Economics Flashcards
Define dependency ratio (2)
proportion of population that has to be supported by the labour force
Number in dependent age groups/Number in labour force x 100
How does PED change in an inward shift in demand
increases PED as consumers are more sensitive since they have less of a desire to buy more
How does the export of primary products cause problems for countries with low economic devlopment (3)
low economically developed countries tend to export primary products
price of primary products tends to fall
countries receive less for exports
Define monetary inflation
rise in price from excessive growth of money supply
Explain cost-push inflation
rise in price by higher cost of production
Causes of a current account deficit (6)
high exchange rate
high inflation
decreased productivity
increased domestic GDP
decreased foreign GDP
increased trade restrictions
Positive consequences of economic growth (3)
improve living standards
government tax revenue increase
political/economic standing increases
Define secondary income as a component of the current account (3)
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)
Define commercial banks
banks which make profit by providing banking services to households/firms
Define tax burden
amount of tax paid
Why is 0% unemployment impossible (2)
workers will always be changing jobs
workers can be unemployed for short periods
Define indirect tax
taxes on expenditure
Disadvantages of protectionism in employment and trade position (2)
risk of retaliation - may sell fewer exports (employment will not improve)
reducing imports of raw materials can increase domestic firm’s costs of production
Government reaction to MNCS (2)
positive - generate jobs, increase output
negative - domestic firms can become out of business
Define a piece rate system
wages based on amount workers produce
Negative impact of direct taxes (3)
may discourage effort
may discourage enterprise
may prevent people entering labour force
Causes of demand of currency (7)
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
How economic development in one country can promote economic development in another country (5)
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
Define capital
man-made goods used to produce other goods/services
Consequences of deflation (3)
good - increased output/employment
bad - decreased output/employment
bad - increase debt value
Arguments trade unions put up (4)
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
Define external diseconomies of scale
higher long term average costs from industry growing too large
Reasons why aggregate supply may decrease (3)
rise in raw material costs
trade unions
war/natural disaster/pandemic
Standard of living indicators for multidimensional poverty index (3)
cooking fuel
water
electricity
Define enterprise (2)
risk taking and decision making required to set up a business
managed other 3 factors of production
Net immigration definition
more people coming to live in the country than people leaving the country to live elsewhere
Define a conglomerate merger
merging with firm producing different products
3 types of unemployment (3)
Frictional
Structural
Cyclical
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
Define perfectly price inelastic (D)
Quantity demand remains constant whatever the price
Define tariff
tax on imported products –> increase its price
Define subsidy
payments by government to producers per unit of good produced
Define demand
the quantity that consumers are willing and able to purchase at any given price
What does a point inside a PPC curve mean
inidicates unemployed resources
Define incidence of taxation
distribution of burden of indirect tax
Shape of curve for average fixed costs
downwards sloping exponential
Examples of capital (2)
factories
machinery
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
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
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
(Gross) investment definition
spending by firms on capital
Define fixed costs
costs not affected by output
Examples of the tertiary sector (3)
banking
tourism
hospitality
Define consumer prices index (CPI)
measure of weighted average change of prices of basket of good/services over time
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
Internal migration
workers migrating from rural to urban areas in search of better jobs + high incomes
Define the secondary sector
processing of raw materials into finished/semi-finished goods
Define excise tax
taxes on certain domestically produced goods
Define a foreign exchange rate
price of one currency in terms of another currency
Name wage factors (4)
wages
overtime pay
bonuses
commision
Define specialisation at an international level
countries concentrating on producing products they are best at making + in high demand
Define private benefits
benefits of consumption enjoyed by consumers
State a factor which determines PES (T)
time taken to produce it - Producers are able to respond immediately to a change in price
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
Factors that influence value of country’s exports + imports (6)
inflation rate
exchange rate
productivity
domestic GDP
foreign GDP
trade restrictions
Why do governments aim for low unemployment (3)
unemployment is a waste of resources
unemployed suffer disadvantages
government tax revenue waste on unemployed
Define regional unemployment
unemployment caused by a decline in job opportunities in an area
Define a free good (2)
good which does not use up any resources in production
has no opportunity cost
Define balance of payments
record of country’s economic transactions with other nations
Define inheritance tax
tax on wealth which is passed on
Define a natural monopoly
industry where single firm can produce at lower average cost than other firms because of economies of scale
Determinants for quantity of labour (5)
population size
age structure of population
retirement age
school leaving age
attitude ot working women
Average variable cost curve
U-shaped
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
Define unemployment
being without a job while willing/able to work
Negatives of International Specialisation for economy (2)
over-reliance on other country’s demand
over-reliance on other country’s supply
Define liquidity
being able to quickly turn an asset into cash without a loss
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
What does a linear PPC curve show
constant opportunity cost
How increasing range of economic + social choices benefit the government (3)
increased freedom
increased access to healthcare + education –> improve productivity
improve quality of life
Define the primary sector (2)
extraction/collection of raw materials
first stage of production
Characteristics of money (7)
Durable
Portable
Divisible
Homogenous - identical
Recognizable
Limited in supply
Generally accepted
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
Define expansionary fiscal policy (3)
increasing aggregate demand
decreasing taxation
increasing government spending
Health indicators for multidimensional poverty index (2)
nutrition
child mortality
Define savings
disposable income which is not spent
What does a outward shift in the PPC curve mean (2)
increase in quantity/quality of resources
increase in productive potential
Why may governments want supply to be elastic
more effective in encouraging production
Causes of economic growth (2)
increase in aggregate demand
quantity/quality of resources increases
Define trade in goods deficit
expenditure on imported goods > revenue from exported goods
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
Purpose of bonuses (2)
reward workers who contribute to higher profits
provide incentive for workers
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
Define factors of production
resources used to produce goods
What does a bowed out PPC curve show
increasing opportunity cost
Define budget surplus
when government revenue > government spending
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
Define profit satisficing (2)
Making just enough dividends to keep shareholders happy
While pursuing other objectives
Factors influencing demand for capital (5)
price of capital goods
price of labour
interest rate
technology
expectations on future
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
Define average variable costs (2)
variable cost per unit of output
TVC/ouput
Determinant of PED (7)
addictiveness
time
Brand loyalty
Income
Substitutes
Necessity/Luxury
Ease and Cost of switching substitute
Firm objectives (5)
survival
growth
social welfare
profit satisficing
profit maximisation
Define “lender of last resort”
central banks lend to banks short on cash
Define labour
human effort used in producing goods
Define average fixed costs (2)
fixed costs per unit of output
total fixed costs/output
Define full employment
no cyclical unemployment
Define capital gains tax
tax on profits made on sold assets
Explain frictional unemployment
temporary unemployment from workers being in between jobs
Define employment
being involved in a productive activity which a payment is received
Define savings ratio
proportion of disposable income saved
Define rationalisation
eliminating unnecessary equipment to make firm more efficient
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
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
Define import substitution
protection of domestic industries against foreign competition by the government
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
Define the quaternary sector (2)
knowledge based service industries
information technology
Define comparative advantage
can produce at a low opportunity cost
Measures to increase living standards (6)
improving education + training
reducing unemployment
improving healthcare
increasing/improving housing stock
improving working conditions
reducing pollution
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
Define contractionary monetary policy (3)
decreasing aggregate demand
decreasing money supply
Increasing interest rate
Define fiscal policy (3)
influencing aggregate demand
using government spending
using taxation
Education indicators for multidimensional poverty index (2)
years of schooling
no. of children enrolled
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
Policies for deflation
expansionary fiscal/monetary policy
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
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
How does education increase wage rate
increases their demand as they are now more skilled
Explain structural unemployment (2)
unemployment caused by decline in industries/occupation
unemployment from changes in demand/production method
Advantages of capital intensive production (4)
gains technical economies of scale
more consistent
production maintained for long time
no industrial action
Measures to promote economic development (4)
Import substitution
expose domestic firms to market forces
attract MNCs (multinational corporations)
borrowing from abroad
Define microeconomics (2)
study of behaviour of individuals and firms
studies performance of individual markets
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
Examples of primary sector industries (3)
agriculture
mining
fishing
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
How does a country determine what it is best at producing
quantity and quality of resources
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
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
Disadvantages of protectionism of declining industries
producers may resist removal of protectionism
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
Define foreign direct investment
setting up/buying production units in another country
Measures of economic development (2)
real GDP per head
HDI
Disadvantages of protectionism of infant industries (2)
difficult to identify infant industries with potential
infant industries may be reliant on protection
Define unemployment rate (2)
percentage of labour force who are willing and able to work but are without jobs
Unemployment/Labour Force x 100
Disadvantages of bonuses
can cause resentment for not receiving bonus
Define specialisation
concentration on particular products/tasks
Define productivity (2)
output per factor of production per hour
measure of efficiency of FoPs
Define net migration
difference between immigration and emigration
Define normal good
product which demand increases when income increases
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
Define dumping
selling products in a foreign market below cost of production
Name the 4 main types of trade unions
Craft Unions
General Unions
Industrial Unions
White collar unions
Define appreciation
rise in value of floating exchange rate
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
Improve quality of enterprise (4)
better education
better training
better healthcare
more experience
Disadvantage of claimant count
those without unemployment benefits could still be unemployed
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
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
Define labour intensive production
production process that uses high proportion of labour
Define economically active (2)
being a member of the labour force
unemployed + employed
Advantages of external growth (2)
immediate increase in market share/income/assets
gain skills of staff working for other firm
Define embargo
ban on imports or exports
Factors influencing production decisions (5)
time/mobility of FoPs
balance of FoPs
productivity of FoPs
cost of FoPs
Risk of FoPs
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
Consequences of unemployment on firms (4)
low demand for firm products
decreased worker bargaining power
worker flexibility
greater availability of workers
Define trade in services
revenue from exported services > expenditure on imported services
Define economic development (5)
improvement in economic welfare
improving living standards
reducing poverty
increasing range of economic + social choices
increasing freedom + self-esteem
How land reform reduces poverty (2)
make ownership of land more equal
may increase output + living standards
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
Define gross domestic product (GDP)
total output of country
Disadvantages of labour intensive production (3)
productivity can vary (absenteeism)
shortages of skilled labour
worker more costly as requires wage and non-wage benefits
Name limiting factors of jobs (6)
opportunity cost
education/qualifications
poverty
discrimination
age
physical ability
Define occupational mobility
ability to move resource between different uses
Define minimum price (2)
encourage production of product
set above equilibrium
Macroeconomic aims of government (5)
Economic growth
Low Unemployment
Price Stability
Balance of Payments Stability
Redistribution of income
Explain demand-side deflation
lack of demand
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
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
Define credit items
money coming into the country
Define revaluation
rise in the value of a fixed exchange rate
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
Define depreciation
fall in value of floating exchange rate
Examples of variable costs (3)
steel
raw materials
workers
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
How can increasing the productive potential of an economy be achieved
rise in quality/quantity of FoPs
Define trade in goods surplus
revenue from exported goods > expenditure on imported goods
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
Market economic system disadvantages (3)
output not reflect full costs/benefits
private sector firms can abuse their power (monopoly)
causes income inequality
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
Explanation of deregulation as a supply-side policy (2)
increase competition cuz more firms in market
increase efficiency –> lowers cost of production + prices
Define labour mobility (2)
ability of labour to move locations
ability of labour to switch between different occupations
Define managerial economy of scale (3)
employing specialised managers
managers more efficient
lowers average total costs
Positive impact of direct taxes (3)
may encourage people with fixed financial commitments to work harder
redistribute income
good sources of tax revenue
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
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
Define strike
workers not working to put pressure on employer to agree to their demands
How MNCs encourage economic development (3)
increase employment
train + educate workers
bring in new technology
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
Define labour market participation rate
proportion of working age population who are in the labour force
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
How trade restrictions influences a country’s exports + imports
strict trade restrictions –> exports decrease
Causes of external economies of scale (4)
skilled labour force
good reputation - improve customer trust in firm
improved infrastructure
specialist suppliers of raw materials
Define absolute poverty
a condition where peoples’ incomes are too low to enable them to meet their basic needs
Methods of protectionism (7)
Tariff
Quota
Embargo
Exchange Control
Quality Standards
Paperwork
Subsidies
Define capital productivity (2)
average output per machine
total output/number of machines
Define trade in goods as a component of the current account
value of exported and imported goofs
Why are workers paid less in the primary sector
workers have less skills/qualifications
Causes of poverty (5)
unemployment
being in low-paid work
lack of skills/education
rising cost of living
being ill/growing old
How governments influence distribution of income (4)
taxation
provision of cash benefits
provision of freed state education + healthcare
using labour and macroeceonomic policies
Define white collar unions
represent white collar professions
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
Define external economies of scale
lower long term average costs from industry growing in size
How protection protects strategic industries (2)
essential for survival + development of country
provide protection to ensure consistent production + promote economic development
How quality standards ensure protectionism (2)
may require imports to reach high standards
dissuade other countries from selling or increase costs + prices
Factors influencing death rate (4)
nutrition
medical care
involvement in military action
lifestyle
Define private sector
part of economy owned/controlled by individuals
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
Define collective bargaining
process which representative of workers negotiate with employers’ associations
Define quota
limit placed on quantity of exports/imports
Why might producers want supply to be elastic
higher profits as they can adjust supply in response to price/demand
How exchange control ensure protectionism
restricting availability of foreign currency
What might trade unions pressure governments about (4)
political representation of workers
maternity/paternity rights
minimum wage
tax breaks for low income workers
Benefit of claimant count (2)
cheap
quick
Define financial economy of scale
banks charge lower interests rates to larger firms as they less risky
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
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
Define infinitely price inelastic/perfectly price elastic (D)
Unlimited demand but only at one price
Disadvantage of deregulation as a supply-side
possibility of monopoly forming
Regulation disadvantages (2)
regulations have to be followed –> expensive and time consuming
government can become unpopular
Define macroeconomics
study of whole economy
Causes of current account surplus (6)
low inflation
low exchange rate
high productivity
low foreign GDP
relaxed trade restrictions
high income + profit earned abroad
Why may people borrow (3)
financial difficulties
car/house/holiday
education/healthcare
2 types of structural unemployment
regional unemployment
technological unemployment
How foreign GDP influences a country’s exports + imports (2)
foreign income increases –> foreigners buy more products
exports increase
Explain supply-side deflation (2)
lower costs of production
improved productivity - unit costs fall
Disadvantages of horizontal integration (3)
different business methods
decrease communication (cause diseconomy of scale)
employees can be fired
Negative consequences of economic growth (4)
depletion of natural resources/pollution
inflation - increased demand –> increase prices
imports can be > exports
inequitable distribution of income
Define internal economies of scale
lower long term average costs from firm growing in size
Define potential economic growth
economy’s productive capacity
Limitations of GDP as a measure of living standards (2)
does not mention degree of income inequality
does not measure external costs
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
Effect of maximum price (3)
market disequilibrium - shortage
rationing - limit on amount to be consumed
queuing - first come first serve
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
Disadvantages of trade union membership
industrial action can decrease productivity
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
Define proportional tax
tax which takes same percentage of income from all taxpayers
How exchange rate influences a country’s competitiveness
decrease in exchange rate –> country’s products more attractive abroad
Define consumption
expenditure of households on consumer goods and income
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
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
Define aggregate supply
total amount of goods/services that domestic firms are willing to supply at a given price level
How to increase quantity of entrpereneurs (3)
good education system
lower taxes on firm’s profits
reduce government regulations
Define a floating exchange rate
an exchange rate in which price is determined by market forces
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
Define monopoly
a single seller in the market
State the PED for an unitary elastic graph
1
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
Calculating nominal GDP for another year
nominal GDP in base year x price index in base year/price index in present year
Function of commercial banks (4)
accept deposits - keep money safe
lend money
provision of foreign currency
advice with financial matters
Define strategic industries
important industries for economic development/safety of country
Define progressive tax
tax which takes larger percentage of income from rich
Policies to control demand-pull inflation
contractionary fiscal/monetary policy
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
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)
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
Define real income
income adjusted for inflation
Why is demand for labour more elastic in the long run
more time for firms to change production methods
Disadvantages of external growth (3)
differing business methods
more responsibility for owner
merge may be outside owner experience
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
Incidence of taxation for products with elastic supply
more of tax borne by consumers
Define a central bank (3)
government owned bank
provides banking services to government/commercial banks
operates monetary policy
How economic growth reduces poverty (2)
increase in aggregate demand
will increase output + create jobs
Define Free Trade
when there are no restriction on products bought abroad or sold to other countries
Define monetary policy (4)
influencing aggregate demand
using money supply
using interest rate
using exchange rate
Methods for calculating GDP (3)
adding output of all industries in country
income earned in producing output
aggregate demand
Disadvantage of subsidies as a supply-side policy (2)
opportunity cost of gov. spending
firms may be dependent on subsidies
Define debit items
money leaving the country
Define public goods
a product which is non-excludable and needs to be provided by government
How to improve quality of labour (4)
better education
better training
more experience
better healthcare
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
Determinants for demand of workers (5)
productivity
price of output
cost of capital
demand of product
size/profitability of firm
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
Define “derived demand”
demand for workers coming from demand of goods produced
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
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
How does supply-side policy influence government macroeconomic policies (3)
output + employment increase without inflation
produces better quality/cheaper products
increases exports + reduces imports
Measures to correct a current account surplus (2)
appreciation + revaluation
expansionary fiscal + monetary policy –> increase demand for imports
Definition of maximum price (2)
price set below equilibrium price
allows consumers to be more willing/able to buy certain product
Define industrial unions
represent workers in one industry
What does a movement along a PPC curve mean (2)
shows reallocation of resources
opportunity cost involved
Define rate of interest (2)
charge for borrowing money
payment for lending money
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
Define inferior good
product which demand decreases when income increases
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
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
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
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
How subsidies ensure protectionism
allow domestic firms to lower prices
Define nationalisation
when a private sector firm/industry is moved to public sector and becomes under government control
Define disinflation
fall in rate of inflation
Factors that influence net migration (2)
living standards at home and abroad
discrimination on groups/extent of control on people
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
Why is GDP per capita more accurate (2)
more accurate to people’s living standards
not affected by other changes in GDP
Define infant mortality rate
the number of deaths per 1000 live births in a year
Define state-owned enterprises
firms owned by government
How do governments redistribute income (2)
tax - rich taxed more than poor
government spending - housing/unemployment benefits and education/healthcare subsidized
Death rate definition
the number of deaths in a year per 1000 population
Define wealth
stock of assets including money
Advantage of horizontal integration (4)
more promotion opportunities
market share increase (more customers gained)
increases potential economies of scale
increased intellectual property
Advantages of fixed exchange rates
firms will know exact amount they will pay + receive in their own currency
Explanation of subsidies as a supply-side policy (2)
provide subsidies to small firms –> increase competition
encourage them to buy capital
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
Define absolute advantage
being able to produce a good using fewer resources than other countries
Define overtime pay
pay to workers that work more than usual working week
Reasons for government spending (4)
influence economic activity
reduce market failure
promote equity
pay interest on national debt
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
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
State a factor which determines PES (S)
Storage of good - Producers can respond to price changes better by changing stock levels –> PES more elastix
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
Define globalisation
process which the world is becoming interconnected through trade and other links
Define fringe benefits
benefits provided to workers by employers
Which factor of production is the most mobile
enterprise
Define national debt
amount government has borrowed
Regulation benefits (2)
backed up by law
easy to understand
Causes of internal diseconomies of scale (3)
miscommunication
lack of control
decreased employee relations
Explain elastic PES
The quantity supplied will change by a greater proportion than the change in price
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
Incidence of taxation for products with inelastic supply
more tax borne by producers
Why would consumers benefit from elastic supply
supply is responsive to consumer demand -changes in quantity demanded cause no shortages or surpluses
Negative effects of internal migration (2)
agricultural productivity may fall
no guarantee that jobs will be available in urban areas
Define capital intensive production
production process that uses high proportion of capital
Define a bonus
extra payment
Define unitary elasticity (D)(2)
proportion which quantity demanded changes = proportion at which price changes
Revenue stays the same at any price
Why may the government take control of a firm (2)
prevent foreign firms from taking over/merging
prevent consumers from being exploited
Define economic agents
decision makers in economy
Define planned economic system (3)
economic system
government makes all key economic decisions
resources are state-owned and allocated by directives
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
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
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
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
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
Define a time rate system
wages based on number of hours worked
What does competition result in (2)
lower prices
higher quality goods
How do central banks manage national debt
carries out borrowing for government (government bonds)
Define budget deficit
when government spending > government revenue
Define money
item acceptable as a means of payment
Define the tertiary sector
producing services
Define capital good
human-made goods used in production
Negative impact of indirect taxes (2)
regressive
can cause inflation
How exposing domestic industries to market forces encourages economic development
firms will be forced to become efficient without gov. support
Define supply
the quantity that produces are willing and able to sell at any given price
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
Disadvantages of state-owned enterprises (2)
inefficient - high prices and low quality
can be difficult to control as they are large
Define production
process of turning resources into goods
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
Ways of coping with an ageing population (3)
raise retirement age
encouraging workers to save for retirement
encourage immigration of younger skilled workers
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
Define labour productivity (2)
average output per worker
total output/number of workers
Disadvantage of vertical integration (2)
lack of knowledge to operate acquired firm
no EoS (production process in each stage different)
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
Government role as producer
products believed to be important/essential
Define free international trade
exchange of goods/services between countries without restrictions
Define a local government
government which administers policies within area of country
Define a backward vertical merger
merging with firm backward in supply chain
How does PED change in an outward shift in demand
reduces PED as consumers are less sensitive since they want to buy more
Disadvantage of privatisation as a supply-side policy (2)
possibility of monopoly forming
private firms less willing to take social benefits into account
Define bilateral aid
aid from one government to another
Birth rate definition
the number of births in a year per 1000 population
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
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
How quality of capital can improve
better technology
Factors of borrowing (4)
interest rate
confidence
social attitudes
availability of loans/overdrafts - if easier to borrow, borrowing increases
State the PED value for a perfectly price inelastic graph
0
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
Disadvantages of conglomerate integration (2)
lack of knowledge to operate acquired firm
increase in conglomerate size –> decreased competition –> monopoly
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
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
Define money supply
all money in economy at any one time
Examples of land (2)
timber, coal
Why governments seek to redistribute income (2)
poverty causes hardships
social unrest from gap between rich and poor
Explain demand-pull inflation
rise in price by excess demand
Curve of Total costs (2)
same as TVC
shifted up by TFC
Define perfectly inelastic supply
Supply is fixed no matter the price
Define market failure
when free market delivers inefficient allocation of resources
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
Define a purchasing economy of scale (2)
suppliers provide volume-based discounts on raw materials
lowers average total costs
Disadvantage of improved education + training as supply-side policy
education + training may not be in right area
Variable cost curve
Upwards sloping graph
Define industrial action
workers disrupting production to put pressure on employers to agree to their demands
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
Benefits of foreign aid
can promote development
3 key allocation decisions
what to produce
how to produce it
for whom to produce
Emigration definition
act of leaving the country to live in another country
Define a natural increase in population
when birth rate exceeds death rate
Examples of fringe benefits (3)
meals
healthcare
leisure facilities
How does comparative advantage change (2)
changing costs
changing quantity + quality of resources
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
Define external growth (2)
increase in firm size
caused by merging/taking over other firm
Define trade bloc
group of countries that remove trade restrictions between themselves
Define private costs
costs of production paid by firm
Effect of subsidy/tax on elastic demand
subsidy/tax will have greater impact on quantity sold with less price
Determinants of wages (5)
demand and supply
Bargaining power of workers
Government Policies
Public opinion
Discrimination
Define expansionary monetary policy (3)
increasing aggregate demand
increasing money supply
decreasing interest rate
Policies to control cost-push inflation (2)
improve education/training
subsidizing firms
Functions of trade unions (4)
negotiate for higher wages
negotiate for more job security
negotiate for better working conditions
negotiate for more fringe benefits
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
Define a flexible labour force
labour force which adjusts quickly to changes in market
Define job security
how easily workers are likely to become redundant
Define technical economies of scale
new machinery that lowers production costs
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
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
Consequences of unemployment on consumers (4)
decreased income
decreased confidence
decreased mental health
decreased chances of getting another job
Examples of secondary sector industries (3)
clothing
steel
electronics
How does exchange rate influence aggregate demand
decrease price of exchange rate –> encourage exports
How does money supply influence aggregate demand (3)
increase money supply –> encourages banks to lend –> increases consumer spending + increases firm investment
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
Define price mechanism
how supply and demand interacts through price to allocate resources
Define budget
relationship between government revenue and spending
Vicious circle of poverty for country (4)
low income
low saving
low investment
low productivity
Define direct tax
taxes on income/wealth
Define deregulation
removal of rules + regulations
Define supply side policy
measures designed to increase aggregate supply
Examples of inferior good
spam
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
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
Define deflation
fall in prices of goods/services over time
State a factor which determines PES (C)
The cost of changing supply
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
Define sales tax
tax on sold products
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
How protectionism raises employment
enable domestic firms to expand + employ more people
Supply side policy measures (6)
improve education + training
lowering direct taxes –> increasing incentives
deregulation
privatisation
labour market reforms
subsidies
Define social cost
private cost + external cost
Effect of subsidy/tax on inelastic demand
subsidy/tax will have less impact on quantity sold
Define geographical mobility
ability to move a resource between different locations
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
Examples of economic agents (3)
individuals
governments
firms
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
Define social optimum (2)
efficient allocation of resources
resources allocated to maximise social welfare
Explain cyclical unemployment
unemployment from lack of aggregate demand
What does a point on a PPC curve mean
shows full use of resources
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
Define a recession
reduction of real GDP over time
Define internal growth
firm increasing its size by enlarging existing plants/opening new ones
Define craft unions (2)
represent workers with particular skills
e.g plumbers and weavers
How loans encourage economic development (2)
can increase productivity
can increase living standards
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
Define disposable income
income after income tax has been deducted
Consequences of unemployment on economy (3)
government tax revenue decreased
unemployment benefits cost increase
economy decreases in productivity
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
How reducing poverty leads to economic development and benefits government (3)
gives access to basic needs
improve health
more productive
Define a horizontal merger
merging with firm that produces same product at same stage of production
Define balance of payments (2)
record of all economic transactions
between country’s residents and rest of world over particular period
State the PED value for an infinitely price inelastic graph/perfectly elastic graph
infinite
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
Define devaluation
fall in the value of a fixed exchange rate
Define capital depreciation
loss in value of capital from it becoming worn out
Components of the current account balance (4)
trade in goods (exports-imports)
trade in services (exports - imports)
primary income
secondary income
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
Define public sector
part of economy controlled by government
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
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)
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)
Name types of industrial action (4)
strike
protest outside workplace/in public places
“go start”
“work to rule”
Define consumer good
goods consumed for their own satisfaction
Define land
gifts of nature available for production
Define economically inactive
those not in the labour force
Explain inelastic PES
The quantity supplied will change by a smaller proportion than the change in price
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
Define labour force (2)
people working
people actively seeking work
Define opportunity cost
next best alternative foregone when a decision is made
Define economic growth (2)
increase in output of economy
increase economy’s productive potential (long term)
Name non-wage factors (6)
Job satisfaction
Type of work
Working conditions
Fringe Benefits
Job security
Career prospects
How paperwork ensure protectionism
may persuade foreign firms to switch to other market with tim-consuming paperwork
How productivity influences a country’s exports + imports
more productive = lower labour costs + cheaper prices –> exports increase + imports decrease
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
Define perfectly elastic supply
Unlimited supply at a fixed price
Name government policies/actions that can change wage rates (5)
National Minimum Wage
improved education
immigration policies
anti-discrimination laws
technology
Define division of labour
workers specialising in particular tasks
Define internal diseconomies of scale
higher long term average costs from firm growing too large
Define an economic good (2)
good which uses scarce resources in production
has an opportunity cost
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
Define variable costs
costs that change with output
Define capital mobility (2)
ability to move capital between different locations
ability to move capital between different uses
Define regressive tax
tax which takes larger percentage of income from poor
Define international trade/external trade
exchange of good/services between countries
Determinants of supply (5)
changes in costs of production (influenced by tax/subsidy)
technology improvements
weather conditions
disaster/war
discovery/depletion of commodities
Determinants of elasticity of supply of labour (5)
qualifications/skills required
level of employment
mobility of labour
degree of vocation (attachment)
time period
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
Define price stability
price level in economy not changing significantly over time
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
Reasons for giving out foreign aid (3)
help people
political support
commercial advantage
Define national champions
industries with potential to be world leaders
Disadvantages of overtime pay (3)
workers may become tired
productivity may decrease
product quality may decrease
Define general unions
represent workers with a range of skills/industries
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)
Net investment definition (2)
gross investment - depreciation
value of extra capital goods made
Define trade union
associations of workers formed to represent their interests
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
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
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
Causes of recessions (2)
decrease in aggregate demand (demand-side shocks)
decrease in aggregate supply (supply-side shcocks)
Define “circular flow of income”
movement of expenditure, income, output around economy
Solution to structural unemployment (2)
supply side policies
improve quality of training/education
Advantages of protectionism (5)
protects infant industries
protects declining industries
protects strategic industries
increases employment
protection from dumping
Aims of commercial banks (2)
profit for shareholders
liquidity
Define multidimensional poverty index
a measure of poverty based on education, health and standard of living
Why does liquidity matter to a commercial bank
ensure banks can meet customer requests to withdraw money
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
Define contractionary fiscal policy (3)
reducing aggregate demand
increasing taxation
decreasing government spending
Define marketing economies of scale
marketing costs spread over more units of output
Define industry
group of firms producing the same product
Define inflation rate
percentage rise in price of goods/services over time
Define multilateral aid
aid from international organisations
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
Define a forward vertical merger
merging with firm further forward in supply chain
Solution to cyclical unemployment (2)
expansionary fiscal policy
expansionary monetary policy
Define wage rate
wage worker receives per unit of output/time
Define technological unemployment
workers redundant from tech advances
Define total cost (3)
total amount spent on factors of production
FC + VC
ATC x output
Examples of fixed costs (2)
rent
insurance
