Macroeconomic Objectives
What is Real GDP?
The total value of all goods and servies within a country adjusted for inflation.
Define Fiscal Policy.
Changes in government spending and taxation to achieve economic objectives.
Define Monetary Policy.
Changes in interest rates or the money supply to achieve economic objectives
Define Supply-side policies
changes aimed at increasing the quality and quantity of the factors of production.
Name two economies of scale.
purchasing (bulk buying of materials through long-term contracts)
managerial (increasing the specialization of managers)
financial (obtaining lower-interest charges when borrowing from banks and having access to a greater range of financial instruments)
marketing
Technical
Why does the government especially want to minimise cyclical and stuctural unemployment?
Structural: Tends to be long-term as skills no longer needed in the economy
Cyclical: Caused by a recession so can be blamed on the government's fiscal policy
Explain the impact of reducing
a) income tax
b) corporation tax
a) Consumers keep more of their income increasing their likelihood of spending at firms
b) Producers keep more of their profit and so may hire more workers, raise wages or invest in new capital or land.
How do interest rates affect Aggregate Demand and Aggregate Supply?
AD: Consumption and Investment
AS: Loans to increase Land, Labour and Capital
Reducing universal credit is a supply-side policy. True or False?
True
Define specialisation.
Gaining expertise and an advantage in production through repetition.
Explain Cost-Push inflation.
AS shifts inwards as the factors of production have increased in price reducing supply.
Supply-side policies are a type of Fiscal Policy. True or False?
True
How does a change in the BoE base interest rate impact consumers?
Changes the cost of borrowing for commercial banks who then adjust the rates they offer consumers.
What is the difference between Interventionist and Free market SSPs
I: The government actively invests in a market
FM: The government reduces involvement and paperwork to allow the market to operate more efficiently.
Give three characteristics of Oligopoly.
Few firms
Large firms
Some barriers to entry
Interdependent firms
Some control over prices
What is the difference between the Balance of Payments and the trade balance.
Balance of Payments is all money flowing into the country minus all money leaving the country.
The government increases spending to create increased Aggregate Demand. Explain how this works.
Increased government spending on public works projects means the government spending at firms and paying workers in the economy increasing Aggregate Demand.
Why are interest rates on mortgages lower than interest rates on credit cards?
The bank can repossess and sell a house if you fail to make your payments and houses usually increase in value.
How does subsidising childcare increase Aggregate Supply?
Parents can work more often as they can more easily have children looked after during school holidays or after school.
How is Price Elasticity of Demand different from Price Elasticity of Supply?
PED measures how sensitive to price consumers are whereas PES measures how sensitive to price producers are.
GDP for the UK was £2,048,534,300,000.00 in 2020. It is estimated Real GDP growth in 2021 has been 4.8%. The Population of the UK in 2021 was 67,220,000. What is the UK GDP per capita for 2021.
£31,937.87
Why is a budget deficit a concern for the government?
Funded through borrowing so has to be paid off with interest in the future so will probably lead to higher future taxes.
What is meant by the central bank increasing the money supply?
Quantitative Easing or open market operations.
Explain why privatisation is supposed to increase efficiency.
Private producers run to maximise profits unlike the government and as such they cut all wasted costs and invest in the most used services.
A cinema sells 40 tickets for £13.49. PED is estimated to be (-)3.18. After dropping the price to £11.80 how many tickets should the cinema now sell?
55 tickets