External Influences- Economic factors Flashcards
What is inflation?
Persistent general tendency of prices in the economy to rise.
What is consumer price index? (CPI)
A measure that examines the weighted average of a price of a basket of consumer goods/services.
How is inflation shown?
Inflation is shown in a positive percentage change
What causes inflation?
- Push in supply cost
- Pull in demand
What is growth domestic product? (GDP)
GDP (growth domestic product) is the total value of output produced in an economy in a year.
What is economic growth?
The annual percentage change in GDP. GDP is the size, Economic growth is the rate of which the size changes.
What can the government do to facilitate economic growth?
- Encourage investment in physical capital by offering subsidies or lowering taxation.
- Improve infrastructure through better transport. Increases the speed with which raw materials and finished products can be delivered. Also helps employees get to work faster.
- Improve quality of human capital by investing in education.
What is standard of living?
The amount of goods and services a person can buy with their income in a year.
GDP per capita
GDP
————
Population
What is an exchange rate?
The value of one currency in terms of another.
Example: An exchange rate of £1 to $1.30 means that an individual has to give up £1 to get $1.30
What is an strengthening exchange rate?
If the pound increases in value it is said to strengthen. This means that a pound will buy more of a foreign currency.
Example: £1 to $1.30 - £1240 to $1612
£1 to $1.50 - £1240 to $1860
What is a weakening exchange rate?
If the pound decreases in value it is sold to weaken. Meaning that it will buy less of a foreign company.
What is an import?
An import is a sale that leads to money leaving a country/economy.
What is an export?
An export is a sale which leads to money coming into a country/economy.
What’s the acronym simplifying exchange rates?
Strong Pound Imports Cheap Exports Dear
