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Economics > Economics > Flashcards

Economics Flashcards

1
Q

Define dependency ratio (2)

A

proportion of population that has to be supported by the labour force

Number in dependent age groups/Number in labour force x 100

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2
Q

How does PED change in an inward shift in demand

A

increases PED as consumers are more sensitive since they have less of a desire to buy more

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3
Q

How does the export of primary products cause problems for countries with low economic devlopment (3)

A

low economically developed countries tend to export primary products

price of primary products tends to fall

countries receive less for exports

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4
Q

Define monetary inflation

A

rise in price from excessive growth of money supply

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5
Q

Explain cost-push inflation

A

rise in price by higher cost of production

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6
Q

Causes of a current account deficit (6)

A

high exchange rate

high inflation

decreased productivity

increased domestic GDP

decreased foreign GDP

increased trade restrictions

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7
Q

Positive consequences of economic growth (3)

A

improve living standards

government tax revenue increase

political/economic standing increases

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8
Q

Define secondary income as a component of the current account (3)

A

transfers of money, goods + services not in return for anything else

between residents and non-residents

e.g (migrant workers sending money to families, government aid)

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9
Q

Define commercial banks

A

banks which make profit by providing banking services to households/firms

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10
Q

Define tax burden

A

amount of tax paid

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11
Q

Why is 0% unemployment impossible (2)

A

workers will always be changing jobs

workers can be unemployed for short periods

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12
Q

Define indirect tax

A

taxes on expenditure

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13
Q

Disadvantages of protectionism in employment and trade position (2)

A

risk of retaliation - may sell fewer exports (employment will not improve)

reducing imports of raw materials can increase domestic firm’s costs of production

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14
Q

Government reaction to MNCS (2)

A

positive - generate jobs, increase output

negative - domestic firms can become out of business

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15
Q

Define a piece rate system

A

wages based on amount workers produce

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16
Q

Negative impact of direct taxes (3)

A

may discourage effort

may discourage enterprise

may prevent people entering labour force

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17
Q

Causes of demand of currency (7)

A

foreigners wanting to buy host’s goods/services

foreign branches of host’s MNC sending back profits

host workers working abroad –> want to send money back home to relatives

Foreign direct investment of foreign firms into host country

foreign governments wanting host currency as reserves

speculators buying host currency believing it will rise in value

foreign firms/individuals wanting to buy shares in host country’s firms + save in host bank

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18
Q

How economic development in one country can promote economic development in another country (5)

A

country A economy grows –> will be able to provide more foreign aid to country B

population A income increases –> more people will buy imports from country B + more tourism to B

country A firms increase profits –> may set up units abroad

improved education in A –> more concerned on other economies –> pressure government to give more foreign aid

country B develops –> requires less aid, able to buy more products from A

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19
Q

Define capital

A

man-made goods used to produce other goods/services

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20
Q

Consequences of deflation (3)

A

good - increased output/employment

bad - decreased output/employment

bad - increase debt value

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21
Q

Arguments trade unions put up (4)

A

increases productivity

firms with increased profits can afford higher wages

workers should receive pay rise to keep pay in line with similar workers

workers need high pay to match higher cost of living

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22
Q

Define external diseconomies of scale

A

higher long term average costs from industry growing too large

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23
Q

Reasons why aggregate supply may decrease (3)

A

rise in raw material costs

trade unions

war/natural disaster/pandemic

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24
Q

Standard of living indicators for multidimensional poverty index (3)

A

cooking fuel

water

electricity

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25
Q

Define enterprise (2)

A

risk taking and decision making required to set up a business

managed other 3 factors of production

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26
Q

Net immigration definition

A

more people coming to live in the country than people leaving the country to live elsewhere

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27
Q

Define a conglomerate merger

A

merging with firm producing different products

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28
Q

3 types of unemployment (3)

A

Frictional

Structural

Cyclical

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29
Q

Determinants of demand (7)

A

income

price of substitutes

price of complements

advertising campaigns

changes in tastes/fashions

changes in size of population

changes in age of population

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30
Q

Define perfectly price inelastic (D)

A

Quantity demand remains constant whatever the price

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31
Q

Define tariff

A

tax on imported products –> increase its price

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32
Q

Define subsidy

A

payments by government to producers per unit of good produced

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33
Q

Define demand

A

the quantity that consumers are willing and able to purchase at any given price

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34
Q

What does a point inside a PPC curve mean

A

inidicates unemployed resources

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35
Q

Define incidence of taxation

A

distribution of burden of indirect tax

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36
Q

Shape of curve for average fixed costs

A

downwards sloping exponential

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37
Q

Examples of capital (2)

A

factories

machinery

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38
Q

Disadvantages of loans for economic development (2)

A

project may not be as successful as suspected –> debt

loan money can be used for unprofitable projects, military, corruption

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39
Q

Determinants for elasticity of demand for labour (4)

A

proportion of labour costs in total costs

ease of labour to be substituted for capital

elasticity of demand for product produced

time period

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40
Q

Reasons for levying taxation (5)

A

redistribute income

discourage consumption of demerit goods

raise costs of firms that create external costs

discourage consumption of imports/protect domestic firms

influence economic activity

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41
Q

(Gross) investment definition

A

spending by firms on capital

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42
Q

Define fixed costs

A

costs not affected by output

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43
Q

Examples of the tertiary sector (3)

A

banking

tourism

hospitality

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44
Q

Define consumer prices index (CPI)

A

measure of weighted average change of prices of basket of good/services over time

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45
Q

How protection protects infant industries (2)

A

prevents foreign competition from eliminating them from the start

allows them to grow, have economies of scale, become competitive

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46
Q

Internal migration

A

workers migrating from rural to urban areas in search of better jobs + high incomes

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47
Q

Define the secondary sector

A

processing of raw materials into finished/semi-finished goods

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48
Q

Define excise tax

A

taxes on certain domestically produced goods

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49
Q

Define a foreign exchange rate

A

price of one currency in terms of another currency

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50
Q

Name wage factors (4)

A

wages

overtime pay

bonuses

commision

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51
Q

Define specialisation at an international level

A

countries concentrating on producing products they are best at making + in high demand

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52
Q

Define private benefits

A

benefits of consumption enjoyed by consumers

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53
Q

State a factor which determines PES (T)

A

time taken to produce it - Producers are able to respond immediately to a change in price

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54
Q

Why do governments aim for price stability (3)

A

ensures economic certainty

prevents domestic firms from losing competitiveness to foreign ones

firms/households can plan ahead

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55
Q

Factors that influence value of country’s exports + imports (6)

A

inflation rate

exchange rate

productivity

domestic GDP

foreign GDP

trade restrictions

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56
Q

Why do governments aim for low unemployment (3)

A

unemployment is a waste of resources

unemployed suffer disadvantages

government tax revenue waste on unemployed

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57
Q

Define regional unemployment

A

unemployment caused by a decline in job opportunities in an area

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58
Q

Define a free good (2)

A

good which does not use up any resources in production

has no opportunity cost

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59
Q

Define balance of payments

A

record of country’s economic transactions with other nations

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60
Q

Define inheritance tax

A

tax on wealth which is passed on

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61
Q

Define a natural monopoly

A

industry where single firm can produce at lower average cost than other firms because of economies of scale

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62
Q

Determinants for quantity of labour (5)

A

population size

age structure of population

retirement age

school leaving age

attitude ot working women

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63
Q

Average variable cost curve

A

U-shaped

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64
Q

Advantages of division of labour (5)

A

workers become very good at doing same task over and over again

trained more efficiently

less time consumed as workers don’t have to move from one job to another

can earn high wages from their skills being in high demand

workers can pursue their specific interests

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65
Q

Define unemployment

A

being without a job while willing/able to work

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66
Q

Negatives of International Specialisation for economy (2)

A

over-reliance on other country’s demand

over-reliance on other country’s supply

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67
Q

Define liquidity

A

being able to quickly turn an asset into cash without a loss

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68
Q

How does interest rate affect aggregate demand (3)

A

loan value increases –> consumer expenditure decreases

more expensive for households/firms to borrow –> less borrowing

higher interest rate –> increased incentive/reward to save

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69
Q

What does a linear PPC curve show

A

constant opportunity cost

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70
Q

How increasing range of economic + social choices benefit the government (3)

A

increased freedom

increased access to healthcare + education –> improve productivity

improve quality of life

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71
Q

Define the primary sector (2)

A

extraction/collection of raw materials

first stage of production

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72
Q

Characteristics of money (7)

A

Durable

Portable

Divisible

Homogenous - identical

Recognizable

Limited in supply

Generally accepted

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73
Q

Market economic system advantages (4)

A

consumers have greater choice - consumer sovreignty + competition

incentives encourage hard work and enterprise

efficient allocation of resources

lowers price and higher quality

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74
Q

Define expansionary fiscal policy (3)

A

increasing aggregate demand

decreasing taxation

increasing government spending

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75
Q

Health indicators for multidimensional poverty index (2)

A

nutrition

child mortality

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76
Q

Define savings

A

disposable income which is not spent

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77
Q

What does a outward shift in the PPC curve mean (2)

A

increase in quantity/quality of resources

increase in productive potential

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78
Q

Why may governments want supply to be elastic

A

more effective in encouraging production

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79
Q

Causes of economic growth (2)

A

increase in aggregate demand

quantity/quality of resources increases

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80
Q

Define trade in goods deficit

A

expenditure on imported goods > revenue from exported goods

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81
Q

Determinants for the size of firms (5)

A

age of firms

availability of financial capital

type of business organisation

internal economies/diseconomies of scale

size of market

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82
Q

Purpose of bonuses (2)

A

reward workers who contribute to higher profits

provide incentive for workers

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83
Q

Measures to correct current account deficit (5)

A

import restrictions

subsidise exports

decreasing exchange rate

reduce consumer spending - increasing income tax, interest rate –> reduce imports + incentivise domestic firms to export since harder to sell domestically

supply side policies - reduce labour costs + increase product quality

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84
Q

Define factors of production

A

resources used to produce goods

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85
Q

What does a bowed out PPC curve show

A

increasing opportunity cost

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86
Q

Define budget surplus

A

when government revenue > government spending

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87
Q

Disadvantages of foreign aid (4)

A

can create economic + political dependency

postpone necessary reforms - less urgency

bring in useless technology - insufficient training to use + lack of supporting infrastructure

may be used on non-profitable projects + corruption

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88
Q

Define profit satisficing (2)

A

Making just enough dividends to keep shareholders happy

While pursuing other objectives

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89
Q

Factors influencing demand for capital (5)

A

price of capital goods

price of labour

interest rate

technology

expectations on future

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90
Q

Government measures to address market failure (6)

A

subsidy - increse production of goods as firms more willing to produce with lower costs

tax - decrease production of goods as firms less willing to produce with greater costs

competition policy - promotes competitition to prevent firms abusing their power

fines and restriction placed on firms which exceed pollution level

direct provision - governments can provide goods they think are essential or beneficial

fairness - financial assistance to the poor and balance out income levels

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91
Q

Define average variable costs (2)

A

variable cost per unit of output

TVC/ouput

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92
Q

Determinant of PED (7)

A

addictiveness

time

Brand loyalty

Income

Substitutes

Necessity/Luxury

Ease and Cost of switching substitute

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93
Q

Firm objectives (5)

A

survival

growth

social welfare

profit satisficing

profit maximisation

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94
Q

Define “lender of last resort”

A

central banks lend to banks short on cash

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95
Q

Define labour

A

human effort used in producing goods

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96
Q

Define average fixed costs (2)

A

fixed costs per unit of output

total fixed costs/output

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97
Q

Define full employment

A

no cyclical unemployment

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98
Q

Define capital gains tax

A

tax on profits made on sold assets

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99
Q

Explain frictional unemployment

A

temporary unemployment from workers being in between jobs

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100
Q

Define employment

A

being involved in a productive activity which a payment is received

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101
Q

Define savings ratio

A

proportion of disposable income saved

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102
Q

Define rationalisation

A

eliminating unnecessary equipment to make firm more efficient

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103
Q

Causes of deflation (4)

A

good - tech advances

good - labour productivity increases

bad - recession

bad - decreased demand from consumers waiting for prices to go down more

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104
Q

Positive effects of an increase in population (4)

A

population is below optimum = make better use of its resources

market size will increase

extra demand

increase in labour force

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105
Q

Define import substitution

A

protection of domestic industries against foreign competition by the government

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106
Q

Why will firms want their supply to be as elastic as possible

A

profits will be higher as they can react more quickly to price increases

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107
Q

Define the quaternary sector (2)

A

knowledge based service industries

information technology

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108
Q

Define comparative advantage

A

can produce at a low opportunity cost

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109
Q

Measures to increase living standards (6)

A

improving education + training

reducing unemployment

improving healthcare

increasing/improving housing stock

improving working conditions

reducing pollution

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110
Q

Disadvantage of labour market reforms as a supply-side policy (3)

A

firms may not train workers as much if they think workers will not be with them for long

reduce trade union benefits

could give too much power to employers

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111
Q

Define contractionary monetary policy (3)

A

decreasing aggregate demand

decreasing money supply

Increasing interest rate

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112
Q

Define fiscal policy (3)

A

influencing aggregate demand

using government spending

using taxation

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113
Q

Education indicators for multidimensional poverty index (2)

A

years of schooling

no. of children enrolled

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114
Q

Define a market economic system (3)

A

system where resources are privately owned

resources allocated by market forces

firms decide what to produce based on consumer demand

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115
Q

Policies for deflation

A

expansionary fiscal/monetary policy

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116
Q

Positive impact of indirect taxes (6)

A

easy to collect/adjust

less disincentive to effort

can be used selectively

harder to evade

more choice - tax depends on what they buy

source of tax revenue

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117
Q

How inflation influences a country’s exports + imports (2)

A

high inflation = civilians will buy more imports + firms will have difficulty exporting

low inflation = increase international competitiveness –> increase exports + reduce imports

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118
Q

How does education increase wage rate

A

increases their demand as they are now more skilled

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119
Q

Explain structural unemployment (2)

A

unemployment caused by decline in industries/occupation

unemployment from changes in demand/production method

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120
Q

Advantages of capital intensive production (4)

A

gains technical economies of scale

more consistent

production maintained for long time

no industrial action

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121
Q

Measures to promote economic development (4)

A

Import substitution

expose domestic firms to market forces

attract MNCs (multinational corporations)

borrowing from abroad

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122
Q

Define microeconomics (2)

A

study of behaviour of individuals and firms

studies performance of individual markets

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123
Q

Negatives of International Specialisation for producers (2)

A

Dependent on other country’s demand - fall in demand abroad could result in unemployment + less output

Dependent on other country’s supply - fall in supply abroad could lower output

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124
Q

Examples of primary sector industries (3)

A

agriculture

mining

fishing

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125
Q

Negative effects of an increase in population (6)

A

famine - overpopulation + low agricultural productivity

restrictions on living standards - resources used on living standards are used to satisfy needs of extra population

overcrowding

environmental pressure

employment - government has to devote more resources to training the new increase of people

balance of payment - rise in imports

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126
Q

How does a country determine what it is best at producing

A

quantity and quality of resources

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127
Q

Changes in employment pattern (5)

A

women in labour force

full/part-time

informal/formal economies - informal tend to have worse quality

employment quality

flexible labour force

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128
Q

Disadvantages of fixed exchange rates (2)

A

central banks has to use large amount of foreign currency to maintain value

policy measures may collide with government intentions –> e.g increase interest rate to decrease value of currency may slow economic growth

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129
Q

Disadvantages of protectionism of declining industries

A

producers may resist removal of protectionism

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130
Q

Factors that affect labour market participation rate (5)

A

wages - high wages = more work

attitude towards working women

availability of care for children/elderly

proportion of people who go into higher education

attitude towards disabled

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131
Q

Define foreign direct investment

A

setting up/buying production units in another country

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132
Q

Measures of economic development (2)

A

real GDP per head

HDI

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133
Q

Disadvantages of protectionism of infant industries (2)

A

difficult to identify infant industries with potential

infant industries may be reliant on protection

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134
Q

Define unemployment rate (2)

A

percentage of labour force who are willing and able to work but are without jobs

Unemployment/Labour Force x 100

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135
Q

Disadvantages of bonuses

A

can cause resentment for not receiving bonus

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136
Q

Define specialisation

A

concentration on particular products/tasks

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137
Q

Define productivity (2)

A

output per factor of production per hour

measure of efficiency of FoPs

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138
Q

Define net migration

A

difference between immigration and emigration

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139
Q

Define normal good

A

product which demand increases when income increases

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140
Q

Define mixed economic system (2)

A

economy where both public and private sectors play important roles

economy which posseses both qualities of a market economy and a planned economy

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141
Q

Define dumping

A

selling products in a foreign market below cost of production

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142
Q

Name the 4 main types of trade unions

A

Craft Unions

General Unions

Industrial Unions

White collar unions

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143
Q

Define appreciation

A

rise in value of floating exchange rate

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144
Q

Benefits of overtime pay (3)

A

employers can respond to higher demand without hiring new workers

employees can earn more

easier for employers to reduce overtime than fire workers

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145
Q

Improve quality of enterprise (4)

A

better education

better training

better healthcare

more experience

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146
Q

Disadvantage of claimant count

A

those without unemployment benefits could still be unemployed

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147
Q

Advantages of floating exchange rates (2)

A

help to lower gap between export revenue + import expenditure - high exports –> appreciation increase export prices + decrease import prices –> exports decrease + imports increase

allows government to focus on other objectives instead of influencing price of currency

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148
Q

Consequences of ageing population (5)

A

rise in dependency ratio

change in labour force - loss of experienced workers

higher demand for healthcare/welfare services

increase cost of pensions

change in pattern of demand

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149
Q

Define labour intensive production

A

production process that uses high proportion of labour

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150
Q

Define economically active (2)

A

being a member of the labour force

unemployed + employed

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151
Q

Advantages of external growth (2)

A

immediate increase in market share/income/assets

gain skills of staff working for other firm

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152
Q

Define embargo

A

ban on imports or exports

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153
Q

Factors influencing production decisions (5)

A

time/mobility of FoPs

balance of FoPs

productivity of FoPs

cost of FoPs

Risk of FoPs

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154
Q

Causes of supply of currency (7)

A

host civilians wanting to buy foreign goods/services

foreign MNCs in host country, sending profits home

foreigners in host country, sending money home

host firms wanting to buy foreign firms + set up production units in other countries

host firms/individuals wanting to buy shares in foreign companies + save in foreign banks

host government wanting to hold foreign currency in reserves

speculators selling host currency believing it will fall

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155
Q

Consequences of unemployment on firms (4)

A

low demand for firm products

decreased worker bargaining power

worker flexibility

greater availability of workers

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156
Q

Define trade in services

A

revenue from exported services > expenditure on imported services

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157
Q

Define economic development (5)

A

improvement in economic welfare

improving living standards

reducing poverty

increasing range of economic + social choices

increasing freedom + self-esteem

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158
Q

How land reform reduces poverty (2)

A

make ownership of land more equal

may increase output + living standards

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159
Q

Mixed economy benefits (4)

A

governments can encourage consumption of merit goods

governments can dissuade consumption of demerit goods

develop more resources to capital goods

creates more even distribution of income

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160
Q

Define gross domestic product (GDP)

A

total output of country

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161
Q

Disadvantages of labour intensive production (3)

A

productivity can vary (absenteeism)

shortages of skilled labour

worker more costly as requires wage and non-wage benefits

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162
Q

Name limiting factors of jobs (6)

A

opportunity cost

education/qualifications

poverty

discrimination

age

physical ability

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163
Q

Define occupational mobility

A

ability to move resource between different uses

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164
Q

Define minimum price (2)

A

encourage production of product

set above equilibrium

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165
Q

Macroeconomic aims of government (5)

A

Economic growth

Low Unemployment

Price Stability

Balance of Payments Stability

Redistribution of income

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166
Q

Explain demand-side deflation

A

lack of demand

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167
Q

3 forms of frictional unemployment

A

search - spend time looking for suitable job

casual - out of work between periods of employment

seasonal - workers not in demand in certain periods of year

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168
Q

Factors of saving (4)

A

income - increase in disposable income –> increase in amount saved

rate of interest - increase in interest –> save more since cost of borrowing increased

age - young/old save less than middle aged

social attitude - attitude to saving

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169
Q

Define credit items

A

money coming into the country

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170
Q

Define revaluation

A

rise in the value of a fixed exchange rate

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171
Q

Factors of spending (6)

A

disposable income

wealth - high wealth is more secure, generates income, wealth can affect confidence

confidence - more confident about future income likely to spend more

rate of interest - borrowing can become less expensive hence encourage spending

improvements in tech - new products encourage people to replace old

income distribution - more even will increase spending

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172
Q

Define depreciation

A

fall in value of floating exchange rate

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173
Q

Examples of variable costs (3)

A

steel

raw materials

workers

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174
Q

Causes of market failure (7)

A

failure to take into account all costs/benefits

overconsumption of demerit goods

underconsumption of merit goods

lack of competition - monopolies

immobility of resources

lack of information - may pay too much

public goods not provided

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175
Q

How can increasing the productive potential of an economy be achieved

A

rise in quality/quantity of FoPs

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176
Q

Define trade in goods surplus

A

revenue from exported goods > expenditure on imported goods

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177
Q

Negatives of International Specialisation for consumers (3)

A

Monopoly - one country can gain control of global market of product, may abuse power to limit suppply + increase price

lack of quality control - firms from abroad may have different safety rules which could endanger consumers

Potential supply side shocks - over-reliance on single supplier could cause products to be unavailable due to certain events

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178
Q

Market economic system disadvantages (3)

A

output not reflect full costs/benefits

private sector firms can abuse their power (monopoly)

causes income inequality

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179
Q

Incidence of taxation for products with elastic demand (2)

A

producers bear most of tax

producers cant pass on tax as it will lower demand significantly

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180
Q

Explanation of deregulation as a supply-side policy (2)

A

increase competition cuz more firms in market

increase efficiency –> lowers cost of production + prices

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181
Q

Define labour mobility (2)

A

ability of labour to move locations

ability of labour to switch between different occupations

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182
Q

Define managerial economy of scale (3)

A

employing specialised managers

managers more efficient

lowers average total costs

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183
Q

Positive impact of direct taxes (3)

A

may encourage people with fixed financial commitments to work harder

redistribute income

good sources of tax revenue

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184
Q

Causes of changes in the supply of labour (5)

A

change in labour force

change in qualifications to do job

degree of risk

change in non-wage benefits of job

change in (non)wage benefits of other jobs

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185
Q

Disadvantages of globalisation (3)

A

risk of external shocks (e.g recession in one country can affect other)

government policy restricted - may fear loss of company through trade restrictions

structural unemployment - may lose jobs due to increased popularity of one market

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186
Q

Define strike

A

workers not working to put pressure on employer to agree to their demands

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187
Q

How MNCs encourage economic development (3)

A

increase employment

train + educate workers

bring in new technology

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188
Q

Harmful effects of inflation (5)

A

decreased value of money - bad for spenders/savers, those with low bargaining power

extra costs on firms

uncertainty for firms/households

harm competitiveness of domestic firms with foreign ones

can cause fiscal drag - tax not adjusted to inflation–>decreased disposable income for people

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189
Q

Define labour market participation rate

A

proportion of working age population who are in the labour force

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190
Q

Why is supply for labour more elastic in the long run (2)

A

more time for workers to notice change in wages rate

more time for workers to gain qualifications

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191
Q

How trade restrictions influences a country’s exports + imports

A

strict trade restrictions –> exports decrease

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192
Q

Causes of external economies of scale (4)

A

skilled labour force

good reputation - improve customer trust in firm

improved infrastructure

specialist suppliers of raw materials

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193
Q

Define absolute poverty

A

a condition where peoples’ incomes are too low to enable them to meet their basic needs

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194
Q

Methods of protectionism (7)

A

Tariff

Quota

Embargo

Exchange Control

Quality Standards

Paperwork

Subsidies

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195
Q

Define capital productivity (2)

A

average output per machine

total output/number of machines

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196
Q

Define trade in goods as a component of the current account

A

value of exported and imported goofs

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197
Q

Why are workers paid less in the primary sector

A

workers have less skills/qualifications

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198
Q

Causes of poverty (5)

A

unemployment

being in low-paid work

lack of skills/education

rising cost of living

being ill/growing old

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199
Q

How governments influence distribution of income (4)

A

taxation

provision of cash benefits

provision of freed state education + healthcare

using labour and macroeceonomic policies

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200
Q

Define white collar unions

A

represent white collar professions

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201
Q

Causes of changes in exchange rate (4)

A

change in export revenue - change in demand for currency –> exchange rate increase/decrease

change in import expenditure - change in supply for currency –> exchange rate increase/decrease

foreign direct investment

speculation

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202
Q

Define external economies of scale

A

lower long term average costs from industry growing in size

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203
Q

How protection protects strategic industries (2)

A

essential for survival + development of country

provide protection to ensure consistent production + promote economic development

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204
Q

How quality standards ensure protectionism (2)

A

may require imports to reach high standards

dissuade other countries from selling or increase costs + prices

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205
Q

Factors influencing death rate (4)

A

nutrition

medical care

involvement in military action

lifestyle

206
Q

Define private sector

A

part of economy owned/controlled by individuals

207
Q

Problems facing economies with low economic development (7)

A

high growth of population - dependency ratio

high international debt - countries pay loans rather than focusing on improving

lack of investment on human capital + capital goods - lowers productivity

emigration of skilled workers - brain drain

export of primary products

trade restrictions on products

unbalanced economies

208
Q

Define collective bargaining

A

process which representative of workers negotiate with employers’ associations

209
Q

Define quota

A

limit placed on quantity of exports/imports

210
Q

Why might producers want supply to be elastic

A

higher profits as they can adjust supply in response to price/demand

211
Q

How exchange control ensure protectionism

A

restricting availability of foreign currency

212
Q

What might trade unions pressure governments about (4)

A

political representation of workers

maternity/paternity rights

minimum wage

tax breaks for low income workers

213
Q

Benefit of claimant count (2)

A

cheap

quick

214
Q

Define financial economy of scale

A

banks charge lower interests rates to larger firms as they less risky

215
Q

Reasons why governments aim for economic growth (3)

A

producing more will increase living standards

employment will increase

country trade improved if output can be exported

216
Q

Define optimum population (3)

A

number of people

when combined with other resources of land, capital and existing technical knowledge

gives the maximum output of goods/services per head of population

217
Q

Define infinitely price inelastic/perfectly price elastic (D)

A

Unlimited demand but only at one price

218
Q

Disadvantage of deregulation as a supply-side

A

possibility of monopoly forming

219
Q

Regulation disadvantages (2)

A

regulations have to be followed –> expensive and time consuming

government can become unpopular

220
Q

Define macroeconomics

A

study of whole economy

221
Q

Causes of current account surplus (6)

A

low inflation

low exchange rate

high productivity

low foreign GDP

relaxed trade restrictions

high income + profit earned abroad

222
Q

Why may people borrow (3)

A

financial difficulties

car/house/holiday

education/healthcare

223
Q

2 types of structural unemployment

A

regional unemployment

technological unemployment

224
Q

How foreign GDP influences a country’s exports + imports (2)

A

foreign income increases –> foreigners buy more products

exports increase

225
Q

Explain supply-side deflation (2)

A

lower costs of production

improved productivity - unit costs fall

226
Q

Disadvantages of horizontal integration (3)

A

different business methods

decrease communication (cause diseconomy of scale)

employees can be fired

227
Q

Negative consequences of economic growth (4)

A

depletion of natural resources/pollution

inflation - increased demand –> increase prices

imports can be > exports

inequitable distribution of income

228
Q

Define internal economies of scale

A

lower long term average costs from firm growing in size

229
Q

Define potential economic growth

A

economy’s productive capacity

230
Q

Limitations of GDP as a measure of living standards (2)

A

does not mention degree of income inequality

does not measure external costs

231
Q

Causes for external diseconomies of scale (3)

A

traffic of transport used by industry = increased traffic costs

large industries may attract government regulation

more demand for skilled labour = increased wages

232
Q

Effect of maximum price (3)

A

market disequilibrium - shortage

rationing - limit on amount to be consumed

queuing - first come first serve

233
Q

Advantages of internal growth (3)

A

owners understand strength/weakness of firm

less debt (uses own profits for growth)

workers more motivated - have been part of firm for long time

234
Q

Disadvantages of trade union membership

A

industrial action can decrease productivity

235
Q

Effect of a increase in exchange rate on export and import prices (3)

A

increase price of exports - host goods will be more expensive in relation

decrease price of imports - host population will demand more imported goods

export revenue decrease + less exports sold

236
Q

Define proportional tax

A

tax which takes same percentage of income from all taxpayers

237
Q

How exchange rate influences a country’s competitiveness

A

decrease in exchange rate –> country’s products more attractive abroad

238
Q

Define consumption

A

expenditure of households on consumer goods and income

239
Q

How protectionism protects industries from dumping (3)

A

may drive domestic firms out of market

will benefit consumers in short-term (low prices)

may result in less efficient allocation of resources + firm becoming monopoly

240
Q

Advantages of International Specialisation for consumers (3)

A

Lower prices - more productive + economies of scale –> lower costs

High quality - specialisation results in repetition + getting better at producing product which increases quality

Better living standards - specialised countries can trade with others –> consumers can enjoy more variety of goods

241
Q

Define aggregate supply

A

total amount of goods/services that domestic firms are willing to supply at a given price level

242
Q

How to increase quantity of entrpereneurs (3)

A

good education system

lower taxes on firm’s profits

reduce government regulations

243
Q

Define a floating exchange rate

A

an exchange rate in which price is determined by market forces

244
Q

Negative consequences of a current account deficit (3)

A

decreased aggregate demand

output + employment lower than possible

deficit due to lack of competitiveness - may continue for long time

245
Q

Define monopoly

A

a single seller in the market

246
Q

State the PED for an unitary elastic graph

A

1

247
Q

Effect of a change in exchange rate on macroeconomy (3)

A

increased exchange rate –> increase aggregate demand for domestic goods

will increase output + employment (economic growth)

depreciation causes inflation - imported raw material will be more expensive (costs) –> increase prices + cause inflation

248
Q

Calculating nominal GDP for another year

A

nominal GDP in base year x price index in base year/price index in present year

249
Q

Function of commercial banks (4)

A

accept deposits - keep money safe

lend money

provision of foreign currency

advice with financial matters

250
Q

Define strategic industries

A

important industries for economic development/safety of country

251
Q

Define progressive tax

A

tax which takes larger percentage of income from rich

252
Q

Policies to control demand-pull inflation

A

contractionary fiscal/monetary policy

253
Q

Advantages of labour intensive production (3)

A

can provide new ideas

can provide personal service to consumers + respond to consumer feedback

number of workers can be changed with demand

254
Q

Define primary income as a component of the current account (2)

A

income earned by firms (profits, dividends) + individuals (wages, fringe benefits) working in different countries

e.g (MNC sending profits back to host)

255
Q

Define PPC curve (2)

A

curve that shows maximum possible output of 2 different goods/services that can be produced with given resources

illustrates opportunity cost

256
Q

Define real income

A

income adjusted for inflation

257
Q

Why is demand for labour more elastic in the long run

A

more time for firms to change production methods

258
Q

Disadvantages of external growth (3)

A

differing business methods

more responsibility for owner

merge may be outside owner experience

259
Q

Functions of money (4)

A

medium of exchange - allows people to buy and sell

store of value - can be stored

unit of account - place value on something

standard of deferred payments - allows borrowing and lending

260
Q

Incidence of taxation for products with elastic supply

A

more of tax borne by consumers

261
Q

Define a central bank (3)

A

government owned bank

provides banking services to government/commercial banks

operates monetary policy

262
Q

How economic growth reduces poverty (2)

A

increase in aggregate demand

will increase output + create jobs

263
Q

Define Free Trade

A

when there are no restriction on products bought abroad or sold to other countries

264
Q

Define monetary policy (4)

A

influencing aggregate demand

using money supply

using interest rate

using exchange rate

265
Q

Methods for calculating GDP (3)

A

adding output of all industries in country

income earned in producing output

aggregate demand

266
Q

Disadvantage of subsidies as a supply-side policy (2)

A

opportunity cost of gov. spending

firms may be dependent on subsidies

267
Q

Define debit items

A

money leaving the country

268
Q

Define public goods

A

a product which is non-excludable and needs to be provided by government

269
Q

How to improve quality of labour (4)

A

better education

better training

more experience

better healthcare

270
Q

How can a government ensure that it achieves all its macroeconomic aims through supply side policies (3)

A

increasing number of policies

have as much accurate information as possible

implement policies quickly

271
Q

Determinants for demand of workers (5)

A

productivity

price of output

cost of capital

demand of product

size/profitability of firm

272
Q

Positives of a current account deficit (4)

A

deficit caused by exchange rate may be short term - market forces will eliminate deficit

deficit caused by changes in income/GDP likely to be short-term - recessions will not last long

imported goods (raw materials) used for production

deficit caused by primary + secondary income leaving country –> suggests that foreign MNCs profiting and sending money back + migrant workers earning high wages and sending money back

273
Q

Define “derived demand”

A

demand for workers coming from demand of goods produced

274
Q

Why might a government need to know the PED of a good (3)

A

discourage/encourage consumption of certain good

more successful if demand elastic - change in price cause greater change in quantity demanded

less successful if demand inelastic - change in price cause smaller change in quantity demanded

275
Q

Advantages of conglomerate integration (3)

A

allows for risk diversion

gains synergies - different firms can benefit from each other

form of investment - profit can be used for investment

276
Q

How does supply-side policy influence government macroeconomic policies (3)

A

output + employment increase without inflation

produces better quality/cheaper products

increases exports + reduces imports

277
Q

Measures to correct a current account surplus (2)

A

appreciation + revaluation

expansionary fiscal + monetary policy –> increase demand for imports

278
Q

Definition of maximum price (2)

A

price set below equilibrium price

allows consumers to be more willing/able to buy certain product

279
Q

Define industrial unions

A

represent workers in one industry

280
Q

What does a movement along a PPC curve mean (2)

A

shows reallocation of resources

opportunity cost involved

281
Q

Define rate of interest (2)

A

charge for borrowing money

payment for lending money

282
Q

How to measure unemployment (2)

A

claimant count - count number of people with unemployment benefits

Labour force survey measure - use survey to count people who feel unemployed

283
Q

Define inferior good

A

product which demand decreases when income increases

284
Q

Define a fixed exchange rate (2)

A

an exchange rate whose values is set at a particular level in terms of another currency or currencies

central bank will buy or sell currency to maintain value

285
Q

Qualities a good tax should possess (6)

A

equity

easy to understand

easy to pay

cost of collecting tax < tax revenue

tax should be able to change if economic activity changes

tax should improve performance

286
Q

Positive effects of internal migration (2)

A

supply growing industries –> better allocation of resources

can send back money to relatives –> raise living standards in rural areas

287
Q

Incidence of taxation for products with inelastic demand (2)

A

consumers bear most of tax

producers can pass on most of tax in the form of higher price as it will not reduce demand much

288
Q

How subsidies ensure protectionism

A

allow domestic firms to lower prices

289
Q

Define nationalisation

A

when a private sector firm/industry is moved to public sector and becomes under government control

290
Q

Define disinflation

A

fall in rate of inflation

291
Q

Factors that influence net migration (2)

A

living standards at home and abroad

discrimination on groups/extent of control on people

292
Q

Advantages of vertical integration (3)

A

costs decrease

more control over their business (less reliant on other firms)

acquires highest profits when product sold to consumers

293
Q

Why is GDP per capita more accurate (2)

A

more accurate to people’s living standards

not affected by other changes in GDP

294
Q

Define infant mortality rate

A

the number of deaths per 1000 live births in a year

295
Q

Define state-owned enterprises

A

firms owned by government

296
Q

How do governments redistribute income (2)

A

tax - rich taxed more than poor

government spending - housing/unemployment benefits and education/healthcare subsidized

297
Q

Death rate definition

A

the number of deaths in a year per 1000 population

298
Q

Define wealth

A

stock of assets including money

299
Q

Advantage of horizontal integration (4)

A

more promotion opportunities

market share increase (more customers gained)

increases potential economies of scale

increased intellectual property

300
Q

Advantages of fixed exchange rates

A

firms will know exact amount they will pay + receive in their own currency

301
Q

Explanation of subsidies as a supply-side policy (2)

A

provide subsidies to small firms –> increase competition

encourage them to buy capital

302
Q

Effects of net emigration (5)

A

labour force will decrease

remaining labour force will have greater burden of dependency

shortage of skilled workers

may become under populated

emigrants may send money to their relatives

303
Q

Define absolute advantage

A

being able to produce a good using fewer resources than other countries

304
Q

Define overtime pay

A

pay to workers that work more than usual working week

305
Q

Reasons for government spending (4)

A

influence economic activity

reduce market failure

promote equity

pay interest on national debt

306
Q

Explain the circular flow of income (3)

A

consumer spends on products increasing expenditure

firm uses expenditure to produce goods/services

revenue given to consumers through wages

307
Q

Define risk-bearing economies of scale (4)

A

produce wide range of products

supply products in different locations

spreads out risk of failure

lowers average total costs

308
Q

State a factor which determines PES (S)

A

Storage of good - Producers can respond to price changes better by changing stock levels –> PES more elastix

309
Q

Benefits of Free Trade (3)

A

allow countries to produce what they are best at –> efficient allocation of resources

increased world output, employment, living standards

firms can experience greater economies of scale, competitive force –> increase quality of goods + lower prices

310
Q

Define globalisation

A

process which the world is becoming interconnected through trade and other links

311
Q

Define fringe benefits

A

benefits provided to workers by employers

312
Q

Which factor of production is the most mobile

A

enterprise

313
Q

Define national debt

A

amount government has borrowed

314
Q

Regulation benefits (2)

A

backed up by law

easy to understand

315
Q

Causes of internal diseconomies of scale (3)

A

miscommunication

lack of control

decreased employee relations

316
Q

Explain elastic PES

A

The quantity supplied will change by a greater proportion than the change in price

317
Q

Disadvantage of lowering direct taxes as a supply-side policy (3)

A

workers may prefer to have more leisure than pay

ineffective for unemployed if no jobs available

firms may lack confidence in future and not invest –> will not expand

318
Q

Incidence of taxation for products with inelastic supply

A

more tax borne by producers

319
Q

Why would consumers benefit from elastic supply

A

supply is responsive to consumer demand -changes in quantity demanded cause no shortages or surpluses

320
Q

Negative effects of internal migration (2)

A

agricultural productivity may fall

no guarantee that jobs will be available in urban areas

321
Q

Define capital intensive production

A

production process that uses high proportion of capital

322
Q

Define a bonus

A

extra payment

323
Q

Define unitary elasticity (D)(2)

A

proportion which quantity demanded changes = proportion at which price changes

Revenue stays the same at any price

324
Q

Why may the government take control of a firm (2)

A

prevent foreign firms from taking over/merging

prevent consumers from being exploited

325
Q

Define economic agents

A

decision makers in economy

326
Q

Define planned economic system (3)

A

economic system

government makes all key economic decisions

resources are state-owned and allocated by directives

327
Q

Explanation of improved education + training as a supply-side policy (3)

A

increases worker skill/productivity

reduce cost of firms + increase product quality –> enables firm to sell more + expand

increases occupational mobility –> supply quickly adjusts to changes in demand

328
Q

Why governments aim for balance of payments (2)

A

country can get into debt if import > export

civilians will not enjoy as much products if export > import

329
Q

Benefits of state-owned enterprises (3)

A

base their decisions on full costs and benefits involved

ensures that basic industries charge low prices and high quality

government makes planning and coordination easier

330
Q

Disadvantages of division of labour (4)

A

workers can get bored

workers may not put in effort and make mistakes

specialised workers are occupationally immobile as they are only trained for one job - may be difficult for them to get another job

more difficult to replace specialised workers

331
Q

Disadvantages of internal growth (4)

A

longer to grow

limited resources for growth

more time for competitors to exploit firm’s weaknesses

less opportunity for promotion

332
Q

Define a time rate system

A

wages based on number of hours worked

333
Q

What does competition result in (2)

A

lower prices

higher quality goods

334
Q

How do central banks manage national debt

A

carries out borrowing for government (government bonds)

335
Q

Define budget deficit

A

when government spending > government revenue

336
Q

Define money

A

item acceptable as a means of payment

337
Q

Define the tertiary sector

A

producing services

338
Q

Define capital good

A

human-made goods used in production

339
Q

Negative impact of indirect taxes (2)

A

regressive

can cause inflation

340
Q

How exposing domestic industries to market forces encourages economic development

A

firms will be forced to become efficient without gov. support

341
Q

Define supply

A

the quantity that produces are willing and able to sell at any given price

342
Q

Consequences of a current account surplus (3)

A

increased aggregate demand –> can cause demand-pull inflation

increased GDP + employment

may experience appreciation –> increased demand of currency

343
Q

Disadvantages of state-owned enterprises (2)

A

inefficient - high prices and low quality

can be difficult to control as they are large

344
Q

Define production

A

process of turning resources into goods

345
Q

Determinants of number of hours people work (5)

A

length of average working day

duration of overtime

length of holidays

amount of times lost through sickness

whether they work full-time or part-time

346
Q

Ways of coping with an ageing population (3)

A

raise retirement age

encouraging workers to save for retirement

encourage immigration of younger skilled workers

347
Q

How protection protects declining industries (2)

A

decline of industry can cause unemployment

may allow industry to decline slower –> eventually remove protection once enough workers leave

348
Q

Define labour productivity (2)

A

average output per worker

total output/number of workers

349
Q

Disadvantage of vertical integration (2)

A

lack of knowledge to operate acquired firm

no EoS (production process in each stage different)

350
Q

How will a government try to control the exchange rate (3)

A

buying/selling currency - limited supply of foreign currency

raise interest rate

measures to influence exports + imports

351
Q

Government role as producer

A

products believed to be important/essential

352
Q

Define free international trade

A

exchange of goods/services between countries without restrictions

353
Q

Define a local government

A

government which administers policies within area of country

354
Q

Define a backward vertical merger

A

merging with firm backward in supply chain

355
Q

How does PED change in an outward shift in demand

A

reduces PED as consumers are less sensitive since they want to buy more

356
Q

Disadvantage of privatisation as a supply-side policy (2)

A

possibility of monopoly forming

private firms less willing to take social benefits into account

357
Q

Define bilateral aid

A

aid from one government to another

358
Q

Birth rate definition

A

the number of births in a year per 1000 population

359
Q

Disadvantages of MNCs to economic development (4)

A

may deplete non-renewable resources

may cause pollution

may put pressure on government to pursue policies which have negative effect on development

profits may reward home country rather than be reinvested in host country

360
Q

Causes of differences in economic development (7)

A

income per head

savings - poor people cannot save + prevents investment

population growth - dependency ratio

education + healthcare - reduce quality of lives + productivity

sectors - tertiary sector

productivity

range of exports - sensitive to change in demand

361
Q

How quality of capital can improve

A

better technology

362
Q

Factors of borrowing (4)

A

interest rate

confidence

social attitudes

availability of loans/overdrafts - if easier to borrow, borrowing increases

363
Q

State the PED value for a perfectly price inelastic graph

A

0

364
Q

Explanation of lowering direct taxes as a supply-side policy (3)

A

increased incentive - greater reward for working

greater reward likely to attract unemployed to job

firms will have greater profits –> more money put to investing

365
Q

Disadvantages of conglomerate integration (2)

A

lack of knowledge to operate acquired firm

increase in conglomerate size –> decreased competition –> monopoly

366
Q

Beneficial effects of inflation (3)

A

reduces debt - good for borrowers

encourage firms to expand from demand-pull

firm’s wage cost may decrease - firms can get away with increasing nominal wages below inflation rate

367
Q

How import substitution encourages economic development (3)

A

allows domestic industries to grow

replace imports with domestic products

may increase domestic output, raise employment, improve country’s balance of payments stability

368
Q

Define money supply

A

all money in economy at any one time

369
Q

Examples of land (2)

A

timber, coal

370
Q

Why governments seek to redistribute income (2)

A

poverty causes hardships

social unrest from gap between rich and poor

371
Q

Explain demand-pull inflation

A

rise in price by excess demand

372
Q

Curve of Total costs (2)

A

same as TVC

shifted up by TFC

373
Q

Define perfectly inelastic supply

A

Supply is fixed no matter the price

374
Q

Define market failure

A

when free market delivers inefficient allocation of resources

375
Q

Consequences of recession (6)

A

increase in unemployment

decrease in living standards

decrease in tax revenue

increase in government spending on benefits

inflation if caused by decrease in aggregate supply

deflation if caused by aggregate demand

376
Q

Define a purchasing economy of scale (2)

A

suppliers provide volume-based discounts on raw materials

lowers average total costs

377
Q

Disadvantage of improved education + training as supply-side policy

A

education + training may not be in right area

378
Q

Variable cost curve

A

Upwards sloping graph

379
Q

Define industrial action

A

workers disrupting production to put pressure on employers to agree to their demands

380
Q

Positives of International Specialisation for producers (3)

A

Economies of scale/Lower costs - can produce product at larger scale + increased productivity will lower costs

Cheaper raw materials - may lower price of firm’s supplier (buying in bulk)

Trade - engages exchange of ideas + technology

381
Q

Benefits of foreign aid

A

can promote development

382
Q

3 key allocation decisions

A

what to produce

how to produce it

for whom to produce

383
Q

Emigration definition

A

act of leaving the country to live in another country

384
Q

Define a natural increase in population

A

when birth rate exceeds death rate

385
Q

Examples of fringe benefits (3)

A

meals

healthcare

leisure facilities

386
Q

How does comparative advantage change (2)

A

changing costs

changing quantity + quality of resources

387
Q

Why firms may choose to stay small (6)

A

small size of market

consumer/owner preference

flexibility - can adapt easier to market changes

lack of financial capital

location

government support

388
Q

Define external growth (2)

A

increase in firm size

caused by merging/taking over other firm

389
Q

Define trade bloc

A

group of countries that remove trade restrictions between themselves

390
Q

Define private costs

A

costs of production paid by firm

391
Q

Effect of subsidy/tax on elastic demand

A

subsidy/tax will have greater impact on quantity sold with less price

392
Q

Determinants of wages (5)

A

demand and supply

Bargaining power of workers

Government Policies

Public opinion

Discrimination

393
Q

Define expansionary monetary policy (3)

A

increasing aggregate demand

increasing money supply

decreasing interest rate

394
Q

Policies to control cost-push inflation (2)

A

improve education/training

subsidizing firms

395
Q

Functions of trade unions (4)

A

negotiate for higher wages

negotiate for more job security

negotiate for better working conditions

negotiate for more fringe benefits

396
Q

Reasons why aggregate demand may decrease (demand-side shocks) (4)

A

decrease in consumer confidence

financial crisis

war/pandemic

firms produce less because of decreased demand

397
Q

Define a flexible labour force

A

labour force which adjusts quickly to changes in market

398
Q

Define job security

A

how easily workers are likely to become redundant

399
Q

Define technical economies of scale

A

new machinery that lowers production costs

400
Q

Advantages of globalisation (2)

A

increases competition - consumers able to buy range of products at low prices

encourages firms to move production in most efficient locations

401
Q

Why are consumers likely to benefit from elastic demand (2)

A

more likely to get lower price - reluctant to increase price as consumers would react quickly

more likely to get better quality - competition with substitutes

402
Q

Consequences of unemployment on consumers (4)

A

decreased income

decreased confidence

decreased mental health

decreased chances of getting another job

403
Q

Examples of secondary sector industries (3)

A

clothing

steel

electronics

404
Q

How does exchange rate influence aggregate demand

A

decrease price of exchange rate –> encourage exports

405
Q

How does money supply influence aggregate demand (3)

A

increase money supply –> encourages banks to lend –> increases consumer spending + increases firm investment

406
Q

Advantages of International trade (3)

A

may be able to reach a wider market

may be able to take greater advantage of economies of scale

competition - may become more efficient

407
Q

Define price mechanism

A

how supply and demand interacts through price to allocate resources

408
Q

Define budget

A

relationship between government revenue and spending

409
Q

Vicious circle of poverty for country (4)

A

low income

low saving

low investment

low productivity

410
Q

Define direct tax

A

taxes on income/wealth

411
Q

Define deregulation

A

removal of rules + regulations

412
Q

Define supply side policy

A

measures designed to increase aggregate supply

413
Q

Examples of inferior good

A

spam

414
Q

How increases in living standards develop economy and benefit government (3)

A

greater income = more goods to be enjoyed

improved healthcare + education

distribution of income should be even

415
Q

Government role as employer (4)

A

employ workers to manage state-owned enterprises

reduce unemployment

control rises in prices by reducing wages and prices

providing workers with training, pensions and no discrimination

416
Q

Define deflation

A

fall in prices of goods/services over time

417
Q

State a factor which determines PES (C)

A

The cost of changing supply

418
Q

Disadvantages of exposing domestic industries to market forces in economic development

A

firms may be unable to compete with foreign firms - established for long time + have economies of scale

419
Q

Define sales tax

A

tax on sold products

420
Q

Function of central banks (6)

A

banker to government/commercial banks

controls banking system

lender of last resort

manages national debt

holds country’s reserves of foreign currency/gold

issues bank notes

421
Q

How protectionism raises employment

A

enable domestic firms to expand + employ more people

422
Q

Supply side policy measures (6)

A

improve education + training

lowering direct taxes –> increasing incentives

deregulation

privatisation

labour market reforms

subsidies

423
Q

Define social cost

A

private cost + external cost

424
Q

Effect of subsidy/tax on inelastic demand

A

subsidy/tax will have less impact on quantity sold

425
Q

Define geographical mobility

A

ability to move a resource between different locations

426
Q

Government policy measures to reduce poverty (6)

A

improving quantity + quality of education

economic growth

national minimum wage

encouraging multinational companies to set up in country

providing state benefits

land reform

427
Q

Examples of economic agents (3)

A

individuals

governments

firms

428
Q

Why may wages change over time? (5)

A

Change in demand/supply of labour

Changes in bargaining power

Changes in government policy

Changes in public opinion

Changes in individuals earnings over time

429
Q

Define social optimum (2)

A

efficient allocation of resources

resources allocated to maximise social welfare

430
Q

Explain cyclical unemployment

A

unemployment from lack of aggregate demand

431
Q

What does a point on a PPC curve mean

A

shows full use of resources

432
Q

Define trade in services as a component of the current account (3)

A

value of services sold abroad

value of services bought from foreign countries

e.g banking, construction services, financial services

433
Q

Define a recession

A

reduction of real GDP over time

434
Q

Define internal growth

A

firm increasing its size by enlarging existing plants/opening new ones

435
Q

Define craft unions (2)

A

represent workers with particular skills

e.g plumbers and weavers

436
Q

How loans encourage economic development (2)

A

can increase productivity

can increase living standards

437
Q

Why may governments try to make the distribution of income and wealth more equal (2)

A

uneven distribution may be socially divisive

ensure everyone has access to a certain standard of living

438
Q

Define disposable income

A

income after income tax has been deducted

439
Q

Consequences of unemployment on economy (3)

A

government tax revenue decreased

unemployment benefits cost increase

economy decreases in productivity

440
Q

Explanation of labour market reforms as a supply-side policy (5)

A

increase quantity, quality, flexibility of labour

better training

easier for employers to hire/fire workers - easier for firms to adjust supply to changing market + encourage firm to employ more workers (can be easily fired)

reduce trade union power

less industrial action –> less disruption to production

441
Q

How reducing poverty leads to economic development and benefits government (3)

A

gives access to basic needs

improve health

more productive

442
Q

Define a horizontal merger

A

merging with firm that produces same product at same stage of production

443
Q

Define balance of payments (2)

A

record of all economic transactions

between country’s residents and rest of world over particular period

444
Q

State the PED value for an infinitely price inelastic graph/perfectly elastic graph

A

infinite

445
Q

Reasons for globalisation (3)

A

reduced transport costs - more efficient ships

advances in communication - consumers can purchase foreign goods online, MNCs can communicate with foreign branches

removal of trade restrictions

446
Q

Define devaluation

A

fall in the value of a fixed exchange rate

447
Q

Define capital depreciation

A

loss in value of capital from it becoming worn out

448
Q

Components of the current account balance (4)

A

trade in goods (exports-imports)

trade in services (exports - imports)

primary income

secondary income

449
Q

When will birth rates be high (5)

A

young average aged population

infant mortality rate is high

women are not well educated

cheap to bring up children

lack of government care for elderly/sick

450
Q

Define public sector

A

part of economy controlled by government

451
Q

Factors affecting strength of trade union (5)

A

level of economic activity

proportion of firm’s labours which are unionised

level of skill of job

level of consistent demand for product produced by workers

whether government legislation is favourable

452
Q

How to construct a CPI (4)

A

select base year

calculate necessary goods households spend their money on and weigh according to frequency

find price changes

multiply weights by price index ( change)

453
Q

Define aggregate demand (2)

A

total demand for country’s product at given price level

consumer spending + spending of firms on capital + government spending + (exports - imports)

454
Q

Name types of industrial action (4)

A

strike

protest outside workplace/in public places

“go start”

“work to rule”

455
Q

Define consumer good

A

goods consumed for their own satisfaction

456
Q

Define land

A

gifts of nature available for production

457
Q

Define economically inactive

A

those not in the labour force

458
Q

Explain inelastic PES

A

The quantity supplied will change by a smaller proportion than the change in price

459
Q

Positives of International Specialisation for economy (2)

A

Increases GDP - more efficient + less costs = more output

Trade - will have surplus amount of good it can use to trade to get goods it could never make

Low inflation - low costs of production

no idle resources - all put into specialised good

460
Q

Define labour force (2)

A

people working

people actively seeking work

461
Q

Define opportunity cost

A

next best alternative foregone when a decision is made

462
Q

Define economic growth (2)

A

increase in output of economy

increase economy’s productive potential (long term)

463
Q

Name non-wage factors (6)

A

Job satisfaction

Type of work

Working conditions

Fringe Benefits

Job security

Career prospects

464
Q

How paperwork ensure protectionism

A

may persuade foreign firms to switch to other market with tim-consuming paperwork

465
Q

How productivity influences a country’s exports + imports

A

more productive = lower labour costs + cheaper prices –> exports increase + imports decrease

466
Q

Cause for geographical immobility of labour (5)

A

difference in price/availability of housing in different areas/countries

family ties

difference in educational system

lack of information - unaware of job opportunities in different place

lack of skill/qualifications

467
Q

Define perfectly elastic supply

A

Unlimited supply at a fixed price

468
Q

Name government policies/actions that can change wage rates (5)

A

National Minimum Wage

improved education

immigration policies

anti-discrimination laws

technology

469
Q

Define division of labour

A

workers specialising in particular tasks

470
Q

Define internal diseconomies of scale

A

higher long term average costs from firm growing too large

471
Q

Define an economic good (2)

A

good which uses scarce resources in production

has an opportunity cost

472
Q

Indicators of a country’s international competitiveness (5)

A

economic growth rate

share of world trade

level of expenditure on research and development

quantity + quality of education + training

state of country’s infrastructure

473
Q

Define variable costs

A

costs that change with output

474
Q

Define capital mobility (2)

A

ability to move capital between different locations

ability to move capital between different uses

475
Q

Define regressive tax

A

tax which takes larger percentage of income from poor

476
Q

Define international trade/external trade

A

exchange of good/services between countries

477
Q

Determinants of supply (5)

A

changes in costs of production (influenced by tax/subsidy)

technology improvements

weather conditions

disaster/war

discovery/depletion of commodities

478
Q

Determinants of elasticity of supply of labour (5)

A

qualifications/skills required

level of employment

mobility of labour

degree of vocation (attachment)

time period

479
Q

Disadvantages with import substitution (2)

A

may raise prices + reduce choice in short term

domestic industries may become reliant on government and not improve their efficiency + competitiveness

480
Q

Define price stability

A

price level in economy not changing significantly over time

481
Q

Why is GDP difficult to measure (3)

A

unrecorded economic activity not counted (drugs, illegal)

products produced/consumed without selling not counted

immigrants with no permission to work - do not declare all earnings to tax

482
Q

Reasons for giving out foreign aid (3)

A

help people

political support

commercial advantage

483
Q

Define national champions

A

industries with potential to be world leaders

484
Q

Disadvantages of overtime pay (3)

A

workers may become tired

productivity may decrease

product quality may decrease

485
Q

Define general unions

A

represent workers with a range of skills/industries

486
Q

Reasons for saving (5)

A

save sum of money for particular purpose

save to increase income

save for retirement

save for security

save for children (education, inheritance)

487
Q

Net investment definition (2)

A

gross investment - depreciation

value of extra capital goods made

488
Q

Define trade union

A

associations of workers formed to represent their interests

489
Q

Explanation of privatisation as a supply-side policy (2)

A

competition - greater incentive to respond to consumer demand + provide high quality products at low price

efficiency - increase productive capacity as firms work more efficiently

490
Q

Disadvantages of floating exchange rates (2)

A

fluctuates - difficult for firms to plan ahead

if demand for currency continue to rise = will not eliminate current account deficit

491
Q

Disadvantages of International trade (6)

A

greater transport costs

buyers + sellers may speak different languages

differences in culture - some countries may not appreciate good being sold

trade restrictions can increase costs of firms

competition - firms may struggle to survive

foreign currencies - value will change over time

492
Q

Causes of recessions (2)

A

decrease in aggregate demand (demand-side shocks)

decrease in aggregate supply (supply-side shcocks)

493
Q

Define “circular flow of income”

A

movement of expenditure, income, output around economy

494
Q

Solution to structural unemployment (2)

A

supply side policies

improve quality of training/education

495
Q

Advantages of protectionism (5)

A

protects infant industries

protects declining industries

protects strategic industries

increases employment

protection from dumping

496
Q

Aims of commercial banks (2)

A

profit for shareholders

liquidity

497
Q

Define multidimensional poverty index

A

a measure of poverty based on education, health and standard of living

498
Q

Why does liquidity matter to a commercial bank

A

ensure banks can meet customer requests to withdraw money

499
Q

Define relative poverty (2)

A

a condition where people are poor in comparison to others in their country

their income is too low for them to enjoy the average standard of living for their country

500
Q

Define contractionary fiscal policy (3)

A

reducing aggregate demand

increasing taxation

decreasing government spending

501
Q

Define marketing economies of scale

A

marketing costs spread over more units of output

502
Q

Define industry

A

group of firms producing the same product

503
Q

Define inflation rate

A

percentage rise in price of goods/services over time

504
Q

Define multilateral aid

A

aid from international organisations

505
Q

How domestic GDP influences a country’s exports + imports (2)

A

domestic income increases –> more imports bought + firms likely to buy more raw materials and capital

exports decrease + imports increase

506
Q

Define a forward vertical merger

A

merging with firm further forward in supply chain

507
Q

Solution to cyclical unemployment (2)

A

expansionary fiscal policy

expansionary monetary policy

508
Q

Define wage rate

A

wage worker receives per unit of output/time

509
Q

Define technological unemployment

A

workers redundant from tech advances

510
Q

Define total cost (3)

A

total amount spent on factors of production

FC + VC

ATC x output

511
Q

Examples of fixed costs (2)

A

rent

insurance

Economics (6 decks)

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