50 Questions
What is another term for a state-controlled economy?
Planned economy
In a state-controlled economy, what replaces profit as the primary incentive of production?
Common good
What challenge can arise in state-controlled economies due to excessive bureaucracy?
Increase in inequality
Why are planned economies sometimes referred to as 'planned'?
Because production and resource allocation are planned in advance
What has led to the reform of many planned economies towards mixed economies?
Excessive layers of bureaucracy
What determines how resources are allocated in a market economy?
Consumer preferences
In a market economy, what is the market-clearing price?
The equilibrium price where supply equals demand
What happens in a market economy if there is oversupply?
Some producers will leave the market
In a market economy, what serves as the 'price' in the labor market?
Wage level
How does competition impact the value of scarce resources in a market economy?
It increases their value
What term is used to describe a country preventing other countries from trading freely with it to protect its domestic market?
Protectionism
Which organization is responsible for promoting the growth of free trade between economies and arbitrating trade disputes?
World Trade Organization (WTO)
What is the primary purpose of the World Trade Organization (WTO)?
Promoting free trade
What do regional and bilateral trade agreements aim to achieve beyond what is stipulated in global trade agreements under the WTO?
Boost economic growth
Why do some governments introduce tariffs on imports, as mentioned in the text?
To protect domestic industry
What is the primary responsibility of central banks with regard to the national debt?
Managing the national debt
Which function of central banks aims to prevent systemic collapse during financial crises?
Acting as lender of last resort
What role do central banks play in influencing a nation's currency value?
Holding the nation’s gold and foreign currency reserves
In what capacity do central banks act when they accept deposits from commercial banks?
Acting as banker to the banking system
Which task falls under the responsibility of setting monetary policy for a nation's financial system?
Controlling the money supply
What is the primary tool used by central banks to control inflation?
Interest rates
How long can it take for changes in a central bank's interest rate to fully impact inflation?
2 years
What characterizes deflation in an economy?
General fall in price levels
What is the primary action taken by a central bank to combat rising inflation?
Raising interest rates
In what situation does a central bank reduce its official rate according to the text?
When inflation is below target level
What is the primary difference between measuring economic activity through individuals' total expenditure and by the value of total output generated by firms?
The consideration of economy-wide spending vs. firm-specific production
What aspect ultimately determines the rate of sustainable growth in an economy over the long run?
The efficiency of domestic savings and capital allocation
Which factor plays a crucial role in influencing an economy's trend rate of growth according to the text?
Innovative technology adoption
What is the primary impact of efficient infrastructure development on economic growth?
Enhances labor productivity
How does Gross Domestic Product (GDP) differ from Gross National Product (GNP) in measuring a country's economic output?
GDP includes foreign income while GNP does not
What factor is mentioned as a key determinant of long-term productivity growth in a mature economy?
Utilisation of new technology
During a recession, what is a common result in the economy?
Spare capacity and unemployment
What term is used to describe the phenomenon when actual output exceeds potential output in an economy growing above its trend rate?
Stagflation
In a post-industrialized economy, why are productivity gains more challenging to extract compared to economies with a large manufacturing base?
Shift towards services-based industries
What is the consequence of economic growth rates exceeding a country's long-term trend growth rate?
Stagflation
What must the balance of payments include in order to balance?
Current account and net inflow of capital
Which type of investment involves trading in stocks and bonds?
Portfolio investment
In the context of the text, what is the role of the balancing item in the balance of payments?
Correcting measurement errors
If a country has a current account deficit due to net importation, how can it be offset according to the text?
With a net inflow of capital from overseas
What category of investment involves transactions in currency and bank deposits?
Other investments
What is the primary difference between government debt and budget deficit according to the text?
Government debt is the shortfall between tax receipts and government spending, while budget deficit is what the government owes.
How are debt measures usually presented according to the text?
As a percentage of GDP to account for effects such as inflation.
In what economic scenario would government spending exceed tax revenues according to the text?
In a recession with low levels of employment and corporate profits.
How does a buoyant economy impact government borrowing according to the text?
Enables the government to reduce public sector borrowing due to higher tax revenues.
What is the conventional way of comparing debt measures over time according to the text?
By dividing them by GDP.
What term do economists use to refer to the extent to which those seeking employment cannot find work?
Natural rate of employment
How do higher levels of unemployment affect a government's finances according to the text?
Decrease in income due to lack of tax revenues
What impact does high unemployment levels have on the demand for goods and services in an economy?
Decreases demand for goods and services
Why does care need to be taken when looking at official unemployment figures according to the text?
Due to fixed hour contracts distorting statistics
What negative impact does high unemployment levels have on a government's finances?
Need to increase social security/welfare payments
Test your knowledge on state-controlled economies where the government decides what is produced and distributed. Learn about planned economies and command economies with examples like the Soviet Union. Explore how resources are planned in advance in these economies.
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