WorksheetsEdexcel Economics Unit 2 Quiz 1 (Macro Objectives)
Total questions: 1
Worksheet time: 55mins
What does GDP stand for?
Gross Domestic Product
General Domestic Product
Gross Development Product
General Development Product
What does Real GDP adjust for?
Inflation
Population
Interest rates
Exchange rates
What is the measure of national income per person often used as a proxy for the standard of living?
Real GDP per capita
Nominal GDP
Gross National Product
Value v volume
What does Purchasing Power Parity (PPP) measure?
The total amount of goods and services that a single unit of a country’s currency can buy in another country
The total value of goods and services produced in a country
The total income of a country from abroad
The total amount of goods and services produced per person
What is included in Gross National Product (GNP) that is not included in GDP?
Net property income from abroad
Income from domestic production
Income from government spending
Income from exports
Which of the following is NOT a factor that could make GNI higher than GDP?
Income from worker remittances
Income from interest on bonds and savings held overseas
Income from domestic production
Income from dividends on profits from overseas investment
What does the term "Value v volume" refer to?
The value of goods and services shows what they are worth; the volume shows the number that are produced
The value of goods and services shows the number that are produced; the volume shows what they are worth
The value of goods and services shows the total income; the volume shows the total expenditure
The value of goods and services shows the total expenditure; the volume shows the total income
What is the definition of the standard of living?
A) A measure of economic welfare and wellbeing.
B) A measure of political stability.
C) A measure of environmental sustainability.
D) A measure of technological advancement.
Which of the following factors does NOT affect the standard of living?
A) Access to good healthcare
B) Quality of housing
C) Political freedom
D) The number of cars owned
What do economists use as a proxy for the standard of living?
A) Nominal GDP
B) Real GDP per capita
C) Inflation rate
D) Unemployment rate
What does "real" in real GDP per capita take into account?
A) Population change
B) Inflation
C) Unemployment
D) Technological advancements
What is the Easterlin Paradox?
A) Happiness increases indefinitely with income.
B) Happiness does not increase with income.
C) Happiness increases with income but only up to a point.
D) Happiness decreases with income.
Which of the following is NOT a factor that affects subjective happiness?
A) Personality and genetics
B) Social influences
C) Income and wealth
D) Number of cars owned
What does the Human Development Index (HDI) measure?
A) Economic growth
B) Political stability
C) Standard of living
D) Technological advancement
Which of the following is NOT a component of the HDI?
A) Health
B) Education
C) Living standards
D) Environmental sustainability
What is one disadvantage of using the HDI?
A) It is a broader measure.
B) It does not take all aspects of wellbeing into account.
C) It is a better measure of economic development.
D) It includes life expectancy at birth.
Which of the following is NOT an example of other measures of living standards?
A) Happy Planet Index
B) Social Progress Index
C) ONS Well-being dashboard
D) Consumer Price Index
What is the definition of inflation?
A sustained decrease in the general price level.
A reduction in the rate of inflation.
A sustained increase in the general price level.
A measure of changes in the average cost for a household of buying a basket of different goods and services.
What does CPI stand for in the context of inflation?
Consumer Price Index
Consumer Price Inflation
Cost Price Index
Cost Price Inflation
How is the CPI Inflation Rate calculated?
[(Current CPI - Previous CPI) / Current CPI] x 100
[(Current CPI - Previous CPI) / Previous CPI] x 100
[(Previous CPI - Current CPI) / Previous CPI] x 100
[(Previous CPI - Current CPI) / Current CPI] x 100
Which of the following is NOT a limitation of the CPI inflation measure?
CPI inflation is only calculated for an 'average' family.
It considers the quality of goods/services.
Needs regular updating to reflect changes in patterns of spending.
International comparisons may not be accurate if other countries do not calculate inflation in the same way.
What are 'shoe leather costs' in the context of inflation?
Costs of redoing menus, parking changes, price labels & lists.
Costs of shopping around when prices change rapidly.
Costs of negotiating real wage increases.
Costs of fiscal drag increase tax paid if thresholds are frozen.
What is the 'headline' rate of inflation?
The annual % change in the CPI.
The monthly % change in the CPI.
The annual % change in the RPI.
The monthly % change in the RPI.
What does 'disinflation' refer to?
A sustained increase in the general price level.
A sustained decrease in the general price level.
A reduction in the rate of inflation.
A measure of changes in the average cost for a household of buying a basket of different goods and services.
Which of the following is a benefit of a low rate of inflation?
It implies aggregate demand is running behind aggregate supply.
It reduces the real value of debt.
It makes malign deflation more likely.
It increases the real value of wages.
What is demand-pull inflation caused by?
Excess AD in the economy
Increases in the costs of production
Decrease in consumer confidence
Lower commodity prices
Which of the following is a cause of demand-pull inflation?
Lower interest rates
Higher commodity prices
Skill shortages
Increasing input costs
What happens to the price level when AD shifts right in demand-pull inflation?
It rises from PL1 to PL2
It falls from PL2 to PL1
It remains constant
It fluctuates randomly
What is cost-push inflation caused by?
Increases in the costs of production
Excess AD in the economy
Decrease in consumer confidence
Lower commodity prices
Which of the following is a cause of cost-push inflation?
Rapid wage rises/higher labour costs
Lower interest rates
High consumer confidence
Positive wealth effects
What is stagflation?
When the economy stagnates as price level rises
When the economy grows rapidly with stable prices
When the economy experiences deflation
When the economy has high employment and low inflation
What do monetarists argue is the cause of inflation?
Excessive growth of the money supply
Decrease in consumer confidence
Lower commodity prices
Lower interest rates
What can help with "inflationary expectations" and anchor inflation to the 2% target?
Having an inflation target
Increasing input costs
Lowering interest rates
Increasing consumer confidence
What causes deflation due to a fall in Aggregate Demand (AD)?
Increase in short run aggregate supply
Lack of AD in the economy
Increase in production costs
Technological advances
What happens when AD shifts left?
Price level rises from PL1 to PL2
Price level falls from PL1 to PL2
Real national output increases
Real national output remains constant
What is a consequence of lower Aggregate Demand (AD)?
Increase in cash flow and profits for businesses
Decrease in real value of debt
Over supply
Decrease in cyclical unemployment
What causes deflation due to an increase in short run aggregate supply (AS)?
Increase in production costs
Decrease in production costs
Increase in AD
Decrease in AD
What is a benefit of deflation?
Falling prices for consumers
Decrease in real incomes
Decreased spending power for those on fixed incomes
Reduced international competitiveness
Which of the following is a cause of 'malign' deflation?
Technological advances
Improvements in productivity
Global recession
Falling price of energy prices
Which of the following is a cause of 'benign' deflation?
Negative demand shock
Globalisation/economies of scale
Global recession
Appreciation of currency
What is the definition of the working population?
The total number of individuals who are of working age and are either employed or actively seeking employment.
The total number of individuals who are of working age and are employed.
The total number of individuals who are of working age and are unemployed.
The total number of individuals who are of working age and are economically inactive.
What does the labour force include?
Only employed individuals.
Only unemployed individuals.
Both employed and unemployed individuals.
Only economically inactive individuals.
What is economic inactivity?
Being engaged in the labour force.
Not being engaged in the labour force.
Actively seeking employment.
Being employed full-time.
What is the labour force participation rate?
The proportion of people of working age who are in employment.
The number of people in the working population.
Workers in the labour force compared to the number of people in the working population.
The percentage of the labour force that are unemployed.
What is the employment rate?
The proportion of people of working age who are in employment.
The number of people in the working population.
Workers in the labour force compared to the number of people in the working population.
The percentage of the labour force that are unemployed.
Who is considered unemployed?
Someone of working age, willing and able to work, and actively seeking work, but cannot find a job.
Someone of working age who is employed.
Someone of working age who is economically inactive.
Someone of working age who is retired.
What does the unemployment rate measure?
The percentage of the labour force that are unemployed.
The number of people in the working population.
The proportion of people of working age who are in employment.
The number of people who are economically inactive.
What is the Labour Force Survey?
A survey that counts the total number of recipients of Job Seeker's Allowance.
A survey that asks UK households to self-classify as being employed, unemployed, or economically inactive.
A survey that measures the employment rate.
A survey that measures the labour force participation rate.
What is the Claimant Count?
A count of the total number of recipients of Job Seeker's Allowance and those looking for work to claim Universal Credit.
A count of the total number of people in the labour force.
A count of the total number of people who are economically inactive.
A count of the total number of people who are employed.
What is regional unemployment?
Unemployment rate varies across regions.
People unemployed for over 12 months.
Unemployment rate for 16 to 24 year-olds.
Inactive work-seekers who have ceased to seek work.
What is long term unemployment?
Unemployment rate varies across regions.
People unemployed for over 12 months.
Unemployment rate for 16 to 24 year-olds.
Inactive work-seekers who have ceased to seek work.
What is youth unemployment?
Unemployment rate varies across regions.
People unemployed for over 12 months.
Unemployment rate for 16 to 24 year-olds.
Inactive work-seekers who have ceased to seek work.
Who are discouraged workers?
People who are employed but their employment is insufficient.
Inactive work-seekers who have ceased to seek work because they believe there are no suitable available jobs.
People who do not work but are not counted in government reports.
People who perform short-term, flexible, and often freelance work.
What is hidden unemployment?
People who are employed but their employment is insufficient.
Inactive work-seekers who have ceased to seek work because they believe there are no suitable available jobs.
People who do not work but who are not counted in government reports.
People who perform short-term, flexible, and often freelance work.
What is underemployment?
People who are employed but their employment is insufficient.
Inactive work-seekers who have ceased to seek work because they believe there are no suitable available jobs.
People who do not work but who are not counted in government reports.
People who perform short-term, flexible, and often freelance work.
What is the gig economy?
A work arrangement where people perform short-term, flexible, and often freelance work.
The displacement of human workers by machines, automation, and technology.
The total number of individuals who are of working age and are either employed or actively seeking employment.
The proportion of people of working age who are in employment.
What is technological unemployment?
The displacement of human workers by machines, automation, and technology.
A work arrangement where people perform short-term, flexible, and often freelance work.
The total number of individuals who are of working age and are either employed or actively seeking employment.
The proportion of people of working age who are in employment.
What is frictional unemployment?
Unemployment caused by fluctuations in the business cycle.
Short-term unemployment caused by people moving between jobs or re-entering the workforce.
Unemployment caused by changes in the economy, such as the decline of certain industries.
Unemployment caused by wages being too high relative to the productivity of workers.
What is cyclical unemployment also known as?
Structural unemployment
Frictional unemployment
Demand-deficient unemployment
Real wage unemployment
What causes structural unemployment?
Seasonal changes in the demand for labor
Fluctuations in the business cycle
Changes in the economy, such as the decline of certain industries or the rise of automation
Wages being too high relative to the productivity of workers
What is real wage unemployment caused by?
Seasonal changes in the demand for labor
Fluctuations in the business cycle
Changes in the economy, such as the decline of certain industries or the rise of automation
Wages being too high relative to the productivity of workers
What is an example of seasonal unemployment?
Unemployment caused by people moving between jobs
Unemployment caused by fluctuations in the business cycle
Construction workers being without paid jobs due to the time of year when there is less need for their work
Unemployment caused by wages being too high relative to the productivity of workers
What is one of the benefits of some unemployment?
Increase in poverty and welfare dependency
Reduced risk of inflation
Loss of output foregone
Increase in physical and mental health issues
What is one of the economic costs of unemployment?
Increase in self-employment start-ups
Increase in poverty and welfare dependency
Loss of output foregone
Pool of unemployed available for growing businesses
What happens when the current wage is above the market-clearing wage?
There is a shortage of labor.
There is an excess supply of labor.
The unemployment rate decreases.
The unemployment rate remains unchanged.
What is the definition of the Balance of Payments?
A record of all the flows of money between the residents of one country and the rest of the world
The value of exports of goods and services minus the value of imports of goods and services
An overseas produced good/service purchased by UK citizens
A UK produced good/service sold overseas
What results in an outflow of income from the UK?
Export
Import
Trade surplus
Trade deficit
What is the value of exports of goods and services minus the value of imports of goods and services called?
Balance of Payments
Current account
Balance of trade in goods and services
Primary income
Which of the following is NOT a category recorded in the current account?
Trade in goods
Trade in services
Primary income
Capital account
Which of the following is a structural cause of a current account deficit?
Overvalued exchange rate
Boom in domestic demand
Under-investment
Slump in global prices of exports
What does the current account on the balance of payments record?
Only the exports of goods
Only the imports of goods
The exports and imports (inflows and outflows) for goods, services, primary and secondary income
The value of exports minus the value of imports
Which of the following is an example of primary income?
Net current transfers between countries
The inflow of interest, profits, and dividends on UK assets held abroad
Payments to and from the EU
Travel and tourism services
What is a potential benefit of running a current account deficit?
Loss of jobs in home-based industries
Depreciation of the currency
More imports can add to the standard of living
Withdrawal from the circular flow
Which of the following is a cyclical cause of a current account deficit?
Under-investment
Relatively low productivity
Overvalued exchange rate
Inadequate R&D, innovation
Which organization monitors and promotes tariff-free international trade?
EU
USMCA
CPTPP
WTO
Which of the following is the largest component of Aggregate Demand (AD)?
Capital Investment (I)
Government Consumption (G)
Net Trade (X - M)
Consumption (C)
What does the formula AD = C + I + G + X - M represent?
Aggregate Supply
Aggregate Demand
Gross Domestic Product
Net National Product
Which of the following is NOT included in Government Consumption (G)?
Healthcare
Education
Transfer payments
Defence
What is the Savings ratio formula?
Which of the following is a benefit of rising consumption?
Inflation pressure
Unbalanced growth
Falling unemployment
More household debt
What does the Keynesian paradox of thrift suggest?
Increased saving leads to increased economic activity
Increased saving leads to decreased economic activity
Increased consumption leads to decreased economic activity
Increased consumption leads to increased economic activity
What does the Average Propensity to Consume (APC) formula represent?
C/Y
S/Y
change in C/change in Y
change in S/change in Y
Which factor is likely to increase consumer spending due to a positive wealth effect?
Increase in interest rates
Increase in job security
Increase in the value of assets
Increase in immigration
What is the definition of investment according to the document?
Addition to capital stock of the economy
Value of the capital stock that falls in value over time
Investment before depreciation
Investment undertaken by businesses in the private sector
What is gross investment?
Investment before depreciation
Investment after depreciation
Investment undertaken by businesses in the private sector
Investment made by a company based in one country in another country
Which of the following is NOT a reason why firms invest?
To expand their business and increase their output capacity
To reduce average costs of production due to economies of scale
To decrease market demand
To increase efficiency and productivity through innovation and technological progress
Which factor does NOT influence investment according to the document?
Interest rate
Availability of finance
Demand for the final product
Population growth
What is the impact of investment on aggregate demand (AD) and aggregate supply (AS)?
Causes short run growth, lower unemployment, and long run non-inflationary growth
Causes short run decline, higher unemployment, and long run inflationary growth
Causes short run growth, higher unemployment, and long run non-inflationary growth
Causes short run decline, lower unemployment, and long run inflationary growth
Which of the following is a type of investment made by the government often in infrastructure?
Private sector investment
Public sector investment
Foreign direct investment (FDI)
Depreciation (capital consumption)
How does a lower interest rate influence investment?
Increases the cost of borrowing and reduces investment
Reduces the cost of borrowing and increases investment
Has no effect on investment
Increases the cost of borrowing and has no effect on investment
What is the effect of technological change on investment?
Reduces investment in new technologies
Ensures businesses do not lag behind their competitors
Has no effect on investment
Increases the cost of investment
What is government consumption also known as?
Capital spending
Current spending
Transfer payments
Discretionary spending
Which of the following is NOT included in government consumption?
Wages to public sector workers
Energy bills for government offices
Transfer payments
Rent bills for schools
What is the role of government spending in influencing economic regions?
Increasing taxes
'Levelling up'
Reducing public goods
Decreasing AD
What does a budget deficit indicate?
Government spending equals tax revenue
Government spending exceeds tax revenue
Government spending is less than tax revenue
Government can pay back some of its debt
What is net trade (X-M)?
The value of imports less the value of exports
The value of exports less the value of imports
The value of government spending
The value of tax revenue
What happens to government spending on welfare benefits and support for businesses during an economic downturn?
It decreases
It remains the same
It increases
It is eliminated
Which factor does NOT influence net trade?
Real income
Exchange rate
State of global economy
Government consumption
What is the fiscal multiplier used to estimate?
The initial change in government spending
The final change in real national income (GDP)
The total tax revenue
The level of AD
What is the definition of national income?
The total value of goods and services produced by households.
The monetary value of the flow of output produced in an economy over a period of time.
The total amount of money saved by the financial sector.
The value of imports and exports in an economy.
