2.1 Government and the Economy: Unit 25 - 27 Flashcards
- Economic growth - Inflation - Unemployment
- What is budget deficit?
- amount by which government spending is greater than government revenue.
- What is macroeconomics?
study of large economics systems such as those of a whole country or area of the world.
- What is microeconomics?
study of small economic systems that are part of national or international systems.
- What is economic growth?
increase in the level of output by a nation.
- What is a national income?
value of income output or expenditure over a period of time.
- What is gross domestic product?
market value of all final goods and services produced in a period(a year), an internationally recognized measure of national income.
- What are the limitations of GDP as a measure of growth? (7)
- inflation
- population changes
- statistical errors
- the value of home-produced goods
- the hidden economy
- GDP and living standards.
- External costs
- What is the economic cycle?
the economic cycle shows the rate of growth of GDP at different stages/phases: boom, downturn, recession, and recovery.
- What is the boom in the economic cycle?
boom is a peak of the economic cycle where GDP is growing at its fastest.
- What is downturn in the economic cycle?
- a period in the economic cycle where GDP grows, but more slowly.
- What is recession/ depression in the economic cycle?
- period of temporary economic decline during which trade and industrial activity are reduced.
- What is a recovery in the economic cycle?
Recovery is where GDP starts to rise again, where economic activity increases.
- What are the 4 advantages of economic growth?
- Fall in unemployment
- Improve standards of living.
- Reduce poverty
- Raise productive potential
- What are the 2 disadvantage of economic growth?
- Inflation may increase as a result of overheating in the economy
- The environment will be damaged due to unsustainable growth in the economy.
- What is overheating?
it is when demand rises too fast, causing prices and imports to rise, a situation that governments may try to correct by raising taxes and interest rates.
- What is unsustainable growth?
economic growth that it is not possible to sustain without causing environmental problems.
- What is inflation?
the rate at which prices rise, a general and continuing rise in prices.
- What is aggregate demand?
- total demand in the economy including consumption, investment, government expenditure and exports minus imports
- What is deflation?
period where the level of aggregate demand is falling
- What is consumer index price? (CPI)
measure of the general price level (excluding housing costs).
- What is the retail price index? (RPI)
- measure of the general price level, which includes house prices and council tax.
- What are the two types of inflation?
- cost-push inflation
- demand-pull inflation
- What is demand-pull inflation?
inflation is caused by too much demand in the economy relative to supply.
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- What is cost-push inflation?
inflation caused by rising business costs.
- What are interest rates?
prices paid to lenders for borrowed money: and rewards to savers. it is the price of money.
- What is monetarist?
economists who believe there is a strong link between growth in the money supply and inflation.
- What are the 4 possible reasons that cause demand-pull inflation?
- rising consumer spending encouraged by tax cuts or low-interest rates.
- sharp increases in government spending
- rising demand for resources by firms
- booming demand for exports
- What are the 9 impacts of inflation?
- prices rising
-wages need to be increased. - Export demand falls.
- Lower levels of employment
- Menu costs
- Shoe leather costs
- Uncertainty
- business and consumer confidence
- investment
- What is menu costs?
- costs to firms of having to make repeated price changes.
- What is shoe leather costs?
- costs to firms and consumers of searching for new suppliers when inflation is high.
- What is hyperinflation?
very high levels of inflation; rising prices get out of control
- What is unemployment?
When those actively seeking work are unable to find a job.
- How is unemployment measured? which organization?
- LFS(labour force survey)
- ILO(international labor organisation)
- What are the 5 types of unemployment?
- cyclical/ demand deficit unemployment
- structural unemployment
- seasonal unemployment
- voluntary unemployment
- frictional unemployment
- What are the 3 types of structural unemployment?
- Sectorial unemployment
- Technological unemployment
- Regional unemployment.
- What is Cyclical/ demand deficient unemployment?
unemployment caused by falling demand as a result of a downturn in the economic cycle
- What is structural unemployment?
unemployment caused by changes in the structure of the economy.
- What is seasonal unemployment?
unemployment caused when seasonal workers, such as those in the holiday industry. are laid off because the season has ended.
- What is voluntary unemployment?
- unemployment resulting from people choosing not to work.
- What is frictional unemployment?
- when workers are unemployed for a short period of time as they move from one job to another.
- What is sectorial unemployment?
occurs when people are laid off because the industry they work in is in decline.
- What is technological unemployment?
- occurs when jobs that were previously done by people are now done by machines.
- What is regional unemployment?
unemployment in a particular country is not likely to be the same in all regions.
- What are the 9 impacts of unemployment?
- levels of output are lower
- waste of resources which results in lower levels of income
- Increase in poverty
- government spending on benefits
- tax revenue will fall
- business confidence, no investment
- consumer confidence
- to a society.
