2.1

• What is the focus of macroeconomics?


  Macroeconomics studies the economy as a whole.
• What does the acronym "BIIG BUSS" represent in macroeconomic objectives?


  It represents Balanced Budget, Inflation, Inequality, Growth, Balance of payment, Unemployment, Standard of Living, and Sustainability & Stability.
• What are the key macroeconomic objectives represented by "BIIG BUSS"?

  • Balanced Budget (Government spending = Tax revenue)
  • Inflation (Price level to be low)
  • Inequality (To be low)
  • Growth (Steady Economic growth)
  • Balance of payment (Satisfactory BOP)
  • Unemployment (To be low)
  • Standard of Living (Improvement in quality of life)
  • Sustainability & Stability (Avoid over-utilization of resources)
• What is GDP and how is it defined?

  GDP (Gross Domestic Product) is the total value of the final goods and services produced in an economy in one financial year.
• What is the difference between value and volume in the context of GDP?

  Value refers to the monetary amount (Price x Quantity), while volume refers only to the quantity of goods produced.
• Why might an increase in GDP not indicate real economic growth?

  An increase in GDP could be due to a rise in price level rather than an increase in the quantity of goods and services produced.
• What is Real GDP?

  Real GDP is the total value of final goods and services produced in an economy in one financial year after adjusting for inflation.
• What does Real GDP per capita measure?

  Real GDP per capita measures the total value of final goods and services produced in an economy adjusted for inflation and population.
• How is GNP calculated?

  GNP (Gross National Product) is calculated as GDP plus net income earned from abroad.
• What is the formula for calculating the economic growth rate?

  The economic growth rate is calculated as \(\text{Economic Growth Rate} = \frac{\text{Change}}{\text{Original}} \times 100\).
• What does a positive economic growth rate indicate?

  A positive economic growth rate indicates that the economy is growing, even if the rate is slowing down.
• What is the standard of living (SoL)?

  The standard of living refers to the improvement in the quality of life, including choice, variety, and balance between work and leisure.
• What is the output gap?

  The output gap is the difference between actual growth and trend growth.
• What defines a recession?

  A recession is defined as two consecutive quarters of negative economic growth.
• What is a boom in economic terms?

  A boom occurs when actual growth is higher than trend growth, leading to high demand and potential inflationary pressure.
• What is a productivity gap?

  A productivity gap refers to the difference in output per worker between an economy and its major trading partners.
• What are the types of recessions?

  Types of recessions include V-shaped, U-shaped, and W-shaped recessions.
• What are some limitations of using GDP as a measure of economic growth?

  Limitations include ignoring inflation, population factors, unrecorded transactions, and income distribution.
• What is purchasing power parity (PPP)?

  Purchasing power parity is the adjustment of exchange rates to equalize the purchasing power of two currencies based on cost of living and inflation differences.
• Why is purchasing power parity important for international comparisons?

  PPP is important because it provides a more valid comparison of the standard of living between countries by accounting for local purchasing power differences.
• What are the key factors that affect the productivity gap?

  • Lack of capital investment
  • Limited technological advancement
  • Less money spent on R&D and innovation