2.1 Government and the Economy: Unit 28 - 30

Question 1

1. What is Balance of payments?

Answer 1

• record of all transactions relating to international trade.

Question 2

2. What are the 2 parts of BOP?

Answer 2

• current account
• capital and financial account

Question 3

3. What is a current account? Capital and Financial account?

Answer 3

Current account- part of the balance of payments where all exports and imports are recorded.
Capital and Financial accounts are part of the balance where a flow of savings, investments, and currencies are recorded.

Question 4

4. What are exports? imports?

Answer 4

exports: goods and services sold overseas
imports: goods and services bought from overseas.

Question 5

5. What is the current balance? how to calculate.

Answer 5

difference between total exports and total imports
- total exports - total imports
- visible trade+ invisible trade

Question 6

6. What is current account deficit?

Answer 6

when the value of imports exceeds the value of exports.

Question 7

7. What is current account surplus?

Answer 7

when the value exports exceed the value of imports.

Question 8

8. What is a balance of trade/ visible balance? Invisible trade?

Answer 8

• visible balance:- the difference between visible exports and visible imports.
• Invisible trade:- involves the exchange of services.

Question 9

9. What is visible trade? Invisible trade?

Answer 9

i. trade in physical goods.
ii. involves in exchange in services.

Question 10

10. What is primary income?

Answer 10

money received from the loan of production factors abroad.

Question 11

11. What is secondary income?

Answer 11

government transfers to and from overseas agencies such as EU.

Question 12

12. What is exchange rate?

Answer 12

price of one currency in terms of another.

Question 13

13. How does exchange rates impact current account?

Answer 13

• Demand for exports as a result of changes in the prices.
• demand for the country’s goods, which influences demand for currency appreciating the value of the currency.

Question 14

14. What are the 5 reasons for deficit and surpluses?

Answer 14

• Quality of domestic goods.
• Quality of foreign goods.
• Price of domestic goods.
• Price of foreign goods.
• Exchange rates between countries.

Question 15

15. What are the 4 impacts of a current account deficit?

Answer 15

• leakages from the economy
• inflation
• low demand for exports.
• funding the deficit.

Question 16

16. What are 5 business activities that damage the environment?

Answer 16

• Mining
• power generation
• chemical processing
• agriculture
  -construction

Question 17

17. What are the 4 types of pollution businesses contribute to?

Answer 17

• visual pollution
• noise pollution
• Air pollution
• Water pollution

Question 18

18. What are the 3 ways air pollution is occurred due to business activity?

Answer 18

• burning of fossil fuels
• emissions from factories and other business activities.
• Agricultural activities.

Question 19

19. What are the 3 main causes of water pollution?

Answer 19

• industrial waste
• Marine and ocean dumping
• Sewage

Question 20

20. What are the 6 measures government intervenes to protect the environment?

Answer 20

• Taxation
• Subsidies
• Regulation
• Fines
• Pollution permits
• Park provision

Question 21

21. What is income inequality?

Answer 21

• differences in income that exists between the different group of earners in society, that is the gap between the rich and the poor

Question 22

22. What are the 2 types of poverty?

Answer 22

• relative poverty
• absolute poverty

Question 23

23. What is absolute poverty?

Answer 23

• where people do not have enough resources to meet all of their basic human needs.

Question 24

24. What is relative poverty?

Answer 24

poverty that is defined relative to existing living standards for the average individual

Question 25

25. What is Lorenz curve?

Answer 25

• graphical representation of the degree of income or wealth inequality in a country

Question 26

26. What are the 3 reasons to reduce poverty and inequality?

Answer 26

• meet basic needs
• raise living standards
• ethical reasons

Question 27

27. What are the 3 ways the government uses to intervene to reduce poverty and income inequality?

Answer 27

• progressive taxation
• redistribution through benefit payments
• investment in education and health care.

Question 28

28. What is progressive taxation? regressive taxation?

Answer 28

• progressive taxation is where the proportion of income paid in tax rises as the income of the taxpayer rises.
• regressive taxation is a tax system that places burden of the tax more heavily on the poor.