Economic Cycle Flashcards
Another name for economic cycle
Circular flow of money
What is the Basic Economic Problem?
Also known as the problem of scarcity.
There are certain needs that are fulfilled for free, but the vast majority of needs and all wants cost money and people therefor need to come up with a plan to acquire money.
The Economic Cycle
The plan for people to acquire money refers to the economic cycle; a two way movement where goods/services are exchanged for money so that needs and wants can be satisfied.
How do goods and services flow in the economic cycle?
- Households possess the factors of production which the sell to businesses through the Market for the Factors of Productions.
- Businesses buy the factors of production to manufacture them into goods and services.
- Businesses then sell those goods and services back to households through the Market for goods and services.
- Households buy the goods and services, which in turn provide them with the factors of production to restart the entire flow.
How does money flow in the economic cycle?
- Households buy goods and services from the product market as an expense.
- Businesses sell their goods and services to the product market in order to receive an income/ profit.
- Businesses first buy the factors of production from the resource market as an expense to then manufacture them.
- The factors of production are sold to the resource market by the households in order to receive an income.
Households:
— possess all factors of production
— the money earned by households when the sell their factors of production is used to satisfy their own needs and wants.
Needs vs Wants
Refers to the necessities that people require in order to survive, for example food and clothing, while wants are goods and/o services that are not essential for survival, but that people like to have.
Is money a needs in society?
Some people believe that money is a need, but this is not true as long before money was used as a means of payments, people survived by providing for their own needs and bartered when necessary.
Characteristics of needs:
— unlimited but the money need to satisfy them is limited.
— needs have a limited intensity.
— different people have different needs: a persons needs are subject to factors such as (amongst others) daily activities. Needs differ depending on the person’s gender, age and career.
— needs are often determined by a person’s geographical location and many change if a moves and lives elsewhere.
— needs change over time.
— sometimes needs add complementary; one need gives rise to the next need.
— some needs may become a habit.
Businesses/ Undertakings/ Firms:
— businesses but the factors of production and manufacture goods and/or services that they will sell at a profit to households or to other businesses.
— privately owned business trade in the private sector.
— different types of goods and services a business can sell.
Types of goods and services:
- Convenience goods: consumers are concerned with the brand since they are important to purchase.
- Select goods: usually bought once a comparison has been regard to price, quality and the brand name.
- Specialty goods: consumers take time to make a decision in regard to these products. Consumers also tend to be brand loyal.
- Intangible services.
The government:
— receive tax from households and businesses and use the revenue to create an infrastructure in order to promote economic activities in the country
— this kind of transaction, involving the government in the economy, takes place in the public sector.
What is infrastructure also known as?
Collective goods, such as public schools, roads, public hospitals, safety services, airports, sewage systems, etc.
The foreign sector:
Is only involved in an open market where goods and services are imported from other countries (purchased) and exported (sold) to other countries.
What are the possible reason for international trade?
- Improving transport and communication
- Seeking specialized expertise for a cheaper price
- Importing goods when the climate is suitable for some.
- Purchasing luxury items from other countries
- Importing a range of natural resources
- International tourism.
What are the possible problems that come with international trade?
- Obstacles between countries in terms of trade (more difficult and expensive to import)
- The different laws in countries may make trade very difficult.
- When creditors and debtors are in different countries
- Different currencies and the fluctuating exchange rates.
Define exchange rates.
The price- ratio that is used to calculate how much a unit of currency is worth compared to a different currency
Factors contributing to a country having a strong currency:
— if the country’s goods/ services are exported sold, because a demand will be created for that currency to pay for the goods
— foreign tourists visiting the country and demanding the currency.
What are the advantages/disadvantages of a strong vs weak rates based on?
A country’s net imports vs net exports;
Are more products imported or exported?
When did South Africa have a closed market?
During Apartheid, the country did not trade with other countries, because other countries did not agree with the government thus, boycotted the country and forcing them to rely on the citizen’s’ abilities to produce the necessary goods and services.
What is the abbreviation of Southern African Development Community?
SADC
Which are the fifteen countries consisting in the SADC?
- South Africa
- Botswana
- Swaziland
- Lesotho
- Namibia
- Zimbabwe
- Malawi
- Mozambique
- Zambia
- Angola
- Congo
- Tanzania
- Mauritius
- Seychelles
- Madagascar
When was the SADC formed and what are the organizations’ aims?
- 1980
- Sustainable economic development
Alleviation of poverty and improving living conditions
Promote and defend peace and security in the region
Regional integration to create a strong trade bond.
What does NEPAD stand for?
The New Partnership for Africa’s Development
What is the goal of NEPAD?
The organization has the goal of helping Africa, as a continent to develop.
What aspects does NEPAD focus on in terms of development?
— agricultural initiatives to improve agriculture
— improving infrastructure by focusing on: providing running water to households, the distribution of electricity to households and by, improving economic development, bettering roads and quality healthcare and education.
— improving the trade between African countries.
— improvement of skills and job creation in member countries
What does AU stand for?
African Union
When was the AU established and what is their purpose as an organization?
The AU was established in 2001 and has tried to get international aid for African countries from the rest of the world to develop economies growth in the African continent.
True or False: All African countries are part of the AU
False, all except for Morocco fall part of the organization.
What is one of the major initiatives of the AU?
To support the countries in West Africa with the Ebola crisis.
In which year was Cyril Ramaphosa the new chairperson of the AU
2020
Who is the current chairperson of the AU?
Mohamed Ould Ghazouani from Mauritania.
When did South Africa join the BRICS organization?
2011
Which countries friends part of the original BRIC?
Brazil
Russia
India
China
Who are the new additions to the BRICS organization who joined in January 2024?
Egypt
Iran
Ethiopia
Saudi Arabia
UAE
Which country pulled out of of the BRICS organization in December of 2023?
Argentina
Which country pulled out of of the BRICS organization in December of 2023?
Argentina
