Economics Flashcards
Opportunity cost
-the item that one decides not to buy in order to buy another
The factors of production
- Land: natural resources
- Labour: the work force
- Capital: assets
- Enterprise: something that brings them all together
The rewards of the factors of production
Land-> rent
Labour-> wage/salary
Capital-> interest
Enterprise-> profit
Free enterprise
Capitalism (eg. America)
-decisions made by private firms/individuals
-resources allocated by supply and demand
-private firms decide•what to produce
•how to produce
•for whom
Centrally Planned
Communism (eg. China)
-government makes decisions+allocates resources+do everything basically
Mixed economy
(Eg. Ireland)
- some made by entrepreneurs, some by gov.
- some resources allocated by supply and demand, others may the state planning system
GDP
Gross Domestic Product
-total value of goods and services produced in. Country in one year (includes foreign companies)
GNP
Gross national product
- total value of goods and services produced in a country in one year that REMAINS there (ie. Only Irish companies)
- includes profit made by Irish companies abroad
Causes of economic growth
- more business investment
- better machinery
- better skills
- new ideas
Benefits of economic growth
- better income
- creates more jobs
- more variety of products
- more tax revenue-> higher standard of living
Consequences of economic growth decline
- less goods and services available
- more cutbacks
- increase in social welfare payments
- less tax revenue
- increase in unemployment and emigration
Recession
When a country experiences a decrease in the total value of goods and services produced (GDP) for 6 months+
Rate of inflation
An increase in the genealogy price of goods and services in a country from one period to the next
What causes inflation?
- increase in production costs
- demand becomes higher than supply
- increase in tax
- cost of imported goods increase
Benefits of low inflation
- income buys more goods
- higher standard of living
- consumers are encourage to save more
- increase in consumer confidence
Inflation is calculated using the
CPI
Consumer price index
Deflation
-A decrease in the general prices of goods and services in a country from one period to the next
National budget
- Adocument which gives a detailed breakdown of government income and expenditure for the next 12 months
- prepared by the minister for finance in October/November
Current
Day to day or regular income and expenditure
Capital
Refers to long term or once off income and expenditure
Examples of government income
- income tax
- corporation tax
- VAT
- DIRT
- EU grants
- Sales of Semi-State Bodies
- Dividends of Semi State Bodies
Examples of government expenditure
Current
- social welfare payments
- wages to public sector
- hospital and school running costs
Capital
-building of new roads
Hospitals
Schools
-new Garda equipment
Deficit National Budget
-government do not have enough money to continue providing it’s services
-may need to borrow money
‘-> this money is called the Government Borrowing Requirement
National debt
Amount of money owed by the government
Debt servicing
-the payment of interest on the national debt
Economics
-how people/countries try to make good decisions on how to use a limited resource available to them
Formula for economic growth
Change in production 100
———————- X —– = GNP
Production in year 1 1
Formula for GNP and rate of Inflation
Change. Multiplied by 100
Year 1
