Economic environment Flashcards
what are the key differences between state-controlled and market economies
state decides what is produced and how it is distributed whereas market economies, the forces if supply and demand determine how resources are allocated.
which international organisation has the role of reducing trade barriers?
The World Trade Organisation exists to promote the growth of free trade between economies, it is therefore called upon to arbitrate when disputes arise.
What is the primary role of the monetary policy committee
primary focus is to ensure that inflation is kept within a government set range, set each year by the chancellor of exchequer , to support the governments economic objectives including those for growth and employment.
what would be the effect of uncontrolled growth in the money supply.
inflation would increase
what are the negative effects of inflation
purchasing power decreases.
what are the principal differences between the retail prices index and the consumer prices index
RPI measures the increase in general household spending, including mortgages and rent payments, food, transport and entertainment. The office for national statistics believes that using RPI is flawed.
CPI excludes depreciation, mortgages. its the standardised method across the EU.
what economic measure is used as an indicator of the health of the economy.
Growth domestic product which measure the output within a country.
what does the balance of payments represent.
its the summary of all the transactions between the UK and the rest of the world. If the UK imports more than it exports then there is a balance of payments deficit. Vice versa.
what is the potential impact of increasing levels of government spending.
excessive government spending can bring about an increase in inflation.
What is the impact of high unemployment levels on the economy.
government spending increases on welfare and tax revenue decreases. growth of the economy slows.
