Theme 2

Question 1

How do we calculate GDP?

Answer 1

Consumer spending + Investment + government spending + (exports-imports)

Question 2

Definition of GDP?

Answer 2

The total value of all final goods and services produced within the borders of a country in a given time period

Question 3

Definition of wealth?

Answer 3

Value of capital assets owned

Question 4

Definition of income?

Answer 4

Amount made in a certain period

Question 5

What are some possible macroeconomic objectives?

Answer 5

-economic growth
- low unemployment
-low and stable rate of inflation
- balance of payments equilibrium on current account
-balanced government budget
-protection of the environment
-greater income equality

Question 6

What are the indicators of strong economic performance?

Answer 6

Trade
Inflation
Growth
Employment
Redistribution of income
Stability

Question 7

Describe the objective for growth in the economy

Answer 7

Strong (high percentage) sustained (has continued for a reasonable amount of time, and is sustainable, e.g low rates of inflation and causes little to no damage to the environment

Question 8

Describe the objective for employment in the economy

Answer 8

Low unemployment, high employment

Question 9

Describe the objective for trade in the economy

Answer 9

Perfect balance between imports and exports

Question 10

What is a trade deficit?

Answer 10

When the value of imports outweighs the value of exports

Question 11

What is a trade surplus?

Answer 11

When the value of exports outweighs the value of imports

Question 12

What is the goal for inflation in the economy?

Answer 12

2(+/-1)%

Question 13

What is the goal for redistribution of income in the economy?

Answer 13

Fair- however this is a normative statement

Question 14

What are the examples of leakages in the economy?

Answer 14

Savings
Tax
M imports

Question 15

What are examples of injections into the economy?

Answer 15

X exports
Investments
Government spending

Question 16

What happens if there are more investments than withdrawals

Answer 16

Economic growth

Question 17

What happens if there are more withdrawals than investments?

Answer 17

The economy will shrink

Question 18

What happens if injections and leakages are equal?

Answer 18

Macroeconomic equilibrium

Question 19

What are the three methods of measuring GDP?

Answer 19

Income method: all factor incomes earned in a year
Expenditure method: Consumer spending, investment, government spending and (exports- imports)
Output method: all the value of the final products produced in an economy in a year

Question 20

What is the purpose of using index numbers?

Answer 20

To make ugly numbers less ugly
To allow for quick and easy data comparisons

Question 21

How to calculate an index value?

Answer 21

The base year always has a value of 100

Index number= raw number/ base year raw number X 100