H2 Economics Flashcards

What does GDP measure?

Answer: The total value of all final goods and services produced within a country in a given period

GDP (Gross Domestic Product) measures the total monetary value of all final goods and services produced within a country's borders in a specific time period.

What is the multiplier effect in macroeconomics?

Answer: When an initial injection of spending leads to a larger final increase in national income

The Keynesian multiplier: an initial injection (e.g., government spending) leads to a larger total increase in national income, as income is spent and re-spent throughout the economy.

What is Singapore's main approach to controlling inflation?

Answer: Adjusting the Singapore dollar exchange rate through MAS monetary policy

Singapore uses exchange rate policy managed by the MAS (Monetary Authority of Singapore) as its primary monetary policy tool to manage inflation, given its small, open economy heavily reliant on imports.

What is the difference between unemployment and underemployment?

Answer: Unemployment means having no job; underemployment means working less than desired or in a job below one's skill level

Unemployment refers to people without jobs who are actively seeking work. Underemployment includes those working fewer hours than they want or those overqualified for their current jobs.

What is the concept of 'comparative advantage'?

Answer: Producing a good at a lower opportunity cost than other countries, as the basis for trade

Comparative advantage is the ability to produce a good at a lower opportunity cost than other countries. It underpins international trade theory — countries specialise in goods they produce most efficiently relative to alternatives.

What is a 'negative externality'?

Answer: A cost imposed on third parties not involved in a transaction

A negative externality is a cost imposed on third parties (outside the market transaction) — for example, pollution from a factory harming nearby residents. It leads to market failure and overproduction.