Macroeconomics Quiz: Key Concepts and Theories

This refers to the study of how individuals and societies make choices about how to allocate scarce resources to satisfy their unlimited wants.

It involves the use of the resources owned by the government to achieve its objectives. Examples include the provision of public goods like education and healthcare.

Refers to the government's policy actions to control the economy, such as managing inflation, unemployment, and economic growth. This often involves adjusting interest rates, government spending, and taxes.

This deals with the supply of money and credit in the economy. It's controlled by the central bank, which adjusts interest rates and reserves to manage inflation and economic growth.

These entail strategies employed by businesses to generate revenue and profits. It includes determining production costs, pricing goods and services, marketing and advertising, and managing risks.

It's a market that comprises numerous participants, none of whom have the power to significantly influence the market price. It's characterized by a large number of buyers and sellers, free entry and exit, and homogeneous products.

This occurs when a single firm controls the entire market for a product or service. It provides all the supply and can set prices without competition.

This occurs when a few firms dominate a particular market. They have significant market power to influence prices and may engage in strategic competition.

A form of business organization characterized by a separation of ownership and management. This means the owners of the business are not necessarily involved in the running of the company, and they delegate management to appointed individuals.

This is a market situation where there's no competition, with just one seller supplying a unique product with no close substitutes. This firm effectively sets the price and has absolute market power.

A situation where the economy experiences a sharp decline in income and production levels, often caused by widespread unemployment and reduced business activity.

The theory that a free market economy, without government intervention, is the best way to achieve economic stability.

The belief that government intervention is necessary to maintain full employment and economic stability, especially during a recession.

The study of how the overall economy works, including factors like national income, employment levels, and inflation.

The book written by John Maynard Keynes that outlined his economic theories, particularly regarding government intervention in the economy.

The process of coordinating various economic policies to address problems like poverty, unemployment, and inflation.

The total value of goods and services produced within a country during a specific period.

The study of how a country's national income is measured, analyzed, and compared across different countries.

Income earned from various sources within a country, such as rent, wages, interest, and profits, reflecting the flow of goods and services.

Income received from sources outside a country, like gifts, donations, or scholarships, but without a corresponding flow of goods or services.

A person who resides in a country for a year or more and has their primary economic interest (production, consumption, investment) tied to that country.

Someone who is a citizen of a country but lives in another country for their primary economic activities.

Measures the value of all final goods and services produced within the geographical boundaries of a country in a given period.

Measures the total value of all final goods and services produced by a country's residents, regardless of location, in a given period.

GDP plus Net Factor Income from Abroad (NFIA), representing the total income earned by a country's residents.

GDP calculated at market prices, including taxes and subsidies.

The total value of all final goods and services produced within a country's borders during a year.

The total value of all final goods and services produced by a country's residents during a year, regardless of location.

The sum of income from property (rent, interest, royalties) and income from entrepreneurship (profit).

The use of intermediate goods in the production process.

The value of goods and services produced using the prices of the base year.

The value of goods and services produced using the prices of the current year.

The ratio of nominal GDP to real GDP, multiplied by 100.

Benefits or harms caused by one unit to another without any penalty for harm or payment for benefit.

A central bank is the top financial institution in a country responsible for managing the money supply and overall banking system.

The Credit Multiplier (K) is a measure of how much the money supply expands for each dollar increase in reserves held by banks.

The reserve requirement ratio (RRR) is the percentage of deposits banks are legally required to hold in reserve, not lending out.

The statutory liquidity ratio (SLR) is the percentage of a bank's deposits it must hold in liquid assets like gold, cash, and government securities.

The bank rate is the interest rate at which a central bank lends money to commercial banks. It's a key tool for controlling the money supply.

The repo rate is the interest rate at which the central bank lends money to commercial banks for short periods by buying securities from them.

The reverse repo rate is the rate at which the central bank borrows money from commercial banks by selling securities to them. This is used to absorb excess liquidity.

A margin requirement is the percentage of the total value of a loan that a borrower is required to pay upfront.

Commercial banks operate under the control of the central bank, are numerous in a country, and can be owned by the government or the private sector. They deal directly with the public, aim to make profits, and create credit.

Demand deposits, like current accounts, are payable on demand and can be withdrawn by cheque without any restriction. They usually don't earn interest, and banks may charge fees.

Savings deposits are payable on demand but have restrictions on withdrawals and cheque usage. Interest rates are typically lower than other deposit options.

Recurring deposits require a fixed amount to be deposited every month for a specific period. Interest rates are higher than savings accounts but lower than fixed deposits.

Fixed deposits are one-time investments with a fixed maturity period. Withdrawals are only possible after the maturity date. Interest rates are the highest among all deposit options.

The total amount of credit created in an economy is calculated by multiplying the initial deposit (PD) by the money multiplier (1/CRR). The money multiplier is determined by the reciprocal of the cash reserve ratio (CRR).

The credit creation process involves banks lending out a portion of their deposits, which then becomes new deposits in other banks, leading to a chain reaction of lending and deposit growth.