everything so far Flashcards
4 main government objectives?
- Economic growth
- Low inflation
- High employment / low unemployment
- Balancing imports and exports
Name the government policies?
- Fiscal policies
- Monetary Policies
- Supply-side policies
Define economic growth?
Economic growth is defined as a rise in the productive capacity of the economy.
How is economic growth measured?
Gross domestic product (GDP)
Define GDP?
GDP measures the value of all goods and services produced in an economy over some time ( usually a year)
Causes of economic growth?
- Investment
- Changes in technology
- A larger workforce (Achieved through immigration)
- Education and training
- Natural resources
- Government policies ( Monetary and fiscal policy)
Benefits of economic growth?
- Higher GDP implies the country is richer and living standards are higher
- If the economy is producing more it is likely that more people are employed. This reduces the cost of unemployment and reduces absolute poverty.
Costs of economic growth?
- Environmental costs: greater pollution
- Air pollution: burning of fossil fuels
- Global warming
- loss of renewable resources
- inequalities of income and wealth: gap between rich and poor widens
Cyclical Unemployement?
Unemployment caused by the economic cycle (recession , boom)
Structural unemeployement?
Unemployment is caused by a lack of demand in a particular industry.
Frictional unemployement?
Unemployment is caused when people are moving between jobs. E.G looking for a new job
What does the claimant count measure?
The number of people receiving benefits
What are the economic consequences (costs) of unemployement for an unemployed worker?
- Reduced disposable income
- Low self-esteem
- possibility of absolute and relative poverty
What are the economic consequences (costs) of unemployement for a business?
- May be less consumer demand for their products when unemployment is high
- May need to spend money on re-training as the worker has been out for a long time.
What are the economic consequences (costs) of unemployment for a government
- Tax revenue falls from both direct taxes
- The government may have to pay for some of the social costs of unemployment
- Government expenditure on benefits will rise
Define the rate of inflation?
The rate at which general price levels rise over time
What is price stability?
It means that the general level of prices is kept at a constant or is growing at an acceptably low rate over time.
How is inflation measured?
Consumer Price Index (CPI)
Define Demand-Pull Inflation?
It is caused when aggregate demand increases in the economy so that there is excess demand.
Two forms of Taxation?
- Direct Taxation
- Indirect Taxation
Examples of Direct Taxation?
- Inheritance Tax: tax on the wealth when it is passed when a person dies
- Council Tax: charges by the local council on the value of our houses
- Business rates: charged by the local council on businesses
Example of indirect taxation?
- Value added tax
2. Excise duties
Other Government objectives?
- Reduce inequality
2. Manage enviroment change
What is the inflation target?
2%
Causes of inflation?`
- Demand-pull inflation
- Cost-push inflation
- restriction in the supply of products
- Monetary inflation
Government policies to control inflation?
- control demand: reducing disposable income means less spending
- Control costs: can help with cost-push inflation by reducing business tax rates
- Direct control: Keep public sector workers on low pay rises
Examples of sources of income?
- Pensions
- Interest from saving
- dividends from shares
- rent from investment property
Wealth?
Wealth is the stock of assets that have market value
Examples of wealth?
- Saving deposits
- Property
- Household items like furniture
- Pension Funds
- Life assurance
- Investments
- Antiques
- Classic cars
Why is income unequally distributed in the UK?
- Wage differences
- Poor households depend on benefits
- Age: younger people earn less than middle-aged people
- Gender pay gap
Why is wealth unevenly distributed in the UK?
- Different attitudes to spending and saving
- inheritance
- some households spend all their income whilst others save
Consequences of inequality?
- Can lead to poverty and deprivation
- homeless people cannot claim benefits
- some households will be living in relative poverty
