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Economics GCSE > Economics term 1 > Flashcards

Economics term 1 Flashcards

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1
Q

Definition of macroeconomic objectives

A

macroeconomic objectives: Aims that a government wants to achieve

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2
Q

Define inflation.

A

Inflation is the rise of prices of goods and services in an economy

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3
Q

What are the macroeconomic economic objectives?

A 
have low unemployment rates
protect the environment
increase economic growth
stabilise inflation
have a positive balance of payments
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4
Q

What is GDP? And what does it stand for?

A

GDP (gross domestic product) measures economic growth by looking at a countries income over a certain amount of time (usually one year)

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5
Q

What are the limitations of GDP?

A

Population changes: population growth must be taken into account for when analyzing growth. If GDP increases that doesn’t mean that people are better off.

Income distribution gap: the difference between a high-income earner and a low-income earner.

Inflation: price increases are not taken into account

Living standards: does not measure living standards

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6
Q

How do you calculate a percentage change?

A

Difference(original and new)
——————————————-x 100
original

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7
Q

What are the factors that can affect the supply of goods?

A 
Changes in technology
Subsidies
Price
Cost of production
Indirect taxes
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8
Q

What is a subsidy?

A

Subsidies are grants given by the government to businesses in order to reduce costs and red tape.

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9
Q

What is a policy instrument?

A

Tools a government uses to help achieve their economic objectives.

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10
Q

What is an economic policy?

A

The different types of actions taken by a government when controlling the economy.

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11
Q

Define Fiscal Policy.

A

Fiscal policies involve using taxation and government expenditure to influence aggregate demand.

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12
Q

define Monetary policies.

A

Using policy instruments like interest rates to influence aggregate demand.

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13
Q

List some types of government expenditure.

A

education
social security
transport
industries

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14
Q

What is the current account?

A

Where all exports and imports are recorded

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15
Q

What is the balance of trade?

A

The trade between visible imports and visible exports.

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16
Q

What are the main types of unemployment?

A

Technological unemployment
Seasonal unemployment
Frictional unemployment
cyclical unemployment

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17
Q

What are some types environmental taxation?

A

Aggregate levy: Tax on rocks, sand, and gravel that are dug up
Landfill tax: added on the disposal of waste in landfill sites.

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18
Q

What are some types of direct taxes?

A

Income tax: tax taken from a persons income
National insurance contributions: Like income tax but used specifically for pensions, benefits and the NHS
Corporation tax: Taken from the profits made by limited companies like partnerships and sole traders.

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19
Q

What are some types of indirect taxes?

A

VAT: main tax on spending in the UK
Custome duties: tax added on imports
Vehicle excise duty: Paid by the owners of vehicles
Duties; heavy taxes on alcohol and tobacco.

20
Q

What are the effects of Inflation?

A
  • Discourages foreign investment
  • increases government spendings
  • increases unemployment
  • Workers demand higher income
21
Q

What is a mixed economy?

A

It has both private and public sectors.

22
Q

What is PED?

A

It measures the responsiveness of demand to a change in price.

23
Q

How do you calculate PED?

A

% change in price

24
Q

What is income elasticity of demand (YED)?

A

It is the responsiveness of demand to a change of income

25
Q

What is international trade?

A

International trade is the exchange of goods and services overseas between countries.

26
Q

What are some advantages of international trade?

A
  • Allows countries to obtain goods that cannot be produced domestically
  • Obtaining goods that can be bought more cheaply overseas rather than producing them (could be due to specialization or cheap labor force)
  • Improves customer choice
27
Q

What are some disadvantages of international trade (same for free trade)?

A
  • can cause overspecialization (rely on trade too much)
  • increases global warming
  • May cause unemployment when demand patterns change
28
Q

What is free trade?

A

This is when governments open access to the markets in its countries. No restrictions are placed on goods coming in and out.

29
Q

What is protectionism?

A

Measures taken by the government in order to decrease/restrict trade.

30
Q

Why would a government use protectionism?

A
  • Protect jobs: If they needed protection from overseas competitors to save jobs
  • Preventing the entry of demerit goods: prevent goods that may harm people
  • Prevent dumping: selling overseas products at an extremely low price so that domestic goods have lower demand.
  • Improving the current balance: Encourages consumers to buy domestic goods
31
Q

What are the types of protectionism?

A
  • Tariffs: taxes put on imports
  • Administrative barriers: Strict barriers to entry, an increase of red tape, strict safety and health regulations
  • Quotas: limit on the amount allowed into the country
  • Subsidies: money given to domestic firms in order to decrease costs= selling at a lower price.
32
Q

What are the problems associated with protectionism?

A
  • Retaliation from other countries, a trade war
  • loss of free trade benefits: consumers will end up paying more for the goods/services
  • limit on choices: there will be fewer choices available for consumers
  • other policies may be more effective: like supply-side policies
33
Q

What are some supply-side policies?

A
  • privatization: transfers a business from the public sector to the private sector
  • deregulation: ‘red tape’- a lot of business legal paperwork
  • improve flexibility in labor markets and restore the incentives to work
34
Q

What are supply-side policies?

A

Used to help increase AS (aggregate supply) in an economy.

35
Q

What is globalization?

A

The growing integration of the world’s economies.

36
Q

What factors have allowed for globalization?

A
  • Better technology: Online shopping, E commer (online retail) and ICT. B2B- business to business B2C business to consumer
  • Deregulation: fewer barriers allow for more trade and expansion of companies
  • Better infrastructure: roads, rail, and air have improved and it is cheaper to fly goods/services overseas.
  • Saturated economies: they benefit where economies (international) where costs are minimized
37
Q

What is a multinational company?

A

Large and powerful firms that sell goods and services to global markets, own production plants and have facilities globally.

38
Q

FDI:

A

When a company makes investments in a foreign country, eg McDonalds.

39
Q

What are some factors that encourage FDI’S?

A
  • investments in infrastructure
  • offering tax breaks, subsidies, and grants
  • lifting red tape
  • investments in education (higher skilled workers)
40
Q

What are exchange rates?

A

The value of one currency compared to another

41
Q

What are exchange rates determined by?

A

Market forces (demand and suppy)

42
Q

What are the factors that affect the demand for a currency?

A
  • Demand for exports: as exports increase the demand for that currency will also increase
  • inward foreign direct investment: as countries come inward yo invest the demand for that currency will increase
  • interest rates: as interest rates increase more firms will be encouraged to save money in those banks, increasing the demand for the currency
43
Q

What are the factors that affect the supply of a currency?

A
  • outward foreign direct investment: if certain British multinationals develop British interest rates abroad, such as building their shops abroad, the supply of the British currency will increase
  • interest rates: if the interest rates are higher in other countries the supply, savers in one country may choose to save their money in other countries, decreasing the supply of that currency
  • the demand for imports: imported goods and services must be bought with a foreign currency
44
Q

What is the impact of a rising exchange rate on exports?

A

The demand for exports is likely to fall because they are now dearer

45
Q

What is the impact of a rising exchange rate on imports?

A

The demand for imports will rise the goods are now cheaper

46
Q

What is a negative externality?

A

A negative externality is a spillover of an economic transaction that negatively impacts a party that is not directly involved in the transaction

47
Q

What is economies of scale

A

It is when average costs decrease as a business grows

Economics GCSE (1 decks)

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