Economy and Business Flashcards
centrally planned
where the gov makes all the decisions on what goods and services are produced
eg Cuba
free economy (market)
where the entrepreneur decides what goods and services are produced
eg USA
mixed economy
a combination of the gov and the entrepreneur decide what goods and services are produced
eg Ireland
how gov affects business
budgetary policy employer taxation government planning infrastructural development regional development local government government agencies
budgetary policy
prepared annually and sets out the sources of revenue for the year and all the spending it intends to do in the year
divided into current and capital
employer
gov is biggest employer in Ireland
employs directly through public sector or indirectly through public private partnerships eg motorways
taxation
decisions can have positive/ negative effects on business activity
lower tax improves business environment
infrastructural development
ability of a business to operate efficiently depends greatly on the quality of a country’s infrastructure eg road, rail
local government
local authorities give support to businesses in :
essential services
grants
train workforce
government agencies
allocate grants to enterprise to help create a suitable climate for business activity
eg Enterprise Ireland, IDA Ireland
IDA Ireland
responsible for attracting foreign direct investment
offer funding, information and provide networking contacts
Enterprise Ireland
helps Irish indigenous companies achieve global success
offer funding, information, advice, networking contacts and help them improve their productivity to improve competitiveness in the market
how gov could help Irish businesses
- increase capital expenditure eg build new infrastructure creating jobs and making ireland more attractive
- gov state agencies eg IDA Ireland
- increase current expenditure eg social welfare payments = greater spending power
- invest in education and training
why does gov regulate business
protect consumer - consumer laws
protect environment - EPA
protect employees - WRC etc
protect general public - GDPR
how does gov affect labour force
largest employer in Ireland
national wage agreements
keep tax low to allow expansion + more workers employed
gov regulation - unfair dismissals
inflation
sustained increase in the general level of prices in a country from one year to the nest (usually a year)
measured by CPI
unemployment
percentage of people in an economy willing and able to work but who cannot find work
problems of high unemployment
reduced demand, fall in earnings
gov revenue falls
gov spending rises
increase in emigration
benefits of high unemployment
easier recruitment
wage levels stabilise
interest rates
cost of borrowing
rates depend on the demand and supply of money
controlled by ECB
high interest rates
demands for goods fall
business investment falls
entrepreneurship decreases
may lead to an increase in prices
low interest rates
increases spending
may lead to inflation
increase in investment
increase in business confidence
high tax affecting business
demand of consumers falls
high vat lowers demand
high rate of corp tax removes incentive to invest
high corp tax takes away from profits
low tax affecting business
increases firms after tax profit
vat falls - increased demand
decreased PAYE strengthens spending power
less revenue to gov
exchange rates
cost of one currency in terms of another
strong € = exports will be less competitive
strong € = foreign goods become cheaper in Ireland
when value of a currency falls
exports are cheaper
tourism benefits
imports are more expensive
imported inflation
economic variables
interest rates
inflation
unemployment
taxation
positive impact of business on the economy
employment
spin offs
inflation - competition between businesses can lead to lower prices, lower inflation
negative impact of business on the economy
environment
prices
competition - small businesses may not survive
pressure on infrastructure
suitable business climate
low interest rates low inflation low unemployment low taxation low national debt stable exchange rate
