3.7.5 - economic change Flashcards
what is GDP?
- gross domestic product is the measure of added value on products, adding income to the economy
what are 3 examples that causes GDP growth?
- capital investment
- technology advancements
- population growth
how does economic growth impact sales?
increases incomes (not inflation) which leads to higher retail sales
how does economic growth impact profits?
creates more demand as more sales are boosting profit margins
how does economic growth impact investments?
creates more production which leads to capital investment and rising share prices therefore ease of financing
how does economic growth impact employment?
more demand means more job opportunities which can lead to skills shortages and impact on costs
what does a weak pound mean for tourists?
it makes it more affordable for tourists to visit as their country has more purchasing power so tourists will get more money
what is free flowing exchange rate?
where a country’s currency price is determined by market supply + demand
what are fixed exchange rates?
when government fixes the currency value in relation to other currencies, typically US$
what is exchange rate uncertainty?
exchange rates change daily, causing uncertainty for export + import, due to knock on fluctuations in price from sales/purchases
what 4 things do the government have to do when exporting UK businesses?
- invest in small businesses
- legislation
- foreign trade
- infrastructure
what is government intervention?
actions taken by the government to influence the market and regulate economic activity
what is inflation?
general increase in prices within the economy and it causes a fall in purchasing power
what is demand - pull inflation?
when people want to buy more goods and services than what is available so prices go up to reduce demand
what is cost - push inflation?
when overall prices increase due to increases in the cost of wages and raw materials
what is the consumer price index?
a measure of the average change over time in the prices paid by consumers
what does free trade do?
promotes unrestricted flow of goods and services across borders
what does protectionism do?
seeks to shield domestic industries from foreign competition by imposing trade barriers
what is the fiscal policy?
the use of government spending and taxation to influence the economy
what is the difference between direct and indirect taxation?
direct taxation is imposed on individuals or organisations that have to be paid straight to the government whereas, indirect taxation is imposed on goods and services then the taxes are collected before passed onto government
what is the monetary policy?
a set of actions to control a nation’s overall money supply and achieve economic growth
what is quantitative easing?
the introduction of new money into the money supply by a central bank
