2016 ppqs Flashcards
Describe what is meant by the term “austerity”.
The measures taken by a government to shrink a budget deficit/create a budget surplus
Describe what is meant by “national debt”
The total amount owed by an economy/country/
government. (1 mark)
The accumulation of all a nation’s annual deficits
Explain why measures to reduce a national debt may conflict with other government objectives.
Debt reduction may involve reducing government spending (ID) which may result in less public sector jobs, increasing unemployment. (1 mark)
Debt reduction may involve increasing rates of indirect taxation (ID) which may result in increased income inequality due to its regressive nature.
Describe a fiscal policy measure which could be used by governments of Eurozone countries to achieve economic growth.
Reduction in tax (1 mark) increases disposable incomes so consumers may spend more.
Increases in government spending (1 mark) will increase public sector jobs/public/private sector contracts/incentives to work etc. (1 development mark)
Explain why “income inequality” is regarded as an example of market failure.
Income inequality is an inefficient allocation of resources (ID) which results in gaps in income and wealth between different groups/everyone does not have equal access to resources (ID) and therefore this is not efficient (1 mark)
Some/wealthier people have access to more resources than others therefore they have more choice
Describe government interventions which may be used to reduce the effects of a market failure.
Taxes are used:
to redistribute wealth/reduce poverty. (1 mark) o to reduce pollution. (1 mark) This increases costs of production, encouraging reduction in supply. (1 development mark)
to reduce consumption of demerit goods.
The government may provide:
public goods ie goods which would not be provided in a free market (1 mark) eg street lighting
Describe factors which affect the price elasticity of a product
If the good has a number of close substitutes demand for it will be more elastic. (1 mark) This is because consumers will be more likely to switch to another good when price goes up.(1 development mark) eg branded toothpaste etc. (1 development mark)
If the good is a necessity demand will be less elastic. (1 mark) eg bread or milk. (1 development mark)
If a small proportion of income is spent on the product demand will be relatively inelastic (1 mark) This is because changes in price are less likely to be noticed. (1 development mark) eg crisps.
(1 development mark)
Describe the difference between economic goods and free goods.
Economic goods are goods that carry a price whereas
free goods do not command a price. (1 mark)
Free goods use up no scarce resources to produce whereas economic goods do use up scarce resources. (1 mark)
Free goods are abundant in supply whereas economic goods are finite/limited. (1 mark)
Free goods have no opportunity cost in production whereas economic goods do incur an opportunity cost during production. (1 mark)
An example of free goods is air, whereas an example of an economic good is a television.
(1 mark)
Describe the uses of a country’s National Income statistics.
Compare figures against other countries. (1 mark)
Compare figures against previous years. (1 mark)
Calculate the country’s rate of economic growth.
(1 mark)
Evaluate/compare living standards in a country
by dividing the NI by head of population. (1 development mark)
Compare performance in different sectors of the economy. (1 mark)
Evaluate success/failure of economic policies.
Explain the effects of the relatively slow recovery in the Eurozone on:
(i) UK businesses 2
(ii) the UK economy.
UK businesses
These nations are the biggest customers for our exports so demand may fall (ID) leading to falling revenue/profits as they struggle to recover. (1 mark)
The lack of profits means businesses may put expansion/diversification plans on hold. (1 development mark)
European customers may buy less UK exports (ID) which will have a negative impact on the Current Account of the Balance of Payments. (1 mark)
Less FDI from Europe may take place in the UK (ID) which will have a negative impact on the Capital Account of the Balance of Payments.
explain why a strong pound would mean British holiday makers get benefit
Imports such as foreign holidays are cheaper (ID) so British holidaymakers will be more able to travel abroad. (1 mark)
UK tourists will be able to buy more Euros for their pound (ID) which will make their holiday seem better value for money. (1 mark)
This means that they can buy more luxurious goods and services/book more expensive/longer holidays abroad
Outline the factors which affect the exchange rate for the pound sterling.
Change in foreign direct investment (1 mark)
Change in demand/supply for UK exports/imports/ pounds (1 mark)
Change in interest rates in the UK
factors which affect price elasticity of a good
If the good has a number of close substitutes demand for it will be more elastic. (1 mark) This is because consumers will be more likely to switch to another good when price goes up.(1 development mark) eg branded toothpaste etc. (1 development mark)
If the good is a necessity demand will be less elastic. (1 mark) eg bread or milk. (1 development mark)
If a small proportion of income is spent on the product demand will be relatively inelastic (1 mark) This is because changes in price are less likely to be noticed. (1 development mark) eg crisps.
describe the powers which have been devolved to the Scottish parliament from the UK government
Vary income tax (1 mark) by plus or minus 3 pence in the pound. (1 development mark)
Collect Land and Buildings Transaction Tax replacing stamp duty. (1 mark)
Control Scottish Landfill Tax to protect the environment. (1 mark)
Control Air Passenger Duty for passengers flying out of UK. (1 mark)
Determine the price of alcohol (1 mark) by setting minimum prices per unit of alcohol/not allowing happy hour/bulk buying
Describe the reasons why governments restrict trade
To protect an infant industry in a competitive market (1 mark). Restricting trade stops foreign competition and this allows the infant industry to find its feet and to grow. (1 development mark) This is because overseas competitors may have economies of scale as yet unavailable to the infant industry. (1 development mark)
To improve the Balance of Payments by reducing imports. (1 mark) This would reduce demand for imports and therefore help reduce a deficit.
(1 development mark)
To retaliate because one of its trading partners has already acted to restrict trade (1 mark). The retaliation could lead to both countries making a new trading agreement for the future.
