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Economics > 3.2.2-Government objectives > Flashcards

3.2.2-Government objectives Flashcards

1
Q

What is the Balance of Payments (BOP)

A

A record of all economic transactions between the residents of the country and the rest of the world in a particular period

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2
Q

What is conflict?

A

The better one objective does, the worse another does

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3
Q

What is economic growth?

A

An increase in the productive capacity of the economy to produce goods and services

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4
Q

What are economic objectives?

A

The main aims of the government

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5
Q

What is full employment?

A

Where all eligable people who want to work can find jobs

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6
Q

What is inequality?

A

A lack of equality in the sharing of wealth or opportunities in an economy

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7
Q

What is price stability?

A

Where the inflation is within the government’s target of 1-3%

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8
Q

What is a trade-off?

A

Accepting less of something in return for more of something else-a solution to minimise the negative impact of an objective comprimise

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9
Q

What are some potential trade offs?

A

Unemployment lowering-Inflation
Economic growth-Inflation
Economic Growth-Environment
Inflation-Current account

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10
Q

What is GDP?

A

Gross domestic product is the total value of everything produced in a country

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11
Q

What is GDP per capita?

A

GDP divided by population-useful for comparing countries and reflects changes in population size

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12
Q

What is real GDP?

A

GDP that is adjusted by inflation

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13
Q

How do you calculate the rate of economic growth?

A

(Change in GDP between year 1 and 2 / GDP in year 1) x 100

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14
Q

What is nominal GDP?

A

GDP not adjusted for inflation

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15
Q

How do you calculate real GDP?

A

GDP x base year price index / current year price index

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16
Q

What determines economic growth?

A
  • Investment
  • Technology
  • Education and training
  • Labour productivity
  • The size of the workforce
  • Natural resources
  • Government policies
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17
Q

What are some benefits of economic growth?

A
  • A rise in living standards
  • Increased employment
  • A reduction in poverty
  • A rise in the welfare of the population
  • A rise in productivity
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18
Q

What are some drawbacks of economic growth?

A
  • Environmental costs
  • Air pollution
  • Global warming
  • Congestion
  • Loss of non-renewable resources
  • A lower quality of life
  • Inequalities of income and wealth
  • Inflation
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19
Q

What are limitations of GDP as a measure of growth?

A
  • Inflation artificially increases GDP
  • Population changes GDP
  • Statistical errors
  • Home goods being produced
  • ‘Black economy’
  • Living standards aren’t reflected
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20
Q

What is employment?

A

The use of labour to produce goods and services in an economy

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21
Q

What is unemployment?

A

Members of the labour force that are willing and able to work and are seeking employment

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22
Q

What is seasonal unemployment?

A

Lack of employment caused by a fall in demand during a particular season

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23
Q

What is frictional unemployment?

A

Lack of employment caused by time lags when workers move between jobs

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24
Q

What is structural unemployment?

A

Unemployment caused by a permanent decline of an industry or industries

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25
Q

What is cyclical unemployment?

A

Lack of employment caused by lack if demand in an economy

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26
Q

What is voluntary unemployment?

A

Unemployment caused by people choosing not to work

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27
Q

What is being dismissed (firing)?

A

When your employer ends your employment

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28
Q

What is redundancy?

A

It is dismissal from your job, caused by your employer needing to reduce the workforce

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29
Q

What is the difference between the level and rate of unemployment?

A

Level of unemployment-Number of people unemployed
Rate of unemployment-Number of people employed as a percentage of the workforce

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30
Q

What is the measure of unemployment in the UK?

A

The claimant count-the amount of people claiming jobseeker’s allowance

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31
Q

What is the rate of unemployment formula?

A

NO. of unemployed / labour force x 100

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32
Q

What groups of people are ‘Economically inactive’?

A
  • Pensioners
  • Students
  • Children
  • Housewives/husbands
  • Prisoners
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33
Q

What are the costs of unemployment to individuals?

A
  • Lower living standards
  • Loss of status and self-esteem
  • May become unemployable after a period of time-skills become outdated
  • Costs to taxpayers increases as more benefit payments must be funded
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34
Q

What are costs of unemployment to the government?

A
  • Labour resouces are wasted
  • Unemployment could lead to more unemployment-cyclical unemployment
  • A budget deficit could occur
  • Cost to specific regions
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35
Q

What is the consumer price index (CPI)

A

An index that compares the current prices of a basket of goods and services to the same basket a year previously

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36
Q

What is cost-push inflation?

A

Prices rising due to an increase in firm’s costs-causing a shift in aggregate supply

37
Q

What is deflation?

A

A general force in the price level

38
Q

What is demand-pull inflation?

A

Prices rising due to an increase in aggregate demand, typically consumption

39
Q

What is disinflation?

A

Where prices are still rising but at a slower rate

40
Q

What is hyperinflation?

A

Very high inflation-1000%+

41
Q

What is inflation?

A

A general increase in prices and fall in the purchasing value of money

42
Q

What is the rate of inflation?

A

The measurement of price changes over a time period, usually a year

43
Q

What are the differences between CPI and RPI?

A

CPI doesn’t include housing costs so is used as the main measure of inflation in the economy (due to usually being a lower figure-as a result of high inflation on housing)

44
Q

What is the BoE’s target for inflation?

A

2±1%

45
Q

What do the goverment do to achieve their objective of low inflation?

A

Monetary policy (interest rates, money supply & exchange rates)

46
Q

What are the benefits of low inflation?

A
  • Economic stability
  • Encourages investment from overseas-if the UK is lower than other countries they will invest in the UK
  • Maintain living standards
  • Avoids ‘booms and busts’ in economic cycles
  • Avoids uncertainty and loss of interational competitiveness
  • Business confidence leading to investment leading to increased productivity and economic growth
47
Q

What are the two types of inflation?

A

Demand pull inflation and cost push inflation

48
Q

What are the causes of demand pull inflation?

A
  • An unexpected increase in consumer confidence
  • Goods not being imported or manufactured fast enough to meet the new demand
  • Collusion between firms-to fix prices via illegal agreements
  • Firms with monopoly power taking advantage of their position by raising prices
49
Q

What are the causes of cost push inflation?

A
  • A rise in the cost of labour
  • A rise in the cost of raw materials, whether imported or domestically produced
  • A rise in transport or energy costs
50
Q

How do increased interest rates affect inflation?

A

Increased interest rates lead to lower economic growth leading to slower inflation

51
Q

How do decreased interest rates affect inflation?

A

Decreased interest rates lead to higher economic growth leading to faster inflation

52
Q

What is the Balance of Trade?

A

The difference between the exports and imports of goods and services into and out of a country

53
Q

What is the Current Account?

A

The account that records the visible and invisible trades of a country as well as government aid payments.

54
Q

What is a Current Account Deficit?

A

Imports are greater than exports

55
Q

What is a Current Account Surplus?

A

Exports are greater than imports

56
Q

What is the Current Balance?

A

The difference between exports and imports

57
Q

What is Invisible trade?

A

Trade in services

58
Q

What is Visible trade?

A

Trade in goods

59
Q

What are the 4 parts of the current account?

A
  • Trade in goods
  • Trade in services
  • Investment income
  • Current transfers
60
Q

What are imports?

A

Outwards flow of money from the country/economy

61
Q

What are exports?

A

Inwards flow of money to the country/economy

62
Q

What are the 5 largest trading partners of the UK?

A
  • USA
  • Germany
  • Netherlands
  • France
  • China
63
Q

What is the UK’s largest trade in goods?

A
  • Cars
  • Medicinal & Pharmaceutical products
64
Q

What is the UK’s largest exported service?

A

Financial services

65
Q

What are the benefits of exporting?

A
  • They are an injection into the economy
  • They increase AD
  • They reduce unemployment levels
66
Q

What are the problems and benefits of importing?

A

Problems:
* Leakage from the economy
* Deacreased AD
* Increase in likelikood of unemployment

Benefits
* Raises standard of living of a country

67
Q

What are exchange rates?

A

The amount of one currency that can be bought with another

68
Q

How can a surplus on the current account affect exchange rates?

A

A larger surplus means there are more exports meaning that there is more demand for currency in the economy-this could lead to the exchange rate getting stronger leading to the rise in the exchange rate.

69
Q

How could an increase in the exchange rate have a negative impact on the current account?

A

If a country’s exchange rate gets stronger, exports become more expensive and imports cheaper-this might result in fewer exports being sold and more imports being bought in-negative impact on the current account.

70
Q

What are the reasons for deficits and surpluses on the current account?

A
  • Quality of domestic goods
  • Quality of foreign goods
  • Price of domestic goods
  • Price of foreign goods
  • Exchange rate
71
Q

What are the impacts of a current account deficit?

A

Leakages–>Inflation–>Low demand for exports–>Funding the deficit–>Leakages

72
Q

`

What is absolute poverty?

A

According to the UN, people surviving on less than $1.90 per day-can’t afford essentials

73
Q

What is income inequality?

A

Differences in income that exist between the different groups of earners in society (the gap between the rich and poor).

74
Q

What is relative poverty?

A

Living below the standards of the average individual.

75
Q

What is under-population?

A

When there could be a population increase without a reduction in living standards

76
Q

What is wealth?

A

Collection of assets (houses, land, shares in companies, money saved in bank accounts).

77
Q

What is wealth inequality?

A

The unequal distribution of assets across an economy

78
Q

What are characteristics of absolute poverty?

A
  • Income is insufficient to obtain the minimum needed to survive
  • Don’t have food, clean water, shelter, heating and clothes
  • Their income is so low they can barely survive
  • Rowntree-shopping list-income below his was absolute poverty
79
Q

What are some characteristics of relative poverty?

A
  • When someone cannot afford to meet the general standard of living of most other people in their society
  • Their income is much less than the average for society as a whole, so they are poor compared with others in society
80
Q

What does the national minimum wage do?

A
  • Helps to give people who are low skilled, traditionally low wage, jobs, a certain amount of money to live on
81
Q

What are the state benefits?

A
  • Universal credit (main one)
  • Jobseeker’s allowance
  • Pension credit
  • Child benefit
  • Carers allowance
  • Disability living allowance
  • Cold weather payment
82
Q

What is the top fifth of incomes compared with the bottom fifth?

A

40% compared to 8%

83
Q

What are the causes of income disparity?

A
  • Income earning assets
  • Differences in wages
  • Reliance on benefits
  • Age and gender differences
84
Q

What are the reasons to reduce poverty and inequality?

A
  • To meet basic needs
  • To raise living standards
  • Ethical reasons
85
Q

How can the government intervene to reduce poverty?

A
  • Progressive taxation
  • Redistribution through payments
  • Investment in healthcare
86
Q

What is the main stat on the benefit of education?

A

One year of extra schooling increases an individual earnings by up to 10%

87
Q

How can investment into healthcare reduce poverty?

A
  • If children are healthier, their attendance at school is higher
  • If people live longer, they are more likely to save for their retirement
  • If people are healthy, they will be more productive in the workplace, which will help to increase economic growth
88
Q

What are the main causes of world poverty?

A
  • Natural disasters
  • Civil war
  • Corruption
  • Climate
  • Unfair World trade
  • Reliance on exports
  • Disease
  • Lower life expectancy
  • Lack of education

Economics (13 decks)

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