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
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
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
4
Q
Define monetary inflation
A
rise in price from excessive growth of money supply
5
Q
Explain cost-push inflation
A
rise in price by higher cost of production
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
7
Q
Positive consequences of economic growth (3)
A
improve living standards
government tax revenue increase
political/economic standing increases
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)
9
Q
Define commercial banks
A
banks which make profit by providing banking services to households/firms
10
Q
Define tax burden
A
amount of tax paid
11
Q
Why is 0% unemployment impossible (2)
A
workers will always be changing jobs
workers can be unemployed for short periods
12
Q
Define indirect tax
A
taxes on expenditure
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
14
Q
Government reaction to MNCS (2)
A
positive - generate jobs, increase output
negative - domestic firms can become out of business
15
Q
Define a piece rate system
A
wages based on amount workers produce
16
Q
Negative impact of direct taxes (3)
A
may discourage effort
may discourage enterprise
may prevent people entering labour force
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
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
19
Q
Define capital
A
man-made goods used to produce other goods/services
20
Q
Consequences of deflation (3)
A
good - increased output/employment
bad - decreased output/employment
bad - increase debt value
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
22
Q
Define external diseconomies of scale
A
higher long term average costs from industry growing too large
23
Q
Reasons why aggregate supply may decrease (3)
A
rise in raw material costs
trade unions
war/natural disaster/pandemic
24
Q
Standard of living indicators for multidimensional poverty index (3)
A
cooking fuel
water
electricity
25
Define enterprise (2)
risk taking and decision making required to set up a business
managed other 3 factors of production
26
Net immigration definition
more people coming to live in the country than people leaving the country to live elsewhere
27
Define a conglomerate merger
merging with firm producing different products
28
3 types of unemployment (3)
Frictional
Structural
Cyclical
29
Determinants of demand (7)
income
price of substitutes
price of complements
advertising campaigns
changes in tastes/fashions
changes in size of population
changes in age of population
30
Define perfectly price inelastic (D)
Quantity demand remains constant whatever the price
31
Define tariff
tax on imported products --> increase its price
32
Define subsidy
payments by government to producers per unit of good produced
33
Define demand
the quantity that consumers are willing and able to purchase at any given price
34
What does a point inside a PPC curve mean
inidicates unemployed resources
35
Define incidence of taxation
distribution of burden of indirect tax
36
Shape of curve for average fixed costs
downwards sloping exponential
37
Examples of capital (2)
factories
machinery
38
Disadvantages of loans for economic development (2)
project may not be as successful as suspected --> debt
loan money can be used for unprofitable projects, military, corruption
39
Determinants for elasticity of demand for labour (4)
proportion of labour costs in total costs
ease of labour to be substituted for capital
elasticity of demand for product produced
time period
40
Reasons for levying taxation (5)
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
41
(Gross) investment definition
spending by firms on capital
42
Define fixed costs
costs not affected by output
43
Examples of the tertiary sector (3)
banking
tourism
hospitality
44
Define consumer prices index (CPI)
measure of weighted average change of prices of basket of good/services over time
45
How protection protects infant industries (2)
prevents foreign competition from eliminating them from the start
allows them to grow, have economies of scale, become competitive
46
Internal migration
workers migrating from rural to urban areas in search of better jobs + high incomes
47
Define the secondary sector
processing of raw materials into finished/semi-finished goods
48
Define excise tax
taxes on certain domestically produced goods
49
Define a foreign exchange rate
price of one currency in terms of another currency
50
Name wage factors (4)
wages
overtime pay
bonuses
commision
51
Define specialisation at an international level
countries concentrating on producing products they are best at making + in high demand
52
Define private benefits
benefits of consumption enjoyed by consumers
53
State a factor which determines PES (T)
time taken to produce it - Producers are able to respond immediately to a change in price
54
Why do governments aim for price stability (3)
ensures economic certainty
prevents domestic firms from losing competitiveness to foreign ones
firms/households can plan ahead
55
Factors that influence value of country's exports + imports (6)
inflation rate
exchange rate
productivity
domestic GDP
foreign GDP
trade restrictions
56
Why do governments aim for low unemployment (3)
unemployment is a waste of resources
unemployed suffer disadvantages
government tax revenue waste on unemployed
57
Define regional unemployment
unemployment caused by a decline in job opportunities in an area
58
Define a free good (2)
good which does not use up any resources in production
has no opportunity cost
59
Define balance of payments
record of country's economic transactions with other nations
60
Define inheritance tax
tax on wealth which is passed on
61
Define a natural monopoly
industry where single firm can produce at lower average cost than other firms because of economies of scale
62
Determinants for quantity of labour (5)
population size
age structure of population
retirement age
school leaving age
attitude ot working women
63
Average variable cost curve
U-shaped
64
Advantages of division of labour (5)
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
65
Define unemployment
being without a job while willing/able to work
66
Negatives of International Specialisation for economy (2)
over-reliance on other country's demand
over-reliance on other country's supply
67
Define liquidity
being able to quickly turn an asset into cash without a loss
68
How does interest rate affect aggregate demand (3)
loan value increases --> consumer expenditure decreases
more expensive for households/firms to borrow --> less borrowing
higher interest rate --> increased incentive/reward to save
69
What does a linear PPC curve show
constant opportunity cost
70
How increasing range of economic + social choices benefit the government (3)
increased freedom
increased access to healthcare + education --> improve productivity
improve quality of life
71
Define the primary sector (2)
extraction/collection of raw materials
first stage of production
72
Characteristics of money (7)
Durable
Portable
Divisible
Homogenous - identical
Recognizable
Limited in supply
Generally accepted
73
Market economic system advantages (4)
consumers have greater choice - consumer sovreignty + competition
incentives encourage hard work and enterprise
efficient allocation of resources
lowers price and higher quality
74
Define expansionary fiscal policy (3)
increasing aggregate demand
decreasing taxation
increasing government spending
75
Health indicators for multidimensional poverty index (2)
nutrition
child mortality
76
Define savings
disposable income which is not spent
77
What does a outward shift in the PPC curve mean (2)
increase in quantity/quality of resources
increase in productive potential
78
Why may governments want supply to be elastic
more effective in encouraging production
79
Causes of economic growth (2)
increase in aggregate demand
quantity/quality of resources increases
80
Define trade in goods deficit
expenditure on imported goods > revenue from exported goods
81
Determinants for the size of firms (5)
age of firms
availability of financial capital
type of business organisation
internal economies/diseconomies of scale
size of market
82
Purpose of bonuses (2)
reward workers who contribute to higher profits
provide incentive for workers
83
Measures to correct current account deficit (5)
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
84
Define factors of production
resources used to produce goods
85
What does a bowed out PPC curve show
increasing opportunity cost
86
Define budget surplus
when government revenue > government spending
87
Disadvantages of foreign aid (4)
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
88
Define profit satisficing (2)
Making just enough dividends to keep shareholders happy
While pursuing other objectives
89
Factors influencing demand for capital (5)
price of capital goods
price of labour
interest rate
technology
expectations on future
90
Government measures to address market failure (6)
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
91
Define average variable costs (2)
variable cost per unit of output
TVC/ouput
92
Determinant of PED (7)
addictiveness
time
Brand loyalty
Income
Substitutes
Necessity/Luxury
Ease and Cost of switching substitute
93
Firm objectives (5)
survival
growth
social welfare
profit satisficing
profit maximisation
94
Define "lender of last resort"
central banks lend to banks short on cash
95
Define labour
human effort used in producing goods
96
Define average fixed costs (2)
fixed costs per unit of output
total fixed costs/output
97
Define full employment
no cyclical unemployment
98
Define capital gains tax
tax on profits made on sold assets
99
Explain frictional unemployment
temporary unemployment from workers being in between jobs
100
Define employment
being involved in a productive activity which a payment is received
101
Define savings ratio
proportion of disposable income saved
102
Define rationalisation
eliminating unnecessary equipment to make firm more efficient
103
Causes of deflation (4)
good - tech advances
good - labour productivity increases
bad - recession
bad - decreased demand from consumers waiting for prices to go down more
104
Positive effects of an increase in population (4)
population is below optimum = make better use of its resources
market size will increase
extra demand
increase in labour force
105
Define import substitution
protection of domestic industries against foreign competition by the government
106
Why will firms want their supply to be as elastic as possible
profits will be higher as they can react more quickly to price increases
107
Define the quaternary sector (2)
knowledge based service industries
information technology
108
Define comparative advantage
can produce at a low opportunity cost
109
Measures to increase living standards (6)
improving education + training
reducing unemployment
improving healthcare
increasing/improving housing stock
improving working conditions
reducing pollution
110
Disadvantage of labour market reforms as a supply-side policy (3)
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
111
Define contractionary monetary policy (3)
decreasing aggregate demand
decreasing money supply
Increasing interest rate
112
Define fiscal policy (3)
influencing aggregate demand
using government spending
using taxation
113
Education indicators for multidimensional poverty index (2)
years of schooling
no. of children enrolled
114
Define a market economic system (3)
system where resources are privately owned
resources allocated by market forces
firms decide what to produce based on consumer demand
115
Policies for deflation
expansionary fiscal/monetary policy
116
Positive impact of indirect taxes (6)
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
117
How inflation influences a country's exports + imports (2)
high inflation = civilians will buy more imports + firms will have difficulty exporting
low inflation = increase international competitiveness --> increase exports + reduce imports
118
How does education increase wage rate
increases their demand as they are now more skilled
119
Explain structural unemployment (2)
unemployment caused by decline in industries/occupation
unemployment from changes in demand/production method
120
Advantages of capital intensive production (4)
gains technical economies of scale
more consistent
production maintained for long time
no industrial action
121
Measures to promote economic development (4)
Import substitution
expose domestic firms to market forces
attract MNCs (multinational corporations)
borrowing from abroad
122
Define microeconomics (2)
study of behaviour of individuals and firms
studies performance of individual markets
123
Negatives of International Specialisation for producers (2)
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
124
Examples of primary sector industries (3)
agriculture
mining
fishing
125
Negative effects of an increase in population (6)
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
126
How does a country determine what it is best at producing
quantity and quality of resources
127
Changes in employment pattern (5)
women in labour force
full/part-time
informal/formal economies - informal tend to have worse quality
employment quality
flexible labour force
128
Disadvantages of fixed exchange rates (2)
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
129
Disadvantages of protectionism of declining industries
producers may resist removal of protectionism
130
Factors that affect labour market participation rate (5)
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
131
Define foreign direct investment
setting up/buying production units in another country
132
Measures of economic development (2)
real GDP per head
HDI
133
Disadvantages of protectionism of infant industries (2)
difficult to identify infant industries with potential
infant industries may be reliant on protection
134
Define unemployment rate (2)
percentage of labour force who are willing and able to work but are without jobs
Unemployment/Labour Force x 100
135
Disadvantages of bonuses
can cause resentment for not receiving bonus
136
Define specialisation
concentration on particular products/tasks
137
Define productivity (2)
output per factor of production per hour
measure of efficiency of FoPs
138
Define net migration
difference between immigration and emigration
139
Define normal good
product which demand increases when income increases
140
Define mixed economic system (2)
economy where both public and private sectors play important roles
economy which posseses both qualities of a market economy and a planned economy
141
Define dumping
selling products in a foreign market below cost of production
142
Name the 4 main types of trade unions
Craft Unions
General Unions
Industrial Unions
White collar unions
143
Define appreciation
rise in value of floating exchange rate
144
Benefits of overtime pay (3)
employers can respond to higher demand without hiring new workers
employees can earn more
easier for employers to reduce overtime than fire workers
145
Improve quality of enterprise (4)
better education
better training
better healthcare
more experience
146
Disadvantage of claimant count
those without unemployment benefits could still be unemployed
147
Advantages of floating exchange rates (2)
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
148
Consequences of ageing population (5)
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
149
Define labour intensive production
production process that uses high proportion of labour
150
Define economically active (2)
being a member of the labour force
unemployed + employed
151
Advantages of external growth (2)
immediate increase in market share/income/assets
gain skills of staff working for other firm
152
Define embargo
ban on imports or exports
153
Factors influencing production decisions (5)
time/mobility of FoPs
balance of FoPs
productivity of FoPs
cost of FoPs
Risk of FoPs
154
Causes of supply of currency (7)
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
155
Consequences of unemployment on firms (4)
low demand for firm products
decreased worker bargaining power
worker flexibility
greater availability of workers
156
Define trade in services
revenue from exported services > expenditure on imported services
157
Define economic development (5)
improvement in economic welfare
improving living standards
reducing poverty
increasing range of economic + social choices
increasing freedom + self-esteem
158
How land reform reduces poverty (2)
make ownership of land more equal
may increase output + living standards
159
Mixed economy benefits (4)
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
160
Define gross domestic product (GDP)
total output of country
161
Disadvantages of labour intensive production (3)
productivity can vary (absenteeism)
shortages of skilled labour
worker more costly as requires wage and non-wage benefits
162
Name limiting factors of jobs (6)
opportunity cost
education/qualifications
poverty
discrimination
age
physical ability
163
Define occupational mobility
ability to move resource between different uses
164
Define minimum price (2)
encourage production of product
set above equilibrium
165
Macroeconomic aims of government (5)
Economic growth
Low Unemployment
Price Stability
Balance of Payments Stability
Redistribution of income
166
Explain demand-side deflation
lack of demand
167
3 forms of frictional unemployment
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
168
Factors of saving (4)
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
169
Define credit items
money coming into the country
170
Define revaluation
rise in the value of a fixed exchange rate
171
Factors of spending (6)
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
172
Define depreciation
fall in value of floating exchange rate
173
Examples of variable costs (3)
steel
raw materials
workers
174
Causes of market failure (7)
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
175
How can increasing the productive potential of an economy be achieved
rise in quality/quantity of FoPs
176
Define trade in goods surplus
revenue from exported goods > expenditure on imported goods
177
Negatives of International Specialisation for consumers (3)
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
178
Market economic system disadvantages (3)
output not reflect full costs/benefits
private sector firms can abuse their power (monopoly)
causes income inequality
179
Incidence of taxation for products with elastic demand (2)
producers bear most of tax
producers cant pass on tax as it will lower demand significantly
180
Explanation of deregulation as a supply-side policy (2)
increase competition cuz more firms in market
increase efficiency --> lowers cost of production + prices
181
Define labour mobility (2)
ability of labour to move locations
ability of labour to switch between different occupations
182
Define managerial economy of scale (3)
employing specialised managers
managers more efficient
lowers average total costs
183
Positive impact of direct taxes (3)
may encourage people with fixed financial commitments to work harder
redistribute income
good sources of tax revenue
184
Causes of changes in the supply of labour (5)
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
185
Disadvantages of globalisation (3)
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
186
Define strike
workers not working to put pressure on employer to agree to their demands
187
How MNCs encourage economic development (3)
increase employment
train + educate workers
bring in new technology
188
Harmful effects of inflation (5)
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
189
Define labour market participation rate
proportion of working age population who are in the labour force
190
Why is supply for labour more elastic in the long run (2)
more time for workers to notice change in wages rate
more time for workers to gain qualifications
191
How trade restrictions influences a country's exports + imports
strict trade restrictions --> exports decrease
192
Causes of external economies of scale (4)
skilled labour force
good reputation - improve customer trust in firm
improved infrastructure
specialist suppliers of raw materials
193
Define absolute poverty
a condition where peoples' incomes are too low to enable them to meet their basic needs
194
Methods of protectionism (7)
Tariff
Quota
Embargo
Exchange Control
Quality Standards
Paperwork
Subsidies
195
Define capital productivity (2)
average output per machine
total output/number of machines
196
Define trade in goods as a component of the current account
value of exported and imported goofs
197
Why are workers paid less in the primary sector
workers have less skills/qualifications
198
Causes of poverty (5)
unemployment
being in low-paid work
lack of skills/education
rising cost of living
being ill/growing old
199
How governments influence distribution of income (4)
taxation
provision of cash benefits
provision of freed state education + healthcare
using labour and macroeceonomic policies
200
Define white collar unions
represent white collar professions
201
Causes of changes in exchange rate (4)
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
202
Define external economies of scale
lower long term average costs from industry growing in size
203
How protection protects strategic industries (2)
essential for survival + development of country
provide protection to ensure consistent production + promote economic development
204
How quality standards ensure protectionism (2)
may require imports to reach high standards
dissuade other countries from selling or increase costs + prices
205
Factors influencing death rate (4)
nutrition
medical care
involvement in military action
lifestyle
206
Define private sector
part of economy owned/controlled by individuals
207
Problems facing economies with low economic development (7)
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
Define collective bargaining
process which representative of workers negotiate with employers' associations
209
Define quota
limit placed on quantity of exports/imports
210
Why might producers want supply to be elastic
higher profits as they can adjust supply in response to price/demand
211
How exchange control ensure protectionism
restricting availability of foreign currency
212
What might trade unions pressure governments about (4)
political representation of workers
maternity/paternity rights
minimum wage
tax breaks for low income workers
213
Benefit of claimant count (2)
cheap
quick
214
Define financial economy of scale
banks charge lower interests rates to larger firms as they less risky
215
Reasons why governments aim for economic growth (3)
producing more will increase living standards
employment will increase
country trade improved if output can be exported
216
Define optimum population (3)
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
Define infinitely price inelastic/perfectly price elastic (D)
Unlimited demand but only at one price
218
Disadvantage of deregulation as a supply-side
possibility of monopoly forming
219
Regulation disadvantages (2)
regulations have to be followed --> expensive and time consuming
government can become unpopular
220
Define macroeconomics
study of whole economy
221
Causes of current account surplus (6)
low inflation
low exchange rate
high productivity
low foreign GDP
relaxed trade restrictions
high income + profit earned abroad
222
Why may people borrow (3)
financial difficulties
car/house/holiday
education/healthcare
223
2 types of structural unemployment
regional unemployment
technological unemployment
224
How foreign GDP influences a country's exports + imports (2)
foreign income increases --> foreigners buy more products
exports increase
225
Explain supply-side deflation (2)
lower costs of production
improved productivity - unit costs fall
226
Disadvantages of horizontal integration (3)
different business methods
decrease communication (cause diseconomy of scale)
employees can be fired
227
Negative consequences of economic growth (4)
depletion of natural resources/pollution
inflation - increased demand --> increase prices
imports can be > exports
inequitable distribution of income
228
Define internal economies of scale
lower long term average costs from firm growing in size
229
Define potential economic growth
economy's productive capacity
230
Limitations of GDP as a measure of living standards (2)
does not mention degree of income inequality
does not measure external costs
231
Causes for external diseconomies of scale (3)
traffic of transport used by industry = increased traffic costs
large industries may attract government regulation
more demand for skilled labour = increased wages
232
Effect of maximum price (3)
market disequilibrium - shortage
rationing - limit on amount to be consumed
queuing - first come first serve
233
Advantages of internal growth (3)
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
Disadvantages of trade union membership
industrial action can decrease productivity
235
Effect of a increase in exchange rate on export and import prices (3)
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
Define proportional tax
tax which takes same percentage of income from all taxpayers
237
How exchange rate influences a country's competitiveness
decrease in exchange rate --> country's products more attractive abroad
238
Define consumption
expenditure of households on consumer goods and income
239
How protectionism protects industries from dumping (3)
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
Advantages of International Specialisation for consumers (3)
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
Define aggregate supply
total amount of goods/services that domestic firms are willing to supply at a given price level
242
How to increase quantity of entrpereneurs (3)
good education system
lower taxes on firm's profits
reduce government regulations
243
Define a floating exchange rate
an exchange rate in which price is determined by market forces
244
Negative consequences of a current account deficit (3)
decreased aggregate demand
output + employment lower than possible
deficit due to lack of competitiveness - may continue for long time
245
Define monopoly
a single seller in the market
246
State the PED for an unitary elastic graph
1
247
Effect of a change in exchange rate on macroeconomy (3)
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
Calculating nominal GDP for another year
nominal GDP in base year x price index in base year/price index in present year
249
Function of commercial banks (4)
accept deposits - keep money safe
lend money
provision of foreign currency
advice with financial matters
250
Define strategic industries
important industries for economic development/safety of country
251
Define progressive tax
tax which takes larger percentage of income from rich
252
Policies to control demand-pull inflation
contractionary fiscal/monetary policy
253
Advantages of labour intensive production (3)
can provide new ideas
can provide personal service to consumers + respond to consumer feedback
number of workers can be changed with demand
254
Define primary income as a component of the current account (2)
income earned by firms (profits, dividends) + individuals (wages, fringe benefits) working in different countries
e.g (MNC sending profits back to host)
255
Define PPC curve (2)
curve that shows maximum possible output of 2 different goods/services that can be produced with given resources
illustrates opportunity cost
256
Define real income
income adjusted for inflation
257
Why is demand for labour more elastic in the long run
more time for firms to change production methods
258
Disadvantages of external growth (3)
differing business methods
more responsibility for owner
merge may be outside owner experience
259
Functions of money (4)
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
Incidence of taxation for products with elastic supply
more of tax borne by consumers
261
Define a central bank (3)
government owned bank
provides banking services to government/commercial banks
operates monetary policy
262
How economic growth reduces poverty (2)
increase in aggregate demand
will increase output + create jobs
263
Define Free Trade
when there are no restriction on products bought abroad or sold to other countries
264
Define monetary policy (4)
influencing aggregate demand
using money supply
using interest rate
using exchange rate
265
Methods for calculating GDP (3)
adding output of all industries in country
income earned in producing output
aggregate demand
266
Disadvantage of subsidies as a supply-side policy (2)
opportunity cost of gov. spending
firms may be dependent on subsidies
267
Define debit items
money leaving the country
268
Define public goods
a product which is non-excludable and needs to be provided by government
269
How to improve quality of labour (4)
better education
better training
more experience
better healthcare
270
How can a government ensure that it achieves all its macroeconomic aims through supply side policies (3)
increasing number of policies
have as much accurate information as possible
implement policies quickly
271
Determinants for demand of workers (5)
productivity
price of output
cost of capital
demand of product
size/profitability of firm
272
Positives of a current account deficit (4)
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
Define "derived demand"
demand for workers coming from demand of goods produced
274
Why might a government need to know the PED of a good (3)
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
Advantages of conglomerate integration (3)
allows for risk diversion
gains synergies - different firms can benefit from each other
form of investment - profit can be used for investment
276
How does supply-side policy influence government macroeconomic policies (3)
output + employment increase without inflation
produces better quality/cheaper products
increases exports + reduces imports
277
Measures to correct a current account surplus (2)
appreciation + revaluation
expansionary fiscal + monetary policy --> increase demand for imports
278
Definition of maximum price (2)
price set below equilibrium price
allows consumers to be more willing/able to buy certain product
279
Define industrial unions
represent workers in one industry
280
What does a movement along a PPC curve mean (2)
shows reallocation of resources
opportunity cost involved
281
Define rate of interest (2)
charge for borrowing money
payment for lending money
282
How to measure unemployment (2)
claimant count - count number of people with unemployment benefits
Labour force survey measure - use survey to count people who feel unemployed
283
Define inferior good
product which demand decreases when income increases
284
Define a fixed exchange rate (2)
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
Qualities a good tax should possess (6)
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
Positive effects of internal migration (2)
supply growing industries --> better allocation of resources
can send back money to relatives --> raise living standards in rural areas
287
Incidence of taxation for products with inelastic demand (2)
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
How subsidies ensure protectionism
allow domestic firms to lower prices
289
Define nationalisation
when a private sector firm/industry is moved to public sector and becomes under government control
290
Define disinflation
fall in rate of inflation
291
Factors that influence net migration (2)
living standards at home and abroad
discrimination on groups/extent of control on people
292
Advantages of vertical integration (3)
costs decrease
more control over their business (less reliant on other firms)
acquires highest profits when product sold to consumers
293
Why is GDP per capita more accurate (2)
more accurate to people's living standards
not affected by other changes in GDP
294
Define infant mortality rate
the number of deaths per 1000 live births in a year
295
Define state-owned enterprises
firms owned by government
296
How do governments redistribute income (2)
tax - rich taxed more than poor
government spending - housing/unemployment benefits and education/healthcare subsidized
297
Death rate definition
the number of deaths in a year per 1000 population
298
Define wealth
stock of assets including money
299
Advantage of horizontal integration (4)
more promotion opportunities
market share increase (more customers gained)
increases potential economies of scale
increased intellectual property
300
Advantages of fixed exchange rates
firms will know exact amount they will pay + receive in their own currency
301
Explanation of subsidies as a supply-side policy (2)
provide subsidies to small firms --> increase competition
encourage them to buy capital
302
Effects of net emigration (5)
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
Define absolute advantage
being able to produce a good using fewer resources than other countries
304
Define overtime pay
pay to workers that work more than usual working week
305
Reasons for government spending (4)
influence economic activity
reduce market failure
promote equity
pay interest on national debt
306
Explain the circular flow of income (3)
consumer spends on products increasing expenditure
firm uses expenditure to produce goods/services
revenue given to consumers through wages
307
Define risk-bearing economies of scale (4)
produce wide range of products
supply products in different locations
spreads out risk of failure
lowers average total costs
308
State a factor which determines PES (S)
Storage of good - Producers can respond to price changes better by changing stock levels --> PES more elastix
309
Benefits of Free Trade (3)
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
Define globalisation
process which the world is becoming interconnected through trade and other links
311
Define fringe benefits
benefits provided to workers by employers
312
Which factor of production is the most mobile
enterprise
313
Define national debt
amount government has borrowed
314
Regulation benefits (2)
backed up by law
easy to understand
315
Causes of internal diseconomies of scale (3)
miscommunication
lack of control
decreased employee relations
316
Explain elastic PES
The quantity supplied will change by a greater proportion than the change in price
317
Disadvantage of lowering direct taxes as a supply-side policy (3)
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
Incidence of taxation for products with inelastic supply
more tax borne by producers
319
Why would consumers benefit from elastic supply
supply is responsive to consumer demand -changes in quantity demanded cause no shortages or surpluses
320
Negative effects of internal migration (2)
agricultural productivity may fall
no guarantee that jobs will be available in urban areas
321
Define capital intensive production
production process that uses high proportion of capital
322
Define a bonus
extra payment
323
Define unitary elasticity (D)(2)
proportion which quantity demanded changes = proportion at which price changes
Revenue stays the same at any price
324
Why may the government take control of a firm (2)
prevent foreign firms from taking over/merging
prevent consumers from being exploited
325
Define economic agents
decision makers in economy
326
Define planned economic system (3)
economic system
government makes all key economic decisions
resources are state-owned and allocated by directives
327
Explanation of improved education + training as a supply-side policy (3)
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
Why governments aim for balance of payments (2)
country can get into debt if import > export
civilians will not enjoy as much products if export > import
329
Benefits of state-owned enterprises (3)
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
Disadvantages of division of labour (4)
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
Disadvantages of internal growth (4)
longer to grow
limited resources for growth
more time for competitors to exploit firm's weaknesses
less opportunity for promotion
332
Define a time rate system
wages based on number of hours worked
333
What does competition result in (2)
lower prices
higher quality goods
334
How do central banks manage national debt
carries out borrowing for government (government bonds)
335
Define budget deficit
when government spending > government revenue
336
Define money
item acceptable as a means of payment
337
Define the tertiary sector
producing services
338
Define capital good
human-made goods used in production
339
Negative impact of indirect taxes (2)
regressive
can cause inflation
340
How exposing domestic industries to market forces encourages economic development
firms will be forced to become efficient without gov. support
341
Define supply
the quantity that produces are willing and able to sell at any given price
342
Consequences of a current account surplus (3)
increased aggregate demand --> can cause demand-pull inflation
increased GDP + employment
may experience appreciation --> increased demand of currency
343
Disadvantages of state-owned enterprises (2)
inefficient - high prices and low quality
can be difficult to control as they are large
344
Define production
process of turning resources into goods
345
Determinants of number of hours people work (5)
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
Ways of coping with an ageing population (3)
raise retirement age
encouraging workers to save for retirement
encourage immigration of younger skilled workers
347
How protection protects declining industries (2)
decline of industry can cause unemployment
may allow industry to decline slower --> eventually remove protection once enough workers leave
348
Define labour productivity (2)
average output per worker
total output/number of workers
349
Disadvantage of vertical integration (2)
lack of knowledge to operate acquired firm
no EoS (production process in each stage different)
350
How will a government try to control the exchange rate (3)
buying/selling currency - limited supply of foreign currency
raise interest rate
measures to influence exports + imports
351
Government role as producer
products believed to be important/essential
352
Define free international trade
exchange of goods/services between countries without restrictions
353
Define a local government
government which administers policies within area of country
354
Define a backward vertical merger
merging with firm backward in supply chain
355
How does PED change in an outward shift in demand
reduces PED as consumers are less sensitive since they want to buy more
356
Disadvantage of privatisation as a supply-side policy (2)
possibility of monopoly forming
private firms less willing to take social benefits into account
357
Define bilateral aid
aid from one government to another
358
Birth rate definition
the number of births in a year per 1000 population
359
Disadvantages of MNCs to economic development (4)
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
Causes of differences in economic development (7)
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
How quality of capital can improve
better technology
362
Factors of borrowing (4)
interest rate
confidence
social attitudes
availability of loans/overdrafts - if easier to borrow, borrowing increases
363
State the PED value for a perfectly price inelastic graph
0
364
Explanation of lowering direct taxes as a supply-side policy (3)
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
Disadvantages of conglomerate integration (2)
lack of knowledge to operate acquired firm
increase in conglomerate size --> decreased competition --> monopoly
366
Beneficial effects of inflation (3)
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
How import substitution encourages economic development (3)
allows domestic industries to grow
replace imports with domestic products
may increase domestic output, raise employment, improve country's balance of payments stability
368
Define money supply
all money in economy at any one time
369
Examples of land (2)
timber, coal
370
Why governments seek to redistribute income (2)
poverty causes hardships
social unrest from gap between rich and poor
371
Explain demand-pull inflation
rise in price by excess demand
372
Curve of Total costs (2)
same as TVC
shifted up by TFC
373
Define perfectly inelastic supply
Supply is fixed no matter the price
374
Define market failure
when free market delivers inefficient allocation of resources
375
Consequences of recession (6)
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
Define a purchasing economy of scale (2)
suppliers provide volume-based discounts on raw materials
lowers average total costs
377
Disadvantage of improved education + training as supply-side policy
education + training may not be in right area
378
Variable cost curve
Upwards sloping graph
379
Define industrial action
workers disrupting production to put pressure on employers to agree to their demands
380
Positives of International Specialisation for producers (3)
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
Benefits of foreign aid
can promote development
382
3 key allocation decisions
what to produce
how to produce it
for whom to produce
383
Emigration definition
act of leaving the country to live in another country
384
Define a natural increase in population
when birth rate exceeds death rate
385
Examples of fringe benefits (3)
meals
healthcare
leisure facilities
386
How does comparative advantage change (2)
changing costs
changing quantity + quality of resources
387
Why firms may choose to stay small (6)
small size of market
consumer/owner preference
flexibility - can adapt easier to market changes
lack of financial capital
location
government support
388
Define external growth (2)
increase in firm size
caused by merging/taking over other firm
389
Define trade bloc
group of countries that remove trade restrictions between themselves
390
Define private costs
costs of production paid by firm
391
Effect of subsidy/tax on elastic demand
subsidy/tax will have greater impact on quantity sold with less price
392
Determinants of wages (5)
demand and supply
Bargaining power of workers
Government Policies
Public opinion
Discrimination
393
Define expansionary monetary policy (3)
increasing aggregate demand
increasing money supply
decreasing interest rate
394
Policies to control cost-push inflation (2)
improve education/training
subsidizing firms
395
Functions of trade unions (4)
negotiate for higher wages
negotiate for more job security
negotiate for better working conditions
negotiate for more fringe benefits
396
Reasons why aggregate demand may decrease (demand-side shocks) (4)
decrease in consumer confidence
financial crisis
war/pandemic
firms produce less because of decreased demand
397
Define a flexible labour force
labour force which adjusts quickly to changes in market
398
Define job security
how easily workers are likely to become redundant
399
Define technical economies of scale
new machinery that lowers production costs
400
Advantages of globalisation (2)
increases competition - consumers able to buy range of products at low prices
encourages firms to move production in most efficient locations
401
Why are consumers likely to benefit from elastic demand (2)
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
Consequences of unemployment on consumers (4)
decreased income
decreased confidence
decreased mental health
decreased chances of getting another job
403
Examples of secondary sector industries (3)
clothing
steel
electronics
404
How does exchange rate influence aggregate demand
decrease price of exchange rate --> encourage exports
405
How does money supply influence aggregate demand (3)
increase money supply --> encourages banks to lend --> increases consumer spending + increases firm investment
406
Advantages of International trade (3)
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
Define price mechanism
how supply and demand interacts through price to allocate resources
408
Define budget
relationship between government revenue and spending
409
Vicious circle of poverty for country (4)
low income
low saving
low investment
low productivity
410
Define direct tax
taxes on income/wealth
411
Define deregulation
removal of rules + regulations
412
Define supply side policy
measures designed to increase aggregate supply
413
Examples of inferior good
spam
414
How increases in living standards develop economy and benefit government (3)
greater income = more goods to be enjoyed
improved healthcare + education
distribution of income should be even
415
Government role as employer (4)
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
Define deflation
fall in prices of goods/services over time
417
State a factor which determines PES (C)
The cost of changing supply
418
Disadvantages of exposing domestic industries to market forces in economic development
firms may be unable to compete with foreign firms - established for long time + have economies of scale
419
Define sales tax
tax on sold products
420
Function of central banks (6)
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
How protectionism raises employment
enable domestic firms to expand + employ more people
422
Supply side policy measures (6)
improve education + training
lowering direct taxes --> increasing incentives
deregulation
privatisation
labour market reforms
subsidies
423
Define social cost
private cost + external cost
424
Effect of subsidy/tax on inelastic demand
subsidy/tax will have less impact on quantity sold
425
Define geographical mobility
ability to move a resource between different locations
426
Government policy measures to reduce poverty (6)
improving quantity + quality of education
economic growth
national minimum wage
encouraging multinational companies to set up in country
providing state benefits
land reform
427
Examples of economic agents (3)
individuals
governments
firms
428
Why may wages change over time? (5)
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
Define social optimum (2)
efficient allocation of resources
resources allocated to maximise social welfare
430
Explain cyclical unemployment
unemployment from lack of aggregate demand
431
What does a point on a PPC curve mean
shows full use of resources
432
Define trade in services as a component of the current account (3)
value of services sold abroad
value of services bought from foreign countries
e.g banking, construction services, financial services
433
Define a recession
reduction of real GDP over time
434
Define internal growth
firm increasing its size by enlarging existing plants/opening new ones
435
Define craft unions (2)
represent workers with particular skills
e.g plumbers and weavers
436
How loans encourage economic development (2)
can increase productivity
can increase living standards
437
Why may governments try to make the distribution of income and wealth more equal (2)
uneven distribution may be socially divisive
ensure everyone has access to a certain standard of living
438
Define disposable income
income after income tax has been deducted
439
Consequences of unemployment on economy (3)
government tax revenue decreased
unemployment benefits cost increase
economy decreases in productivity
440
Explanation of labour market reforms as a supply-side policy (5)
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
How reducing poverty leads to economic development and benefits government (3)
gives access to basic needs
improve health
more productive
442
Define a horizontal merger
merging with firm that produces same product at same stage of production
443
Define balance of payments (2)
record of all economic transactions
between country's residents and rest of world over particular period
444
State the PED value for an infinitely price inelastic graph/perfectly elastic graph
infinite
445
Reasons for globalisation (3)
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
Define devaluation
fall in the value of a fixed exchange rate
447
Define capital depreciation
loss in value of capital from it becoming worn out
448
Components of the current account balance (4)
trade in goods (exports-imports)
trade in services (exports - imports)
primary income
secondary income
449
When will birth rates be high (5)
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
Define public sector
part of economy controlled by government
451
Factors affecting strength of trade union (5)
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
How to construct a CPI (4)
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
Define aggregate demand (2)
total demand for country's product at given price level
consumer spending + spending of firms on capital + government spending + (exports - imports)
454
Name types of industrial action (4)
strike
protest outside workplace/in public places
"go start"
"work to rule"
455
Define consumer good
goods consumed for their own satisfaction
456
Define land
gifts of nature available for production
457
Define economically inactive
those not in the labour force
458
Explain inelastic PES
The quantity supplied will change by a smaller proportion than the change in price
459
Positives of International Specialisation for economy (2)
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
Define labour force (2)
people working
people actively seeking work
461
Define opportunity cost
next best alternative foregone when a decision is made
462
Define economic growth (2)
increase in output of economy
increase economy's productive potential (long term)
463
Name non-wage factors (6)
Job satisfaction
Type of work
Working conditions
Fringe Benefits
Job security
Career prospects
464
How paperwork ensure protectionism
may persuade foreign firms to switch to other market with tim-consuming paperwork
465
How productivity influences a country's exports + imports
more productive = lower labour costs + cheaper prices --> exports increase + imports decrease
466
Cause for geographical immobility of labour (5)
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
Define perfectly elastic supply
Unlimited supply at a fixed price
468
Name government policies/actions that can change wage rates (5)
National Minimum Wage
improved education
immigration policies
anti-discrimination laws
technology
469
Define division of labour
workers specialising in particular tasks
470
Define internal diseconomies of scale
higher long term average costs from firm growing too large
471
Define an economic good (2)
good which uses scarce resources in production
has an opportunity cost
472
Indicators of a country's international competitiveness (5)
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
Define variable costs
costs that change with output
474
Define capital mobility (2)
ability to move capital between different locations
ability to move capital between different uses
475
Define regressive tax
tax which takes larger percentage of income from poor
476
Define international trade/external trade
exchange of good/services between countries
477
Determinants of supply (5)
changes in costs of production (influenced by tax/subsidy)
technology improvements
weather conditions
disaster/war
discovery/depletion of commodities
478
Determinants of elasticity of supply of labour (5)
qualifications/skills required
level of employment
mobility of labour
degree of vocation (attachment)
time period
479
Disadvantages with import substitution (2)
may raise prices + reduce choice in short term
domestic industries may become reliant on government and not improve their efficiency + competitiveness
480
Define price stability
price level in economy not changing significantly over time
481
Why is GDP difficult to measure (3)
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
Reasons for giving out foreign aid (3)
help people
political support
commercial advantage
483
Define national champions
industries with potential to be world leaders
484
Disadvantages of overtime pay (3)
workers may become tired
productivity may decrease
product quality may decrease
485
Define general unions
represent workers with a range of skills/industries
486
Reasons for saving (5)
save sum of money for particular purpose
save to increase income
save for retirement
save for security
save for children (education, inheritance)
487
Net investment definition (2)
gross investment - depreciation
value of extra capital goods made
488
Define trade union
associations of workers formed to represent their interests
489
Explanation of privatisation as a supply-side policy (2)
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
Disadvantages of floating exchange rates (2)
fluctuates - difficult for firms to plan ahead
if demand for currency continue to rise = will not eliminate current account deficit
491
Disadvantages of International trade (6)
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
Causes of recessions (2)
decrease in aggregate demand (demand-side shocks)
decrease in aggregate supply (supply-side shcocks)
493
Define "circular flow of income"
movement of expenditure, income, output around economy
494
Solution to structural unemployment (2)
supply side policies
improve quality of training/education
495
Advantages of protectionism (5)
protects infant industries
protects declining industries
protects strategic industries
increases employment
protection from dumping
496
Aims of commercial banks (2)
profit for shareholders
liquidity
497
Define multidimensional poverty index
a measure of poverty based on education, health and standard of living
498
Why does liquidity matter to a commercial bank
ensure banks can meet customer requests to withdraw money
499
Define relative poverty (2)
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
Define contractionary fiscal policy (3)
reducing aggregate demand
increasing taxation
decreasing government spending
501
Define marketing economies of scale
marketing costs spread over more units of output
502
Define industry
group of firms producing the same product
503
Define inflation rate
percentage rise in price of goods/services over time
504
Define multilateral aid
aid from international organisations
505
How domestic GDP influences a country's exports + imports (2)
domestic income increases --> more imports bought + firms likely to buy more raw materials and capital
exports decrease + imports increase
506
Define a forward vertical merger
merging with firm further forward in supply chain
507
Solution to cyclical unemployment (2)
expansionary fiscal policy
expansionary monetary policy
508
Define wage rate
wage worker receives per unit of output/time
509
Define technological unemployment
workers redundant from tech advances
510
Define total cost (3)
total amount spent on factors of production
FC + VC
ATC x output
511
Examples of fixed costs (2)
rent
insurance
