Year 1 macro

• What are the main macroeconomic objectives of government policy?

  Economic growth, price stability, high employment
• What does price stability refer to in macroeconomic objectives?

  Control of cost and price inflation
• What is meant by a sustainable overseas trade balance?

  Balance of Payments current account in equilibrium
• Why might it be difficult to meet all macroeconomic objectives simultaneously?

  There are trade-offs between objectives
• How can faster economic growth affect inflation?

  It can fuel demand-pull inflation
• What is the impact of low unemployment on wages?

  It can increase real wages
• How can policies to reduce inflation affect economic growth?

  They can slow growth and cause unemployment
• What are some other goals the government can set beyond macroeconomic objectives?

  Net zero, reducing child poverty, new housing
• How can the economic context change the prioritization of objectives?

  Different crises shift priorities, like price stability
• What is an index number?

  A figure reflecting price or quantity compared to a base value
• What does the base value of an index number represent?

  It always has an index number of 100
• How do you calculate the percentage change in an economic variable?

  Percentage change = (new - old) / old x 100
• What is the annual percentage change between 2021 and 2022 if the index numbers are 105 and 110?

  +4.76%
• What does productivity measure in macroeconomics?

  Supply-side efficiency
• What is total factor productivity?

  Output per unit of input
• What is the Labour Force Survey?

  A survey asking households to classify employment status
• What does the Claimant Count measure?

  Total number of Job Seeker's Allowance recipients
• What does GDP measure?

  Value of real output of the economy
• What is the difference between nominal GDP and real GDP?

  Real GDP is adjusted for inflation
• What is real GDP per capita used for?

  Proxy measure for the standard of living
• What does the Consumer Price Index (CPI) track?

  Changes in prices of a basket of goods
• What is the Retail Price Index (RPI) used for?

  Calculating increases in welfare benefits
• What does the Balance of Payments record?

  Flows of money between residents and the world
• What does the balance of trade in goods and services measure?

  Value of exports minus value of imports
• How is public finance measured?

  By looking at the budget deficit and national debt
• How is income inequality measured?

  By the Gini coefficient
• What should be considered when comparing macroeconomic indicators across countries?

  Ensure like-for-like comparisons and data accuracy
• What does national income represent?

  Monetary value of output produced in an economy
• What are injections in the circular flow of income?

  Investment, government consumption, exports
• How do households participate in the circular flow of income?

  They exchange productive resources for income
• What happens when injections exceed withdrawals in the circular flow?

  National income rises, indicating economic growth
• What is the financial sector's role in the circular flow of income?

  It lends saved income to businesses
• How does the government sector affect the circular flow of income?

  It injects income through government spending
• What is the difference between wealth and income?

  Wealth is a stock; income is a flow
• How does saving contribute to the economy?

  It provides financial stability and investment funds
• What is the aggregate demand (AD) equation?

  AD = C + I + G + X - M

  
• What happens to AD when the general price level falls?

  AD extends, leading to higher real Y
• What is the relationship between price level and aggregate demand?

  It is inverse; lower prices increase AD

  
• How does consumer confidence affect aggregate demand?

  High confidence increases consumption and investment
• What is the wealth effect in relation to aggregate demand?

  Increased asset prices boost consumer spending