Unit 7 - Section 5: Analysing The External Environment, Economic Change

Question 1

Economy

Answer 1

Production, distribution, or trade, and consumption of goods and services by different agents in a given geographical location

Question 2

Gross domestic product (GDP)

Answer 2

Measures the value of a country’s total output over a period of time

Question 3

Business cycle

Answer 3

The periodic but irregular up and down movements in economic activity

Question 4

Boom

Answer 4

When economic activity peaks

Question 5

Recession

Answer 5

When the economy contracts. Defined as two consecutive quarters of negative growth in GDP

Question 6

Slump

Answer 6

When economic activity is at its lowest point in the business cycle

Question 7

Recovery

Answer 7

When there is an expansion in economic activity

Question 8

Exchange rate

Answer 8

The price of one currency in terms of another

Question 9

Balance of payments

Answer 9

Compares the value of imports to exports over a period

Question 10

Imports

Answer 10

Goods and services produced abroad and brought into the UK

Question 11

Exports

Answer 11

Goods and services produced in the UK and sold abroad

Question 12

Inflation

Answer 12

An increase in the general levels of price in the economy resulting in a fall in the purchasing power of money

Question 13

Real income

Answer 13

The purchasing power of pay. Pay increases compared to price increases

Question 14

Nominal income

Answer 14

The amount that wages and salaries rise

Question 15

Cost push inflation

Answer 15

General price rises caused by rising costs

Question 16

Demand pull inflation

Answer 16

General price rises caused by high demand for goods and services

Question 17

Wage price spiral

Answer 17

How raising wages drive up costs and therefore cause inflation

Question 18

Hyperinflation

Answer 18

The value of money decreases so fast that people lose confidence in it

Question 19

Fiscal policy

Answer 19

The way the government tax and spend

Question 20

Monetary policy

Answer 20

Now demand is controlled by limiting the money supply usually by using interest rates or quantitative easing

Question 21

Open trade

Answer 21

Countries that are open trade freely with those around them

Question 22

Protectionism

Answer 22

How the government of a country tried to restrict imports

Question 23

Tariff

Answer 23

Tax on imports

Question 24

Quota

Answer 24

A limit on the amount of goods that can be imported

Question 25

Embargo

Answer 25

A ban on trade with a certain country

Question 26

Subsidies

Answer 26

Where home industry receives payments to combat imported goods

Question 27

EU

Answer 27

The European Union a trade bloc where there is free movement of people, capital and goods and services

Question 28

Emerging markets

Answer 28

Countries growing quickly economically. Currently India, China, Russia and Brazil

Question 29

Expansionary fiscal policy

Answer 29

When the government starts cutting taxes and increasing expenditure

Question 30

Contractionary fiscal policy

Answer 30

When the government is reducing expenditure and increase taxes

Question 31

Direct taxation

Answer 31

Levied on a person or organisation

Question 32

Indirect taxation

Answer 32

Charged on goods and services

Question 33

Current account deficit

Answer 33

When the government raise less from tax than it spends on the economy

Question 34

Quantitative easing

Answer 34

The government buys assets (usually bonds). This allows the institutions selling these assets to have new money available

Question 35

Forward guidance

Answer 35

The Bank of England communicate forecasts and expectations of changes in interest rates to influence business and consumer behaviour

Question 36

Supply-side policy

Answer 36

A range of long term measures to increase the amount of economic activity

Question 37

Globalisation

Answer 37

A term to describe the trend that markets are becoming worldwide in scope