6. External Influence On Business Activity Flashcards
Gross Domestic Product (GDP)
the total value of output of goods and services in acountry in one year
Recession
when there is a period of falling GDP
Inflation
the increase in the average price level of goods and services over time
Unemployment
when the people who are willing and able to work cannot find a job
Economic growth
when a country’s GDP increases- more goods and services are produced than in the previous year
Balance of payment
records the difference between a country’s exports and imports
Real income
the value of income and it falls when prices rise faster than money income
Export
goods and services sold from one country to other countries
Import
goods and services bought in by one country from other countries
Exchange rate
the price of one currency in terms of another
Exchange rate appreciation
the rise in the value of a currency compared with other currencies
Exchange rate depreciation
the fall in value of a currency compared with other currencies
Fiscal policy
any change by the government in tax rates or public sector spending
Direct tax
paid directly from incomes, eg- income tax or profits tax
Indirect tax
added to the prices of goods and taxpayers pay the tax as they purchase the goods, e.g. VAT
Disposable income
the level of income a taxpayer has after paying income tax
Monetary policy
a change in rates by the government or central bank
Supply-side policy
aim to increase supply and make the economy more efficient
Private cost
an activity are the costs paid for by a business or the consumer of the product
Private benefit
an activity are the gains to a business or the consumer of the product
External cost
costs paid for by the rest of society, other than the business, as a result of business activity
External benefit
the gains to the rest of society, other than the business, as a result of business activity
Social cost
external costs + private costs
Social benefit
external benefits + private benefits
Globalization
the term used to describe increases in worldwide trade and movement of people and capital between countries
Free trade agreement
exist when countries agree to trade imports/exports with no barriers such as tariffs or quotas
Import tariff
a tax placed on imported goods when they arrive into the country
Import quota
a restriction on the quantity of a product that can be imported
Protectionism
when a government protects domestic businesses from foreign competition using tariffs and quotas
Multinational business
those with factories, production or service operations in more than one country
