Unit 1 Topic 2 Flashcards
What is meant by macroeconomic objective?
Objective that relates to the economy as a whole rather than to a specific sector or individual company.
4 main objectives that UK government aims to achieve?
- Price stability
- Low unemployment
- A balance of payments equilibrium
- Satisfactory economic growth
What is potential negative impact of expanding economic growing to reduce unemployment?
Measures taken to expand the economy (eg reducing interest rates and taxation) increases the demand for goods and services which is likely to result in rise in inflation.
All governments aim to achieve zero inflation.True or false?
False. They aim to keep prices stable but seeking to reduce inflation to zero is likely to increase unemployment.
Disinflation means:
- Prices are rising faster than previously
- Prices are falling
- Prices are rising but more slowly than previously
- Prices are staying the same
- Prices are rising but more slowly than previously
Which of the following economic measures alem by the government would not help to achieve budget surplus?
- Increase taxation
- Increase public spending
- Reducing public spending
- Increase public spending
To achieve budget surplus a government must cut public spending, raise taxes or both.
A new piece of EU legislation is being introduced. It is being implemented at the same time and in exactly the same way across all members. This indicates that the legislation is in the form of:
- Directive
- Regulation
- Regulation
Member states have flexibility in the way they introduce directives.
What is the definition of inflation?
(A) A rapid decrease in the general level of prices.
(B) A fall in the rate at which prices are rising.
(C) A sustained increase in the general level of prices of goods and services
(D) A general fall in the price of goods and services.
(C) A sustained increase in the general level of prices of goods and services
What is the country’s inflation target?
(A) 0%
(B) 1%
(C) 2%
(D) 3%
(C) 2%
What does GDP measure?
(A) The total income of a country’s citizens, regardless of location.
(B) The monetary value of all final goods and services produced within the country in a given period
(C) The average price level of goods and services in an economy.
(D) The rate of unemployment within a country.
(B) The monetary value of all final goods and services produced within the country in a given period
During the recovery and expansion phase of the economic cycle, what tends to happen to interest rates, inflation, and unemployment?
(A) They are all high.
(B) They are all low
(C) Interest rates rise, inflation falls, unemployment rises.
(D) Interest rates fall, inflation rises, unemployment falls.
(B) They are all low
What is the definition of the Consumer Prices Index (CPI)?
(A) It measures the overall economic output of a country.
(B) It measures the rate of unemployment.
(C) It measures the average change in prices of a basket of goods and services over time
(D) It measures the value of a country’s currency against others.
(C) It measures the average change in prices of a basket of goods and services over time
What is the purpose of using the CPI?
(A) To control government spending.
(B) To set interest rates directly.
(C) To track inflation and assess changes in the cost of living
(D) To measure the stock market performance.
(C) To track inflation and assess changes in the cost of living
What is the “bank rate”?
(A) The rate at which commercial banks lend to each other.
(B) The rate of inflation targeted by the government.
(C) The rate at which the BoE lends to other financial institutions
(D) The average interest rate charged on mortgages.
(C) The rate at which the BoE lends to other financial institutions
Who sets interest rates?
(A) The government.
(B) Commercial banks.
(C) The Bank of England’s Monetary Policy Committee (MPC)
(D) International financial institutions
(C) The Bank of England’s Monetary Policy Committee (MPC)
What are fiscal policy measures primarily concerned with?
(A) Interest rates and money supply.
(B) Taxation, public spending, and borrowing
(C) Exchange rates and international trade.
(D) The regulation of financial institutio
(B) Taxation, public spending, and borrowing
What are indirect taxes applied to?
(A) An individual’s total earnings.
(B) The value of inherited property.
(C) Goods and services when they are purchased
(D) A company’s profits before deductions.
(C) Goods and services when they are purchased
Which of the following is given as an example of a direct tax ?
(A) Value Added Tax (VAT)
(B) Stamp duty
(C) Income tax
(D) Customs duty
(C) Income tax
W hat occurs when there is a budget deficit?
(A) Taxation is greater than public spending.
(B) Public spending is equal to taxation.
(C) Public spending is greater than taxation
(D) The economy shrinks significantly.
(C) Public spending is greater than taxation
Who presents the budget statement to the House of Commons each year?
(A) The Prime Minister.
(B) The Governor of the Bank of England.
(C) The Chancellor of the Exchequer
(D) The Speaker of the House of Commons.
(C) The Chancellor of the Exchequer
What is a key characteristic of EU Regulations?
(A) They are interpreted differently by each member state.
(B) They set out a result to be achieved, leaving discretion to member states.
(C) They are binding in their entirety and directly applicable in all member states
(D) They require specific transposition into national law by each member state.
(C) They are binding in their entirety and directly applicable in all member states
What is the main characteristic of EU Directives?
(A) They are immediately and uniformly applied in all EU countries.
(B) They are binding upon each member state to which they are addressed, regarding the result to be achieved
(C) They do not require any action from member states.
(D) They have general application across all sectors.
(B) They are binding upon each member state to which they are addressed, regarding the result to be achieved
