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IAD PAPER 2 > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

Population trends

A

The population in England is aging and this effecting the state pension age as the government is having to raise it as it cannot support the volume of pension age people.

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2
Q

Living standards and what this includes

A

This refers to the level of wealth, happiness , comfort, material goods and other necessities are an aisle to people.

One common measuring tool of this is GDP

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3
Q

Different sectors name of the economy

A

The primary sector - producers of raw materials
Secondary sector - processing of raw materials ie manufacturing.
Tertiary sector - good distribution/ service sector
Quaternary sector - sector providing education, training and R&D
Quinary sector - top level decisions ie government.

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4
Q

Uks growing service sector

A

80% of the uks GDP is now made up of the service sector.

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5
Q

Productivity and the four that contribute to it

A

There are four factors effecting productivity
Land
Labour
Capital
Enterprise

Productivity is a measure of the efficiency of the above four and can be calculated by adding all the above and then dividing by output.

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6
Q

Wealth income distribution

A

Income = the amount received by individuals and households from all sources
Wealth = households or under ideals stock of financial assets including cash, property and investments also chattles

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7
Q

Measuring distribution of wealth

A

This can be done using the Lorenz curve and the Gini coefficient

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8
Q

Gini coefficient

A

This ranges between 0 or 100% and is used in connection with a Lorenz curve
= area A/ Area (A + B)

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9
Q

Explaining wealth inequality

A

Employment changes
Decline of trade unions
Eroding value of minuimum wage
Government policy
Taxation
Technology change
Globalisation

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10
Q

Developing economies

A

They are fulled by two ways
Internally - when demotic demand grows the economy
Externally - when external trade deals and demand for national products pulls the economy into growth.

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11
Q

Climate change

A

This is effected by human activity and has not been helped by globalisation and now increases the risks associated with climate change. COP26 and the Paris agreement are meant to help fight these effects.

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12
Q

Globalisation and its effects on global markets

A

It brings global markets in much closer connection with each other meaning their cycles are far greater linked.

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13
Q

Globalisation definition

A

Increasing inter connectivity and interrelated nature of business and their financial systems. It also is used to describe how products around the world are becoming similar.
The WTO and the the OECD are set up to help with globalisation and help invigilators the situation the have come about because of them.

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14
Q

Market failure

A

This occurs when the freely functioning markets fail to deliver an optimum allocation of resources. This prevents equilibrium.

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15
Q

Externalities

A

These arise from production and or consumption of goods and services that affect other parties. These can be both positive and negative.

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16
Q

Public goods

A

Pure public goods are the complete opposite from private goods, they are provided by the govement for two main reasons
Non-exludability - they cannot be confined to those who have paid for them
Non-rivalry in consumption - consumption from one doesn’t reduce availability for another to consume.

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17
Q

Merit goods

A

This is what governments and societies regard a necessary to avoid under consumption. Meaning usually they are subsidies by the GOV.
They can be provided by both public and private sectors however usually generate positive externalities.

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18
Q

Monopoly and oligopoly

A

When one or a few select companies control the market

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19
Q

Types of Trade agreements

A

Unilateral trade agreement = when one poses restrictions on another or loosens them. With no response
Bilateral agregreement = between two countries usually lowering trade barriers to promote growth
Multilateral agreements = three or more countries are involved.

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20
Q

Protectionism

A

This is where a country makes I purposely difficult to import/ trade with another country or purposely easy to. It is about manipulating trade for the benefit of the host country and their objectives.

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21
Q

Economic cycle

A

This describes the course an economy take usually 7-10years in repeat. The main sectors are recovery, boom and recession. These sectors are splits by wither growth or deceleration.
Recovery - peak - slump - trough

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22
Q

Assets price bubbles and causes for this

A

This is where a price rises rapidly and leaves usual value and then is followed. Y a reversal of expectations in sharp decline. This is caused by three main conditions
Low interest rates
Asset shortage
Demand pull inflation

23
Q

Economic shocks

A

This is an event that provides a significant change within an economy despite occurring outside it. This can be because of supply or repaid devaluation of a currency.

24
Q

Economic indicators

A

National income, gross national product and GDP

25
Q

National income

A

This is the total income of residents of a country. Which arises from production of goods and services by that country.
Also called net national product
NI = GNP - Capital consumption
Can be useful for:
Standard of living
Comparing wealth
Measuring changes in wealth

26
Q

GDP

A

Total value of income/ production from the economic activity.
GDP = c + I + g (x-m)
Consumer spending
Investment
Gov spending
Exports
Imports

27
Q

Gross national product gnp

A

GNP = GDP plus net property income from abroad

28
Q

Injections and withdrawals

A

Savings = withdrawals
Investment = injections
Imports = withdrawals
Exports = injections
Taxation = withdrawal
Gov spending = injection

29
Q

Interest rates

A

This is a monetary policy option. This describes the general increase in price levels.

30
Q

Inflation indices

A

This index uses a basket of goods to measure the average increase in price to calculate inflation. CPI (consumer price index) is one metric or RPI (retail price index) in another.
CPI is used by the uk government because - more realistic, compare international economies.

31
Q

Differences in cpi and rpi

A

Item included in the basket
Broader range of items in cpi
Different weightings for items

32
Q

Retail sales… show

A

Household consumption

33
Q

Unemployment and types

A

This measures the rate of people available for work that are not in work currently. The main types of unemployment:
Cyclical - occurs because of market cycle and the general market health or weakness
Frictional - when between jobs either voluntary or not also seasonal.
Structural - this is where what unemployed people can offer and what firms need. Tech can be a reason to cause this type.

34
Q

Money supply

A

The toal amount of money within the economy p, including narrow and broad.

35
Q

Economic indicators and their characteristics

A

Each indicator can have one of the following
Procyclic - characterised by directional movement that moves in step with the overall movement of the economy
Countercyclic- indication move in the opposite direction to the economic growth.
Indicators are also characterised further by when they take place:
Lead indicators - usually change becofre economy as a whole
Lagging indicator- change after economic change
Coincident indicators- they change approximately at the same time as the economy.

36
Q

Quantitative analysis

A

This relays on statistics and numerical data.

37
Q

Qualitative analysis

A

Ore subjective and concerned mainly with social, institutional and commercial theams.

38
Q

Gov economic aims

A

Sustained growth
Control inflation
Achieve full employee net
Achieve trade balance

39
Q

Fiscal policy

A

Government policy on taxation, public borrowing and public spending

40
Q

Types of taxationTaxation

A

Direct = income and wealth
Indirect = products and services ie vat

41
Q

Types of fiscal policy

A

Expansionary
Contractionary
Neutral

42
Q

Monetary policy

A

This is concerned with the amount of money in circulation and with the changes or its price ie interest.

43
Q

MPC

A

Part of the BofE, nine members meeting 8 times a year. Deciding on interest rates.

44
Q

Narrow and broad money

A

Narrow money - sum of all financial assets that meet a Norris definition ie very liquid and available to finance current spending.
B-road money - this includes the total sum of a wider group of financial assets

45
Q

Examples of measuring money supply

A

M0 = this is the measure of notes and coins in circulation outside the BofEand operational deposits.
M4 = measure of notes and coins in circulation with the public plus sterling deposits held with the uk banks and building societies.

46
Q

How money supply effects inflation, deflation and disinflation

A

Les money will push up prices and hence increase inflation and then reverse.

47
Q

How money supply effects interest rates

A

Interest rates are largely determined by the demand for loanable funds so if there is more money then there is less borrowing so less demand equals less interest.

48
Q

Relationship between monetary supply and interest rates with unemployment

A

Fisher equation
MV = PT
Money supply
Velocity of circulation
Price level
Transaction output

49
Q

Balance of payments

A

Current account = this accounts for a countries imports and exports. In other workds the short term flows of a country
Capital accounts = this is transactions that don’t affect incomes, production or savings ie a copyright. If it attracted an income then it would be in this account.

50
Q

Currencies effect on accounts

A

If a current account has a deficit then a falling currency value can be good as it make imports more expensive so people are pushed to domestic goods.

51
Q

Market behaviour

A

The economy as a whole has a big influence on the financial market as prices usually are effected by the economy as the economy effect sentiment.
Persistent share fall equals a bear market
Persistent growth is a bull market

52
Q

Primary markets

A

Market for new issues of shares or securities

53
Q

Secondary market

A

Where already purchased assets are resold to new owners.

54
Q

Fixed incomes securities

A

These can be effected by the interest rate.

IAD PAPER 2 (8 decks)

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