6.1 Economic issues Flashcards
What is GDP?
The total value of the output of goods and services in a country in one year.
What is the business cycle?
The cyclical fluctuations in the economy that include stages like recession, slump, growth, and boom.
What is a recession?
A period of falling GDP, demand, and prices, leading to job losses and decreased spending.
What is a slump?
A prolonged recession where unemployment is high, prices fall, and many businesses fail.
What is growth in the business cycle?
A stage where GDP rises, unemployment falls, and living standards increase.
What is a boom?
A stage characterized by excessive spending, inflation, and a shortage of workers.
How do changes in employment levels impact businesses?
They affect recruitment and the income of customers.
How does inflation impact businesses?
It increases business costs, potentially leading to higher prices for products.
How does GDP growth impact businesses?
An increase in GDP means more sales and higher income but may make employee recruitment difficult.
What is low inflation?
A situation where the prices of goods and services remain stable, encouraging businesses to expand.
What is the impact of rapid inflation on businesses?
It can lead to falling currency value, reduced international competitiveness, and lower investment.
What is low unemployment?
A situation where a high percentage of people are employed, reducing reliance on government benefits.
What is the impact of unemployment on the economy?
It lowers the country’s output as fewer people are producing goods and services.
What is economic growth?
An increase in a country’s GDP, leading to more goods and services being produced and sold.
What happens when GDP falls?
It leads to unemployment, lower living standards, less investment, and higher poverty.
What is the balance of payments?
The record of a country’s financial transactions with the world, including exports and imports.
What is the impact of a budget deficit?
It can lead to borrowing, depletion of foreign currency reserves, and depreciation of the exchange rate.
What is the exchange rate?
The price of one currency in terms of another currency.
What is fiscal policy?
Government changes in tax rates or public sector spending to influence economic conditions.
What is the effect of government spending increases on businesses?
It can lead to more subsidies, increased consumer income, and stimulation of economic growth.
What is the effect of government spending decreases on businesses?
It can lead to increased competition and disinflation.
What is direct tax?
A tax on income or corporate profit, such as income tax or corporation tax.
What is indirect tax?
A tax on goods and services, such as VAT or import tariffs.
What are import tariffs?
Taxes on imported goods designed to reduce imports.
