Macroeconomics Questions

1. durability2. portability3. divisibility 4. acceptability5. scarcity6. security

a method to compare the rate of inflation in the euro area, EU and EEA (European economic area)

How do firms change their investment with higher interest rates?

1. ECB creates new money to buy financial assets (bonds)2. increased demand for bond means return (yield) reduces3. banks now have surplus cash from sale of bonds4. banks can now pay lower interest rate5. commercial banks now have more cash to lend out to businesses and individuals 6. this increases inflation

Demand-pull inflation is a period of inflation which arises from rapid growth in aggregate demand. It occurs when economic growth is too fast.

Who is directly affected by a change in interest rates?

Overall effect on Output due to Income-Expenditure Multiplier

1. medium of exchange2. a store of value or wealth3. a measure of value4. standard for deferred payment

the European Central Bank is the central bank of the 19 European countries that have adopted the euro

1. consumers tend to spend (generates demand i.e. employment)2. government tax revenue increases3. the demand for wage increases is steady4. savings in economy may increase if rate of inflation is less than rate of interest

the total amount of money in the economy at a particular time

1. borrowing is discouraged and saving is encouraged2. DIRT revenue increases3. incentive to invest increases4. economic growth is dampened

the way to measure the change in the price of one good over time. simply look at two prices in different years and compare them

a way to measure the overall change in the prices of goods and services that people typically buy over time. It does this by collecting approximately 53,000 prices every month and compares these to the corresponding prices from the previous month

measures the change in price of consumer goods and services. Doesn't include income levels, taxation, social welfare payments etc.

1. index only of the average consumer2. it is not a cost of living index3. lags behind consumers trends and fashions4. quality of products changes

Transfer payments have a - effect on PAE

1. measures the rate of inflation2. allows us to make international comparisons3. indicator of country/government's performance4. used in wage negotiations

1. select representative base year2. decide which goods will be put in the CPI based on the household budget survey3. gather data (obtain price of each good for each time period being observed)4. observe how much a typical consumer spends on the good as a proportion of total income5. multiply the price change index for each component of the index by its weight6. add up all the prices changes to get the overall change in price

inflation is defined as a steady and persistent increase in the general level of prices. It is the rate at which your money loses its ability to buy goods and services