Theme 2 - The UK Economy - Performance And Policies

Question 1

What is inflation?

Answer 1

A steady rise in prices over time.

Question 2

What is unemployment?

Answer 2

The proportion of the available workforce that does not have a paid job.

Question 3

What are imports?

Answer 3

Goods and services that are country buys from other countries.

Question 4

What are exports?

Answer 4

Goods and services as a country sells to other countries.

Question 5

What are interest rates?

Answer 5

The cost of borrowing money.

Question 6

What is national income?

Answer 6

The total value of all goods and services produced by a country in one year.

Question 7

What is an investment?

Answer 7

Firms spend money on something that will make them more money in the future.

Question 8

What is consumption?

Answer 8

Amount of money spent by consumers.

Question 9

What is Econmics growth?

Answer 9

An increase in a country’s national income.

Question 10

What is the EU?

Answer 10

A group of countries in Europe who operate as a single market.

Question 11

What is globalisation?

Answer 11

The idea that countries’ economies are increasingly interdependent.

Question 12

What is taxation?

Answer 12

The money taken by government to be used for public spending.

Question 13

What is public spending?

Answer 13

Money spent by the government.

Question 14

What does aggregate mean?

Answer 14

The sum or total.

Question 15

What is aggregate demand?

Answer 15

The total of all demands or expenditures in the economy at any given price.

Question 16

What does the aggregate demand curve show?

Answer 16

The relationship between price level and equilibrium national income. As the price level rises, the equilibrium level of national income falls.

Question 17

What’s a domestic economy?

Answer 17

The economy of a single country.

Question 18

What is macroeconomics?

Answer 18

Macroeconomics is concerned with the study of the economy as a whole.

Question 19

Why is macroeconomics useful?

Answer 19

It tells us something about the performance of an economy. In particular, it allows economists to compare the economy today with the last year.

Question 20

What is GDP?

Answer 20

The standard measure of output, which allows us to compare countries. It is the total value of goods and services produced in a country within a year.

Question 21

What is the difference between real GDP and nominal GDP?

Answer 21

Real GDP​ strips out the effects of inflation whilst ​nominal GDP​ does not.

Question 22

How does GDP per capita grow?

Answer 22

GDP per capita grows if national output grows faster than population over a given time period, so there are more goods and services to enjoy per person.

Question 23

What is the difference between total GDP and GDP per capita?

Answer 23

Total GDP represents the overall GDP for the country whilst ​GDP per capita is the total GDP divided by the number of people in a country.

Question 24

What is GDP an indicator of?

Answer 24

GDP is an indicator of the standard of living in a country.

Question 25

What is the difference between real and nominal values?

Answer 25

• Real values can be described as the ​volume of national income i.e. the size of the basket of goods.
• Nominal values represent the ​value ​of the national income i.e. the monetary cost of this basket of goods.
• The value is equal to the volume times the current price level.
• The value of national income is its monetary value at the prices of the day; the volume is national income adjusted for inflation and is expressed either as index number or in money terms.

Question 26

What is Gross National Income (GNI)?

Answer 26

The value of goods and services produced by a country over a period of time plus net overseas interest payments and dividends.

Question 27

What is Gross National Product (GNP)?

Answer 27

The value of goods and services over a period of time through labour or property supplied by citizens of a country both domestically (GDP) and overseas.

Question 28

What is deflation and why is it bad?

Answer 28

Deflation is the falling of prices. Deflation makes it more difficult for a country to grow its GDP (hence deflation and recessions are linked).

Question 29

When do economists worry that inflation is too high?

Answer 29

When inflation starts to climb through through the 5% barrier.

Question 30

What are the problems with inflation?

Answer 30

• Rising prices means that the value of of what savings can buy falls
• It disrupts knowledge of prices in a market (consumers won’t know what a reasonable price for an item is if prices keep changing)

Question 31

What is the formula for aggregate demand?

Answer 31

AD = C + I + G + M + (X-M)