Economic Issues

Question 1

What is GDP

Answer 1

The total value of output and goods and services in a country in one year

Question 2

Business cycle/trade cycle

Answer 2

The cycle of GPD in an economy

Growth - when the GDP is rising, unemployment is also falling and business usually do well in this time
Boom - this is caused by to much spending, prices rise quickly and their is a lack of skilled workers
Recession - often caused by too little spending this is a period when GDP actually falls business will experience falling demand and workers start to lose their jobs
Slump - a serious and long drawn out recession. Unemployment reaches very high levels and prices may fall many business are unable to survive here

Question 3

Inflation

Answer 3

The increase in the average price level of goods and services over time

Question 4

Unemployment

Answer 4

When people who are willing and able to work cant find a job

Question 5

Economic growth

Answer 5

When a country’s GDP increases more goods and services are produced than in the previous year

Question 6

The effects of unemployment on a business

Answer 6

• business can more easily recruit new workers
• customers have no jobs so they cant buy your products if its high
• low priced goods are more likely to have sales instead

Question 7

The effects of inflation for a business

Answer 7

• business costs will increase so prices have to increase to pay off their costs
  Which will lead to less sales if the business is not careful
• non essential products will likely to lose sales more rapidly
• essential products will still have sales

Question 8

Government economics objectives

Answer 8

• low inflation , business are more likely to expand selling more exports
• low unemployment, employed people are more likely to produce goods and services for exports
• economic growth,
• balance of payments (imports and exports)

Question 9

Imports vs exports

Answer 9

Exports are goods and services sold from one country to other countries
Import are goods and services bought in by one country from other

Question 10

Exchange rate

Answer 10

Exchange the price of one currency in terms of another for example £1: $2 (one pound = two dollars)

Question 11

Exchange appreciation

Answer 11

When the pound has appreciated this means that the pound is worth more in terms of another currency

£1 = $2
£1 = $2.50

Question 12

Exchange rate depreciation

Answer 12

When the pound has depreciated means it has lost worth in terms of another currency

£1 = $2
£1 = $1.50

Question 13

The effects of exchange rates

Answer 13

£1 = $2
£1 = $2.50

When the pound has appreciated exports are now more expensive for the USA and Imports are more cheaper for the UK

£1 = $2
£1 = $1.50

When the pound has depreciated, exports are now more cheaper for the USA and imports are more expensive for the UK

Question 14

Direct taxes and indirect taxes

Answer 14

direct taxes - when the government taxes your income
Indirect taxes - when the government tax goods and services that customers buy

Question 15

Tariffs and quotas

Answer 15

Tariffs - a tax on an imported good so customers are more likely to buy locally
Quotas - a physical limit on the quantity of a product that can be brought in

Question 16

The effects of tariffs and quotas for business

Answer 16

• local businesses will benefit if they are competing with imported goods
• business will have higher costs if they have to import raw materials may encourage them to buy locally which may be lower quality
• other countries may add tariffs and quotas in retaliation

Question 17

Changes in government spending, what does the government use their tax revenue on

Answer 17

Governments like to spend their their revenue on programmes that boost the economy and maximise economic growth as it creates more demand in the economy, more jobs and GPD will increase
Some of the programmes they spend on is
- education
- health
- defence
- law and order
- transportation