2.1 Flashcards
what are interest rates
the cost of borrowing money or the return on investment
what is inflation
a sustained increase in the price level of goods and services as an annual % increase
how does an increase in inflation impact consumers
pay more for goods and services
devalues savings
decrease in disposable income
how does an increase in inflation impact businesses
increase staff wages
increase in supply costs
decrease in sales
what is demand pull
buyers want to buy more than sellers can produce so increases in price
what is cost push
businesses costs start to rise so sellers increase prices to compensate
why can inflation be good
sign the economy is growing
what is the fiscal policy
used by government in revenue collection
raise direct taxes
what is the monetary policy
actions of the bank of England to control the size & rate of growth
what is the business cycle
cycle or series of cycles of economic expansion & contraction
define GDP
the value of all goods & services produced by a countries businesses within a time period
what is a boom
rapid & significant growth in the economy
what is a recession
when the level of real national output decreases over two successive quarters
what is a slump
a sharp decline in the national level of output
what is recovery
slow build up of real national output
describe the term exchange rate
the value of one currency expressed in terms of another
what is direct tax (examples)
collected by inland revenue income tax, business, corporation, inheritance tax
what is indirect tax
collected by the customs and excise tobacco duties, wine, spirit, beer duties
what is income tax
workers pay income tax and national insurance
what is corporation tax
businesses pay on their profits
what is VAT
tax placed on all goods except food & children clothes
what an excise duties
specific taxes charged on products such as alcohol, tobacco, fuel
what is macroeconomic performances
government finances e.g. GDP
define uncertainty
how things can change and the outcome is difficult to predict
how can a business reduce uncertainty
research
contracts
diversification
what is perfect competition
many competitors offering the same products
what is monopolistic competition
many small firms offering differentiated products
what is an oligopoly
market is dominated by a small number of firms
what is a monopoly
only one provider for the good/service control over market, heavily regulated
