Economic Factors Flashcards
What are the key economic indicators?
GDP, inflation, interest rates …..
What is indirect tax?
- Taxes on expenditure/spending
- (HMRC) Her Magisty Revenue Customers
What is direct tax?
Taxes on income and profits.
What is income tax?
- a tax taken out a persons income
- (Those earning more, pay a higher proportion of their incomenin tax)
- direct tax
What is national insurance?
- This is taken as a contribution towards the state pension and treatment under the NHS
- (employer also contributes)
- direct tax
What are the main types of government expenditure?
- health
- welfare
- eductation
- state pension
- environment
- transport
- defence
What is meant by a subsidy?
Payments by the government to suppliers that reduce their costs.
Also known as grants
What are the benefits of subsidies?
- helps business survival
- boost demand during a rececssion
- decreases prices
- helps declining industries
What is the monetary policy?
Manipulation of the level of demand in the economy using the rate of interest.
Controlled by the Monetary Policy Committee (The Bank of England)
What is the fiscal policy?
Economic policy used to influence the level of spending in an economy. It is conducted by the government through taxation and public spending.
Controlled by the government and led by hte chancellor of the Exchequer.
What is supply-side policies?
Supply-side policies aim to improve the economy’s overall productive capacity.
What are interest rates?
The reward for saving and the cost of borrowing expressed as a percentage of the money saved or borrowed.
What are exchange rates?
The value of one currency in terms of another.
Strenghtening exchange rate
If the pound increases in value it is said to strenghten. This means that a pound will buy more of a foreign currency.
Strong Pound Imports Cheap Exports Dear
Weakening exchange rates
If the pound decreases in value it is said to weaken. This means that a pound will buy less of a foreign currency.
Weak Pound Exports Dear Imports Cheap
What is Gross Domestic Product?
The total value of output produced in an economy in a year.
What is economic growth?
The annual percentage change in GDP.
What is the standard of living?
The amount of goods and services a person can buy with their income in a year.
What is a consumer price index (CPI)?
A measure that examines the weighted average of prices of a basket of consumer good/services.
What is a consumer price index (CPI)?
A measure that examines the weighted average of prices of a basket of consumer good/services.
What is inflation?
General tendency of prices in the economy to rise
What causes inflation?
> how popular something is (demand) - high demand prices increase
how much is available (supply) - shortages price rise
cost of productivity
What is demand pull and cost push?
Demand pull - buyers activity is pulling up prices
Cost push - increase in cost pushes the price up
What are the impacts of high inflation?
> makes uk exporters uncompetitive (as other products can be produced in a different country for a cheaper cost)
> can reduce multinational investment in the UK
> creates uncertataround profits
What are factors that determine the value of the pound?
> ‘Hot money”
Foreign investment in the UK
Desire of foreign customers to buy UK exports
What is ‘hot money’?
The flow of money from country to country, which is chasing the highest rate of interest it can possibly get.
What is foreign investment in the UK?
A foreign business wishing to build a factory or office in the UK, will have to use its currency to demand pounds in order to pay the uk construction companies.
What is desire of foreign customers to buy UK exports?
E.g Uk firm sells clothes to a business in Germany, it would want to be paid in pounds not euros.
What is unemployment?
A situation in which people who are able and willing to find work are not able to find employment.
What is the meaning of economically unactive?
Not looking for work
