6.1 Economic Issues Flashcards
Define Economy.
The economy is everything which is produced and consumed within a country.
What contributes to the economy?
Every action by businesses or individuals which involves a transaction
Define Gross Domestic Product (GDP).
a way of measuring the size of the economy or economic activity
How is GDP measured?
by adding up the value of all the goods and services produced in one country in one year.
Which countries countries are considered the GDP “giants”?
The United States and China
they contribute over 40% of the whole world’s GDP.
Explain the impact of high GDP.
Increased GDP leads to a positive spiral of greater consumer spending, increased production, and higher employment. Higher consumer spending means increased opportunities for higher sales and profits for businesses.
Explain the impact of decreasing GDP.
negative spiral of decreasing GDP, resulting in lower consumer spending, production and employment means tougher economic conditions for businesses.
Plot the business cycle in a graph.
Explain the growth phase.
In the growth phase, GDP is increasing so it’s a good time for businesses to expand. Unemployment decreases, so consumers have more money to spend.
Explain the “boom” phase.
In the boom phase there are high levels of consumption and lots of money flowing in the economy but also high costs, as prices rise and labour becomes more expensive.
________ is likely to take place in the boom phase.
Inflation
Define inflation.
when prices and salaries rise quickly so the value of money (what you can buy) decreases.
Define Recession.
when the economy is getting smaller.
Explain what happens during a recession.
It’s a tough time for businesses with less demand from consumers and higher unemployment.
Explain the slump.
a slump is when there is a long period of little movement in the economy. There is low demand from consumers so it’s not a good time for business. There are also high unemployment rates.
