Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics > Chapter 1- Government Objectives > Flashcards

Chapter 1- Government Objectives Flashcards

0
Q

What are the two types of inflation and name what causes them.

A

Demand Pull: increase in AD near full output in the economy

Cost push: increase in the production costs of goods or services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
1
Q

What are the four types of unemployment?

A

Cyclical
Seasonal
Frictional
Structural

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the difference between real and nominal GDP?

A

‘Nominal GDP is actual GDP without adjustments for inflation’
‘Real GDP is the physical amounts of goods and services produced in a country in a year’

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Name three ways of measuring GDP

A

Output method: give surveys to firms about everything that they produce in a year and calculate the entire economies figure.

Income Method: use tax returns to calculate the income of everyone in an economy in a year

Expenditure method: Total the expenditure of everyone in an economy in a year.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Name three problems in measuring growth

A

Output: counting the same item twice (like raw materials and then in the final product)

Income: only include incomes that are earned in return for goods and services (not transfer payments)

Expenditure: include exports and exclude imports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Name four advantages of growth

A

Material living standards increase

Poverty levels are reduced

Can help reach full employment

Public care and health services are better quality

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Name four disadvantages of growth

A

If it is not achieved in a sustainable manor it can have a very bad effect on the environment

People could struggle to adapt to new jobs

Increase in productivity comes at the cost of freedom and esteem

Can cause unwanted inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What four things cause growth?

A

Increase in physical capital

Increase in active labour force size

Increase in labour quality

Progress in technology

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the problems in comparing growth figures?

A

Differences in population can cause differences in productive ability so GDP per capita is calculated

If income is distributed unfairly it will give an unfair average value

If there is a large informal economy then a lot of trade will be unrecorded

If cost of living is lower, they can buy more with each pound.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the definition of unemployment and unemployment rate?

A

Unemployment: the amount of the labour force out of work.

Unemployment rate: the percentage of the labour force out of work

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What two ways are used to measure unemployment?

A

Claimant count: the amount of people who claim job seekers allowance (1.53M in U.K)

Labour Force Survey: A monthly survey is given to firms about their workforce by ILO (29.7M currently employed in U.K)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What could cause unemploment?

A

Rising the minimum wage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What consequences of unemployment effect the individual?

A

Harder to find work with no experience

Can become deskilled from certain jobs

Health figures are lower for unemployed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are the consequences of unemployment to the community?

A

Higher levels of crime rate

Less money in circulation due to lack of demand

Falling house prices

More derelict land

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What consequences of unemployment are for the government?

A

Loss in revenue as less tax and more benefit

Lowering of possible
GDP figures

Lower living standards

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Benefits of unemploment?

A

Easier to recruit workers

Cheaper to recruit workers

Less demand pull inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What’s inflation

A

The annual percentage change in price level

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What’s the difference between CPI and RPI

A

RPI: includes housing costs
CPI: doesn’t include mortgages, rent and council tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What’s the Bank Of England’s target inflation rate

A

2%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are the disadvantages of inflation ?

A

If inflation is too high it makes us less competitive than other countries
Risk of hyperinflation
Cost of changing prices due to inflation ( menu costs)
Cost in terms of extra time and effort involved in reducing money holdings (shoe leather costs )

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What’s the definition for balance of payments

A

Record of money flows coming in and going out of the country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What’s the current account

A

Al exports + all imports of goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What’s the visible balance :

A

Visible exports - visible imports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What are invisible credits

A

Sell service abroad

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What are invisible debts

A

Buy services for abroad

25
Q

What’s the invisible balance

A

Invisible credits - invisible debts

26
Q

What causes a deficit

A

British goods become more uncompetitive. Due to the being more expensive because of inflation, high exchange rate and low productivity

27
Q

What’s a disadvantage of a deficit

A

£falls and imports are more expensive, so inflation occurs.
Rise in unemployment
Lowers growth
Borrow money from IMF which impose conditions

28
Q

What’s the disadvantage of a large surplus

A

Trading partners have a large deficit and put tariffs and quotas on your goods

Exchange rate increases. Harder for firms to trade in future

29
Q

What are the consequences of unemployment to the individual?

A

Harder to find work as they have little experience

Long term unemployment can cause workers to become deskilled

Health figures are worse for unemployed

30
Q

Consequences of unemployment to the government?

A

Loss in revenue as more is spent on benefits and health care

Lowering the possible higher GDP figure

Reduction in living standards

31
Q

What are the two causes of inflation?

A

Demand pull: where an increase in aggregate demand occurs when the economy is operating near full output.

Cost push: Is caused by an increase in the cost of production for goods and services.

  • labour cost
  • weaker pound
  • oil price rise
32
Q

Explanation of CPI

A
  • Family expenditure aurvey carried out on over 6000 families.
  • A normal shopping basket is then calculated of 650 items.
  • weights of how much income each item takes up are calculated.
  • price quotations are taken 120,000
  • weights are multiplied by price index to work out price level change

(Actual figure x100)/ base year figure

33
Q

How does RPI differ from CPI?

A

Measured in the same way.

But it has:

  • housing costs
  • mortgage interest payments
  • council tax

It doesn’t have:

  • uni accommodation
  • Foreign student tuition fees
  • stockbrokers charges
34
Q

What is RPIX and RPIY

A

RPIX= RPI-mortgage interest

RPIY=RPI+mortgage interest+indirect taxes

35
Q

Name three consequences of high inflation

A
  • domestic firms are uncompetitive against foreign firms
  • can result in hyperinflation (over 50%)
  • causes economic uncertainty for saving and investment
36
Q

What are the difficulties in inflation measuring?

A
  • improvemtns in technology means you’re not technically still buying the same good
  • people stop buying expensive items so inflation overstates living cost
  • changes in weights can occur due to fashion or taste changes
  • CPI uses an average household, but not household is the same
37
Q

What is the current U.K inflation

A

2.7%

38
Q

Who wins in inflation?

A

Debtors, because their wages go up but debt stays the same, meaning they have less to pay off

39
Q

Who loses in inflation?

A

Savers, because inflation is higher than the saving interest so the money is worth less when you withdraw it.

40
Q

Define Balance of Payments

A

Balance of payments is the total amount of money in and out of a country in a year

41
Q

What is the current account?

A

The current account is an account of all the imported and exported goods and services in a year

42
Q

What is the current account made up of?

A

Visible account: An account of all imported and exported goods

Invisible account: An account of all imported and exported services

43
Q

How do you calculate the visible and invisible balances?

A

Visible = visible exports - invisible exports

Invisible= invisible credits - invisible debits

44
Q

How to calculate the current account balance?

A

Current Balance= visible account + invisible account

45
Q

What are surpluses and deficits

of the balance of payments?

A

Surplus: more money in than out

Deficit: more money out than in

46
Q

What are the causes of a deficit?

A

Low exchange rate means cheaper exports

Higher quality goods and services

If goods are produced at low cost

47
Q

How should economies combat recession

A

Compete in foreign markets

48
Q

What are the causes of a deficit?

A

Higher inflation than trading partners makes exports more expensive

Lack of competitiveness between firms

High exchange rate makes exports more expensive

Poor quality goods and services

49
Q

Current UK bop trends

A

Has a visible defecit

Since 1966 it has invisible surplus

50
Q

Consequences of a surplus

A

Currency gains in value so exports are more expensive

Causes inflation due to lots of money but not many goods

Cause another country to have a deficit meaning the may place legislation against trading with you (retaliation)

51
Q

Consequences of a deficit

A

A country could go bankrupt as IMF only lends under strict guidelines

Currency will lower so imports are more expensive

Lots of unemployment in exports

52
Q

Define exchange rate

A

It is the value of one currency in terms of another

53
Q

How is it calculated (floating system)

A

It is determined by supply and demand

Increase= more demand less supply
decrease=less supply more demand

Pounds are demanded when the are exchanged for other currencies

Pounds are supplied when they are converted from other currencies

54
Q

What is appreciation and depreciation of the £

A

Appreciation exchange rate goes up:

  • cheaper imports so lower inflation
  • makes exports more expensive

Depreciation exchange rate goes down:
-exports are cheaper abroad

55
Q

What is economic stability?

A

Is an economy that displays only minor fluctuations in growth, output and has constantly low inflation

56
Q

What is income redistribution?

A

Is transferring income to different parties if the economy

Achieved through policies

57
Q

Progressive and regressive taxes?

A

Progressive: hit the rich harder

Regressive: hit the poor harder

Proportional: hit both parties the same

58
Q

Why do the government redistribute income?

A

To stabilise the economy

59
Q

What is fiscal drag?

A

If tax brackets are not adjusted with inflation, peoples income can be pushed into higher tax bands

Economics (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions