Theme 2 - The UK Economy (Performance And Policies)

Question 1

What is economic growth?

Answer 1

The long-term expansion of the productive potential of the economy.

Question 2

How is economic growth measured?

Answer 2

By an annual % increase in real GDP (adjusted for inflation).

Question 3

What causes economic growth?

Answer 3

Right shift in AD and right shift in AS.

Question 4

What are the benefits of economic growth?

Answer 4

• Average incomes increase, lifting some out of poverty
• Fall in unemployment
• Fiscal boost
• Increased confidence in consumption (C) and investment (I)

Question 5

What problems can arise from economic growth?

Answer 5

• Inflation
• Environmental issues

Question 6

Fill in the blank: Economic growth is measured by an annual % increase in _______.

Answer 6

real GDP (adjusted for inflation)

Question 7

True or False: A right shift in aggregate demand (AD) is a cause of economic growth.

Answer 7

True

Question 8

Fill in the blank: The benefits of economic growth include a fall in _______.

Answer 8

unemployment

Question 9

True or False: Environmental issues are a benefit of economic growth.

Answer 9

False

Question 10

What is low unemployment?

Answer 10

The number of people willing and able to work that are unable to find a job despite an active search for one.

Question 11

What are the causes of low unemployment?

Answer 11

Cyclical, structural, frictional, seasonal, technical.

Question 12

What is considered low and stable inflation?

Answer 12

An increase in the average price level over one year, typically around 2%.

Question 13

What are the causes of low and stable inflation?

Answer 13

Demand pull, cost push, wage price spiral.

Question 14

What problems arise from low and stable inflation?

Answer 14

Fixed incomes lose out, international competitiveness suffers, uncertainty leads to a lack of Consumption (C )and Investment (I), savers lose.

Borrowers may benefit from inflation, but it can create challenges for those on fixed incomes and economic stability.

Question 15

What does ‘Claimant Count’ refer to?

Answer 15

A measure of unemployment based on the number of people claiming unemployment benefits.

Question 16

Fill in the blank: The three types of inflation are ______, ______, and ______.

Answer 16

demand pull, cost push, wage price spiral.

Question 17

True or False: The Labour Force Survey (LFS) is greater than the Claimant Count because it includes more demographics.

Answer 17

True.

The LFS includes 16-18 year-olds, married women, and those on sick benefits, providing a broader view of unemployment.

Question 18

What are the potential economic impacts of high unemployment?

Answer 18

Fiscal drain, output falls, fall in living standards, social costs.

High unemployment can lead to increased government spending on welfare and reduced economic activity.

Question 19

How is Unemployment Measured?

Answer 19

Measured by the Claimant Count and the Labour Force Survey (LFS), which includes 16-18 year-olds, married women, and those on sick benefits.

Question 20

How is Inflation Measured?

Answer 20

Measured by CPI (Consumer Price Index) and RPI (Retail Price Index), excluding mortgage interest payments from RPIX and CPI.