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Exams > Economics > Flashcards

Economics Flashcards

1
Q

What is meant by money?

A

Money is a commodity that can be used as a medium of exchange for the purchase of goods and services.

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2
Q

What are the various forms of money?

A

Bank notes and coins, commercial bank deposits and central bank reserves.

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3
Q

What are the key functions of money?

A

A medium of exchange
A measure of value
A store of value
A standard for deferred payment.

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4
Q

What is a central bank?

A

The central bank of a country is the monetary authority that oversees and manages the economies money supply and banking.

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4
Q

What is a commercial bank?

A

A commercial bank is a retail bank that provides financial services to its customers e.g savings, bank loans and mortgages.

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5
Q

What are the main functions of a commercial bank?

A

Accepting deposits
Making / approving advances
Credit creation
Cheque clearance

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6
Q

What are the main factors that affect the level of consumer spending in an economy?

A

Interest on savings, rent earned from leasing property, dividends, profit earned from running a business.

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7
Q

How will the spending, borrowing and saving patterns of a young family with two children under the age of 5 compared with those of an old-aged pensioner?

A

The young family will spend more on things such as schooling / education, health, toys and stuff compared to an old pensioner who wouldn’t want to spend as much.

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8
Q

How do spending and saving patterns of low income earners differ from those of high income earners?

A

Low income earners will spend less money compared to high income earners who may spend more money and are able to pay off debt faster.

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9
Q

How does wealth affect a persons level of spending, saving and borrowing?

A

The wealth of an individual is measured by the amount of assets they own minus their liabilities (the amount they owe.) A positive wealth effect causes to spend more.

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10
Q

How do changes in interest rates influence consumer spending, saving and borrowing?

A

Borrowing becomes more expensive

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11
Q

What are the main determinants of the level of savings in an economy?

A

The level of disposable income
Age attitudes towards saving
Confidence levels and interest rates

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12
Q

What factors affect the level of borrowing in an economy?

A

The level of disposable income
Interest rates
Confidence levels
The availability of funds

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13
Q

How do wage and non-wage factor differ, regarding a workers choice of occupations?

A

Wage factors refer to the financial rewards that workers receive in return for their labour services. Non-wage factors can also influence an individuals choice of occupation as they may want to be happy and motivated doing their work.

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14
Q

What are fringe benefits?

A

Fringe benefits are additional benefits, which have a monetary value like health insurance or mobile phones.

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15
Q

How are wages determined?

A

Wages are determined by the interaction of the demand for labour and the supply of labour.

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16
Q

What is meant by the demand for labour, and what are the factors that affect the demand for labour?

A

The demand for labour is the number of workers that firms are willing and able to hire at a given wage rate. The factors (productivity and cost of labour)

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17
Q

What is derived demand?

A

Derived demand means that labour or any factor of production is not demanded for itself but for the good and services it is used to produce.

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18
Q

What is meant by the supply of labour, and what are the factors that affect the supply of labour?

A

The supply of labour refers to everyone in an economy who is of working age and is both willing and able to work at different wage rates. (factors affecting it is labour force participation rate, availability and level of welfare benefits and changing social attitudes.

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19
Q

Why might the supply of labour curve be backward bending after a certain wage rate is reached?

A

The backward bending supply of labour curve, occurs when wage rates rise to a high enough point to allow people to work less and enjoy more leisure hours.

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20
Q

How are wages determined In a market economy?

A

Wages are determined by the interaction of the demand for labour and the supply of labour

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21
Q

How might a national minimum wage affect the demand for and supply of labour?

A

The national minimum wage is the lowest amount a firm can pay its workers as set by the government. Meaning the supply of labour may be low.

22
Q

What are the various factors that influence differences in earnings between workers?

A

Level of skills, the production sector, gender, private or public sector employment and age of the worker.

23
Q

How do the division of labour and specialisation of labour improve productivity and efficiency.

A

It allows workers to focus on one specific task and specialise in that so workers can become experts in their field, skilful and the quality of the product or service increases making it more efficient and increasing productivity.

24
Q

What is meant by a trade union?

A

An organisation which aims to protect the interests of its worker members that is, way and terms and conditions of employment.

25
Q

Why might a worker join a trade union?

A

The negotiate with employers own behalf of their members for better pay and working conditions, can help reduce conflict and develop industrial relations.

26
Q

How do the aims and objectives of employees differ from those of employers?

A

Employers:
-maximise profits
-minimise costs
-maximise sales

Employees
-maximise wages/salaries
-work in a safe healthy environment
-Have good conditions at work

27
Q

What are the main types of trade unions?

A

Craft unions
Industrial unions
“White collar” unions
General unions

28
Q

What are the main roles of trade unions?

A
  • bargaining with employers for pay rises and better terms and conditions

-ensuring members are given legal advice when necessary

-giving support to members

29
Q

What is meant by the collective bargaining process?

A

Collective bargaining is the process of trade union representatives negotiating on behalf of their workers members with employer.

30
Q

What is meant by industrial action and why might it occur?

A

Industrial action refers to measures taken by trade union members

31
Q

What are the different types of industrial actions?

A

strike
work-to-rule
go-slow
sit-in

32
Q

What factors influence the strength of trade unions?

A

Growth in manufacturing jobs in these countries, a widening wealth gap and higher cost of living which have caused worker to petition for higher wages and better working conditions.
(number of members and their degree or unity)

33
Q

What are the disadvantages and advantages of being in trade unions?

A

Disadvantages:
Pay tax to be in union

Advantages:
acting as a communication channel between employers and employees negotiating with employers for better pay and working conditions for their members

34
Q

What are the differences between the primary secondary and tertiary sectors of the economy?

A

The primary sector of the economy contains firms that extract raw materials from the earth - for example, firms involved in fishing, mining and agricultural farming. The secondary sector of the economy contains firms that manufacture goods. The tertiary sector contains firms that provide services to the general public and other firms like retail and accounting services.

35
Q

Why are the primary secondary and tertiary sectors said to be interdependent?

A

Because a firm cannot operate without using goods and services from all three sectors of industry to make and sell its goods or services to the final customer.

36
Q

How does the private sector differ from the public sector?

A

Private sector firms are owned by private individuals and owners, and their main aims is profit maximisation.

Public sector firms are owned by the government and their main aim is to provide a service to the general public.

37
Q

How might the size of firms be measured?

A

Firms can be measured by the number of employees, market share, market capitalisation of a firm and sales revenue of a firm.

38
Q

Why do so many small firms exist?

A

Small firms are able to co-exist with larger firms due to the advantages of being small - for example low set-up costs, profit incentives and being able to provide a personal service.

39
Q

What are the advantages and disadvantages of small firms?

A

Advantages of small firms:
-Few legal formalities exist
-The sole trader is the only owner of a firm and therefore receives all the profits made by the business.

Disadvantages:
-Small firms have limited start up capital
-Statistically, small firms have the largest risk of business failure

40
Q

How does internal growth differ from external growth?

A

Internal growth occurs when firms expand using their own resources. External growth occurs when expansion involves another organisation.

41
Q

What is the difference between a merger and a takeover?

A

A merger occurs when two or more firms join together to form just one firm.

A takeover occurs when a firm is taken over by another firm.
A takeover may be more hostile or the two firms might have agreed to takeover.

42
Q

How do horizontal, vertical and conglomerate mergers differ from each other?

A

A horizontal merger occurs when two or more firms in the same economic sector of an industry integrate.

A vertical merger occurs when integration takes place between two firms from different economic sectors of industry.

A conglomerate merger occurs when two or more firms from unrelated areas of business integrate to create a new firm.

43
Q

What are the advantages and disadvantages of a merger?

A

Advantages:
higher market share
gaining skilled employees
taking advantage of economies of scale

Disadvantages:
there may be a duplication of resources
The newly formed, larger firm may face increasing costs arising from diseconomies of scale.

44
Q

How do economies of scale differ from diseconomies of scale?

A

Economies of scale are the cost saving benefits of large sale operations, which reduce average costs of production.
They can be classified as internal or external economies of scale.
Diseconomies of scale occur when average costs of production start to increase as the size of a firms increase.

45
Q

How do internal and external economies of scale differ from each other?

A

Internal economies of scale are economies of scale that arise from the internal organisation of the business. e.g financial, bulk-buying
External economies o scale are economies of scale that arise from factors outside of the firm e.g the location of the firm.

46
Q

What is a demerger and why might it occur?

A

A demerger occurs when two previously merged firms decide to break up and become two separate firms.

47
Q

What are factors of production and what are the four factors of production?

A

Factors of production are the resources used to produce goods and provide services. The four factors are:

Land
Labour
Capital
Enterprise

48
Q

Why is demand for factors of production a derived demand?

A

Because the demand for factors of production depends on the demand for the goods and services which the factors will be used to produce.

49
Q

What are the factors that determine whether firms are capital intensive or labour intensive?

A

The cost of labour compared to the cost of capital

The size of the market

The firms objectives

50
Q

How does production differ from productivity?

A

Production refers to the total output of goods and services in the production process.

Productivity is a measure of the degree of efficiency in the use of factors inputs in the production process.

51
Q

Why is higher productivity important for an economy?

A

Higher productivity increases the output of goods and services

higher profits
higher wages
economic growth

52
Q

What are the main determinants of productivity?

A

skills and experience
investment
innovation

Exams (4 decks)

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