Question

Match the economic concepts given in COLUMN A with its description in COLUMN B. Write down the question numbers and correct answer next to it, for example: 2.11 A

COLUMN A		COLUMN B
2.1	Macroeconomics	A	This is a rate set and maintained by the government.
2.2	Market failure	B	The part of consumer expenditure which is determined by the level of income.
2.3	Monetary policy	C	Refers to the outflow from the circular flow of income and spending.
2.4	Leakages	D	This is the government’s spending and taxation policies that influencesmacroeconomic conditions.
2.5	Induced consumption	E	The study of the whole economy and the effects of changes in the international economy on a country
2.6	Devaluation	F	This is the process by which the monetary authority of a country controls the supply of money for the purpose of promoting economic growth and stability.
2.7	Absolute advantage	G	This is the value of current output of a country expressed in terms of prices of a base year.
2.8	Deflation	H	This is a sustained decrease in the general price level of an economy.
2.9	Repo rate	I	This refers to the increase of a given currency’s value in terms of the other.
2.10	Real GDP	J	This is when one country is able to produce more of a product than the other whilst using the same amount of inputs.
		K	This is an official lowering of a country’s fixed exchange rate.
		L	The part of consumer expenditure which is not determined by the level of income
		M	The interest rate at which the central bank in a country repurchases government securities from commercial banks.
		N	This is when the market system is unable to achieve an efficient allocation of resources.

Answer 1

2.1 - E. Macroeconomics.

• Macroeconomics can be defined as the study of the whole economy and the effects of changes in the international economy on a country.
• It studies the changes that occur Within an overall economy rather than studying the effects on a single individual.

2-2 - N Market failure.

• A market failure is said to occur when the market system is unable to achieve an efficient allocation of resources.
• It is said to occur when it is not able to produce and allocate goods efficiently which leads to a loss in the total surplus.

2-3 - F Monetary policy.

• Monetary policy refers to those policy goals that are put forward by monetary authorities and controlled by them to control the money supply and bring in economic growth.

2-4 - C Leakages.

• Leakages are said to occur within a circular flow model of an economy when there is an outflow from the circular flow model of income and spending.
• It is usually caused due to increased savings, taxations and imports.

2-5 - B induced consumption.

• Induced consumption is a type of consumption by the consumer's within an economy that depends on their levels of income.

2-6 - K Devaluation.

• Devaluation of a currency can be defined as the the lowering of a country's exchange rates when compared to other currencies exchange rates.

2-7 - J Absolute Advantage.

• A country is said to have an absolute advantage if it is able to produce more amount of goods and services with same resources when compared to other countries.

2-8 - H Deflation.

• Deflation is an opposite term used for inflation and it refers to the general decrease in the price level of an economy over a given period of time.

2-9 - A Repo Rate.

• A repo rate is a rate that is set and maintained by the government.
• It is a rate at which the central bank of any country lends to other commercial banks when they are in need.

2-10 - G Real GDP.

• Real GDP can be defined as a measure of nations output which includes the inflation effects of a nation.
• It is the value of a country's output which is expressed in terms of the prices of a base year.