Unit 2 Macroeconomics and Circular flow

Question 1

Define Macroeconomics

Answer 1

Macroeconomics is the study of the economy as a whole.

Question 2

Define Microeconomics

Answer 2

Microeconomics studies the behaviour of individual sector of the economy (households, firms, government and etc.)

Question 3

Define economic indicators and its purpose

Answer 3

Indicators of whether the economy is expanding or contracting, allow firms to make better business decisions and governments to formulate more appropriate economic policies.

Question 4

List the types of economic indicators

Answer 4

1. Leading
2. Lagging
3. Coincident

Question 5

Explain the role of
Leading economic indicator.

Answer 5

Predict trends in economic activity, changing before a direction becomes evident in the rest of the economy

Question 6

What does Y stands for?

Answer 6

Income

Question 7

What does C stands for?

Answer 7

Consumption Expenditure

Question 8

What does S stands for?

Answer 8

Savings

Question 9

What does I stands for?

Answer 9

Investment

Question 10

What does T stands for?

Answer 10

Taxation

Question 11

What does G stands for?

Answer 11

Government expenditure

Question 12

What does M stands for?

Answer 12

Imports

Question 13

What does X stands for?

Answer 13

Exports

Question 14

Define and explain the role of Lagging economic indicators.

Answer 14

Lagging economic indicators are not expected to show any change until after trends in the rest of the economy have been confirmed, react to development that occurred sometime in the past

Question 15

Define and explain the role of Coincident economic indicators.

Answer 15

Coincident economic indicator appear to move in line with the level of economic activity

Question 16

List examples of leading economic indicators.

Answer 16

1. Building approvals
2. Share prices
   3.New employment vacancies
3. Levels of business confidence
4. Consumer sentiment

Question 17

List examples of Coincident indicators

Answer 17

1. Manufacturing output
2. Sales of consumer durables
3. Interest rates

Question 18

List examples of Lagging indicators

Answer 18

1. Bankruptcies
2. Unemployment levels
3. Consumer debt levels

Question 19

Define the circular flow income and expenditure in the economy

Answer 19

It is the pattern of exchange that would occur in order for people to satisfy their wants and needs in the economy