Theme 2 topics eg. AD

Question 1

What is Economic Growth?

Answer 1

An increase in the availability of goods and services in an economy, measured by GDP, at a given time period.

Question 2

What are the benefits of economics growth

Answer 2

1. consumers have more choice
2. Coorporate tax revenue increases so better for government

Question 3

Define Unemployment

Answer 3

The number of people of working age who are willing to work, able to work, and actively seeking work, yet not employed.

Question 4

How is unemployment measured

Answer 4

1. Claimant count - Number of people claiming Job seeker allowance.
2. Labour force survey.

Question 5

What is the advantage of low unemployment

Answer 5

1. Higher Incomes
2. Governments would pay less welfare benefits
3. More workers can lead to higher profits - Increase in output for firms
4. More income tax for government

Question 6

Define Inflation

Answer 6

Increase in the general price level in an economy at a given time period. - of goods/services

Question 7

How is inflation measured

Answer 7

1. CPI - Consumer Price Index
2. RPI - Retail Price Index

Question 8

What is the inflation objective of the government

Answer 8

A low and stable rate of 2%

Question 9

What are the benefits of Low Inflation.

Answer 9

1. people can have a better standard of living
2. More sales for companies as prices are cheaper for consumers
3. More foreign investments as Internationally more competitive as prices in UK cheaper.

Question 10

What is Balance of Payments - BOP

Answer 10

An account record of transactions between one country and rest of the world, including exports and imports.

Question 11

How is balance of payment measured

Answer 11

1. Trade deficit - Imports>exports - imports more than exports
2. Trade surplus - Imports<exports - more exports than imports.

Question 12

What are the benefits of Positive Balance of payments

Answer 12

1. Exports raise revenue for economy
2. More exports means that demand for workers rises so unemployment decreases

3.Higher exports can encourage economic growth

Question 13

What is Aggregate demand - AD

Answer 13

Total demand for goods and services produced within the economy over a period of time

Question 14

What is the equation for AD

Answer 14

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

Question 15

Name the components in the AD equation

Answer 15

AD = Consumption of goods and services + Investment + Government spending + ( exports - imports)

Question 16

What is consumption

Answer 16

Spending by households on goods and services in an economy at a given time period

Question 17

Define Investment in economics

Answer 17

Spending on capital goods, such as -

Machinery and Equipment - in an economy at a given time period

Question 18

What is Government Spending

Answer 18

Spending by the public sector on goods and services such as education, health care and defence.

Question 19

Sketch of an AD curve

Answer 19

Question 20

Why is the AD curve downwards sloping

Answer 20

1. At a lower price, goods and services are cheaper so firms produce more units as more sales.
2. At lower price, UK will have more exports as more Internationally Competitive.

Question 21

If price changes in AD, then what happens in graph

Answer 21

There is movement along the AD curve from point A to B

Question 22

When does AD curve shift and why

Answer 22

When factors other than price such as components of AD change, then the AD curve can shift to the right or the left

Question 23

Sketch of the AD shift

Answer 23

Question 24

What factors affect investment

Answer 24

1. Interest rates
2. Access to funds
3. Accelerator effect
4. confidence
   5.animal spirit

Question 25

Which AD factor is most % in UK economy

Answer 25

Consumption at 60%

Question 26

What is disposable income?

Answer 26

Income after taxes.