Year 12 Macro papers

Paper and Word or phrase Definitions question May 2016 balance of trade difference between value (1) of country’s imports and exports (1) OR value of exports minus value of imports of a country (2) OR imports – exports (1) January Circular Flow Flow of goods and services between households 2011 and firms and their corresponding payments in money terms. (2 marks). January Circular flow of income model of the economy which shows the movement 2013 of goods and services between households and firms, and their corresponding payments in money terms (2 marks) June 2013 CPI a measure of the average price level of goods and services in the UK January Current Account The balance of payments in simple terms of imports 2011 and exports ( 2 marks) and then some explanation of components of the balance of payments, such as trade in goods (2 marks), trade in services (2 marks). January Deficit Government spending is more than 2011 revenue/taxation (2 marks) Government spending is too high, it has overspent or the government has to borrow (2 marks). Explanation of modest (2 marks). January Deflation A decrease in the cost of living or average 2011 price level, or a rise in the purchasing power of £1 (2 marks) June 2009 Economic growth Increase (1 mark) in actual or real (1 mark) GDP or Qai income or output (1 mark). Allow potential (1 mark) output. June 2013 economic growth as an increase in either real OR potential GDP January Fall in GDP A contraction, decrease, or reduction (accept 2011 recession) (1 mark) in the volume or after discounting the effect of inflation (1 mark) of output or goods and services produce (1 mark). June 2011 Fiscal policy the government’s manipulation of its spending and 1d taxation in order to affect aggregate demand (2 marks) June 2015 Fiscal policy Increasing government spending increasing employment and/or growth. June 2009 free market economy Where resources are allocated by the price Q5 mechanism and there is no government intervention June 2015 Geographical mobility of The ability of labour to move from one area to Q10c labour another area in order to take available work June 2009 government failure Government intervention leads to a net welfare loss Year 12 Macro papers

Q7 / inefficient allocation of resources June 2015 Government failure Government intervention leads to an inefficient or Q10e misallocation of resources / welfare loss June 2009 How CPI is calculated Basket of goods (1 mark) price survey (1 mark) food 0aii and expenditure survey (or equivalent) (1 mark) index (process of how an index is compiled) (1 mark) base year. (1 mark) June 2009 Human Development A composite measure of economic development (1 0ci Index. mark) which includes longevity, years of school enrolment, literacy and GDP at PPPs (1 mark for each element given) presented as an index or rank which gives an indication of health and education rather than just incomes. (1 mark) June 2010 ILO unemployment and Unemployment (ILO) up to 2 marks: Q1 (b) (i) claimant count • out of work in last four weeks (1) • ready to work in two (1) • Questionnaire/interview (1) • Survey by phone call/paper (1) • Internationally recognised (1) • age 16-65 (1) • Sample, and related problems (1) Claimant count up to 2 marks: • the number of people claiming/receiving (1) • JSA/dole/or unemployment related benefit (1) • Age range – 18-60/65 (1) • savings cap (1) • must be able to prove they are looking for work (1). • Register at unemployment offices (1) January Inflation An increase in the cost of living on average/general 2011 price level. (1 mark) January Injection An addition to the level of I+G+X demand in the 2011 circular flow e.g. an increase in government spending (2 marks). June 2015 Investment Increase/spending/purchase of capital stock/machinery asset build up and replacing of depreciated assets purchase of capital goods by firms January Labour productivity Output per worker or output per hour worked (2) 2013 measured either in volume or value; or output per unit of labour (2) January living standards raising real or potential GDP 2013 increase in (average) real income non-GDP economic and social indicators, i.e. the quality of life or reduction in income Year 12 Macro papers

inequality June 2014 Macroeconomic Economic Growth objectives o Low and stable inflation o Reduction in unemployment o Reduction of the deficit on the current account of the balance of payments June 2011 meaning of a sharp • a pound that is falling or has fallen in value 1c depreciation of the against another major currency pound • a pound that buys less foreign currency than it used to • accept current account as imports & exports June 2015 Minimum wage The lowest wage that workers can be paid / a wage Q7 or price floor for labour June 2014 Monetary policy Monetary policy is the process by which the monetary authority of a country, like the central bank or currency board, controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency. June 2015 monetary policy use of interest rates/quantitative easing/money supply (1) to control the level of economic growth/inflation in the economy January Multiplier The number of times a rise in income exceeds the 2011 rise in injections that caused it. It measures the more than proportionate increase in the circular flow of income. (2 marks) January Multiplier the number of times a rise in national income 2013 exceeds the rise in injections that caused it / It measures the knock-on effects when an injection or withdrawal changes / The idea that one person's expenditure becomes another person's income. Withdrawals/leakages from the circular flow fall June 2014 Multiplier The number of times a rise in national incomes exceeds the rise in injections that cause it. It measures the subsequent effects when an injection or withdrawal changes. Accept formula 1/(1-m.p.c.) or 1/m.p.w. or 1/(m.p.s.+m.p.m.+m.p.t.) (2 marks) June 2010 Output gap A measure of the difference between actual and Q1(a)(i) potential (or trend) growth/output/GDP. Reward explanations of both positive and negative put gaps. (2 marks) Allow up to 2 marks for written explanation OR an appropriate diagram (AS/AD, PPF, Business Cycle showing trend or potential and actual) showing actual and potential growth/output/GDP. Year 12 Macro papers

January Output gap A measure of the difference between actual and 2013 potential (or trend) growth/output/GDP (2) • The potential output is where the economy is at full capacity whereas the actual level of real GDP is at the intersection of AD and AS below that June 2014 Productivity Productivity is output per unit of input (2) Accept labour productivity definition June 2011 Rate of unemployment the percentage of the workforce that is not 1d currently employed (2 marks) May 2016 real GDP growth An increase (1) in the total value of goods and services produced in an economy/GDP adjusted for inflation (1) June 2014 Real national income Real Gross National Income (accept Gross National Product and Gross Domestic Product) (2) per household or capita/head (2). May 2016 real wage growth Increase/rise in wages/income (1) adjusted for inflation (1) June 2010 Recession, negative Recession: 2 quarters of negative economic growth Q1 (d) economic growth, UK Negative economic growth: negative growth usually economy refers to shrinking gross domestic product (GDP). January spare capacity A situation where there are unemployed resources 2013 2bi in the economy. Accept also Negative output gap. June 2013 standard of living a measure of the welfare of people living in an economy / real GDP per capita PPP (2) OR a definition of real income (2) June 2015 Subsidy Government grant to firms to increase supply / Q6 lower price. The effect of a subsidy is to lower the costs of production. June 2013 Supply-side policies Measures by the government to increase productive capacity of the economy OR increase LRAS June 2011 Supply-side policy actions by government designed to promote 1d market forces in order to increase economic growth or shift AS/PPF curve out (2 marks) June 2014 Unemployment It refers to those of working age who are not working (1) Actively looking for a job and out of work in last four weeks (1) June 2015 wealth effect e.g. an increase in the value of houses that will increase householder’s confidence