 22

What factors can affect LRAS

Answer 22

• Technological Advances
• Education
• Migration

Question 23

What is Wealth

Answer 23

The value of assets

Question 24

What is income

Answer 24

The flow of money

Question 25

What is the equation for the Multiplier Effect

Answer 25

1 / 1 - MPC

Question 26

What is a Negative Output Gap

Answer 26

When actual grow is lower than potential growth

Question 27

What is a Positive Output Gap

Answer 27

When actual growth is higher than potential growth

Question 28

What are the 4 Characteristics of a Boom

Answer 28

- Low Inflation - Low Unemployment - High Consumer Spending - High Living Standards

Question 29

What are 4 Characteristics of a Recession

Answer 29

- High Inflation - High Unemployment - Low Consumer Spending - Lower Living Standards

Question 30

Define Monetary Policy

Answer 30

Manipulation of monetary variables in order to influence AD

Question 31

Define Fiscal Policy

Answer 31

Manipulation of Government Spending and Taxation in order to influence AD

Question 32

What is Quantitative Easing

Answer 32

The buying of government bonds by the central bank as a means of increasing money supply to stimulate growth

Question 33

What is the Base Rate

Answer 33

The rate that the central bank will charge commercial banks for loans

Question 34

What are 2 Benefits of Demand Side Policies

Answer 34

- Can lead to a Multiplier Effect - If there is Spare Capacity the economy can grow quickly

Question 35

What are 2 Drawback of Demand Side Policies

Answer 35

- Multiplier may have a small effect - If there is no spare capacity supply side policies are needed - Can create huge budget deficits

Question 36

What are 2 Benefits of Supply Side Policies

Answer 36

- They can help increase production - Can help increase growth when spare capacity is limited

Question 37

What are 2 Drawbacks of Supply Side Policies

Answer 37

- It can be very expensive - Takes a lot time before seeing the effects

Question 38

Define Investment

Answer 38

Money spent on purchasing capital goods improve factors of production

Question 39

Define Exchange Rate

Answer 39

The value of one currency compared to another