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Economics > Stuff > Flashcards

Stuff Flashcards

1
Q

Cyclical unemployment

A

The impact of economic recession or expansion on employment level

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2
Q

Frictional unemployment

A

Voluntary employment transitions within an economy

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3
Q

Real wage unemployment

A

When wages are set above the equilibrium causing supply of labour to be greater than demand

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4
Q

Natural unemployment

A

The minimum unemployment rate resulting from real or voluntary economic forces

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5
Q

Productivity

A

The output produced per factor input in a period of time

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6
Q

Production

A

Converting factors of production into outputs (something to sell)

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7
Q

What can a reduction on productivity cause

A

Output per worker decreases

Increased average costs so may increase prices of goods to maintain same level of profit

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8
Q

3 advantages of higher productivity

A
  • decrease in price of goods as there is a decrease in AC which may also lead to increased employment

-higher profits to be re-invested back into the business for long term growth

-higher wages for workers

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9
Q

3 ways in which productivity can be increased

A

-specialisation

-lnvestment to increase human capital

-subsidise firms to upgrade their technology or engage in r&d

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10
Q

Define living standards

A

The qty and quality of material goods and services available to a given population

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11
Q

How are living standards normally measured

A

They are normally measured with Gdp

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12
Q

5 reasons why an increase in gdp may not cause a rise in living standards

A

-increase in production from firms reinvestment -> increase in pollution

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13
Q

What is a better measure of living standards

A

Purchasing power parity

Adjusts GDP to account for the cost of living.

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14
Q

4 reasons for inflation

A

-indirect taxes -> cost passed onto consumer

-fall in exchange rate -> increased costs of production -> cost passed onto consumer

-decreasing interest rates -> less incentive to save -> increase in AD -> Demand pull inflation

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15
Q

3 reasons why inflation above 2% is regarded as bad

A

Idk

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16
Q

Give 5 reasons for unemployment

A

-occupational immobility

-geographical immobility

-cyclical unemployment

-frictional unemployment

-real wage unemployment

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17
Q

3 reasons why unemployment is regarded as bad

A

-high levels of unemployment -> decrease in consumption -> decrease in GDP

-burden on government with unemployment benefits

-

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18
Q

What Graph would be used to show the relationship between inflation and unemployment

A

Keynsian LRAS

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19
Q

Reasons to raise taxes

A

-redistribute income to benefit LIH

-increase spending on public sector e.g. NHS, public transport

-to regulate behaviour e.g. sugar tax to stop spending on sugary foods and drinks to reduce obesity

20
Q

What is a direct tax

A

A tax that is directly paid to an individual or entity e.g. income tax

21
Q

What is an indirect tax

A
22
Q

Purchasing power parity

A

How many units of one countries currency are needed to buy the same basket of goods and services as can be bought with a given amount of another currency

E.g. Norway (high cost of living) there is a downward adjustment to a nations purchasing power parity

23
Q

Real GDP

A

The value of national output adjusted for inflation and measured at constant prices

24
Q

Gross Domestic product

A

The total value of goods and services produced within a country

25
Q

Gross national product/Gross national income

A

The total value produced by factors of production owned by a country, no matter the location

GDP + income from overseas assets

E.g. overseas property investment

26
Q

How is standard of living measured and how is it improved upon

A

Measured with real GDP per capita

Improves when a country sustains a rise in real income per capita

Benefits:
Inc human capital

More people in properly paid work

Living wage can help to lift labour productivity

Accessible and high quality public services

27
Q

Marginal propensity to consume

A

The proportion of an increase in income that gets spent on consumption

28
Q

Customs union

A

Free trade areas where there are also standard tariffs imposed on non-members

29
Q

Yield

A

The annual return an investor will get from the bond

The less someone pays for a bond, the higher its yield

Yield = (coupon / market price) x 100

30
Q

Interest in bonds

A

The amount that is paid to the bondholder per annum

The amount paid is the coupon

31
Q

Bank rate

A

The interest rate a nations central bank charges to its domestic banks to borrow money in order to stabilize the economy

32
Q

Financial market

A

a market where financial assets or securities are traded

E.g. bonds, real estate, stock market

33
Q

Financial institution

A

a company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange

34
Q

Personal loans

A

Loans to individuals to be paid back over a small number of years

Secure - bank can force sale of asset if the loans cost isn’t repaid

Unsecured- much riskier loan therefore higher rate of interest

35
Q

Equity finance

A

Raised by selling shares in a company

Person providing finance becomes a shareholder and claims some ownership. Entitles to a share of the firms profits in the form of dividends

36
Q

Debt finance

A

Borrowing money that has to be paid back (usually with interest)

Can be borrowed from financial institutions e.g. banks

37
Q

Money markets

A

Provide short-term finance to e.g. banks, individuals etc.

Short term debt will have a maturity upto 1 year (can be as little as 24 hours)

38
Q

Capital markets

A

Provide firms, governments with medium- longterm finance

Can raise capital by issuing bonds or shares, borrowing from banks

39
Q

Primary market

A

For new share and bond issues

40
Q

Secondary market

A

Where existing securities are traded(e.g. stock exchange). This increases their liquidity (selling them makes it easier to ‘convert them to spendable cash’)

41
Q

Foreign exchange markets

A

Where different currencies are bought and sold

Usually done to allow international trade and investment

Split into 2 markets -

Spot market - transactions happening now

Forward market - transactions that will happen at an agreed time in the future

42
Q

Main roles of commercial banks

A

Accept savings

To be financial intermediaries (move funds from lenders to borrowers)

To lend to individuals and firms

To allows payments from one person or firm to another

Split into 2 types:

Retail banking - providing services for individuals and smaller firms (e.g. savings accounts, mortgages)

Wholesale banking - dealing with large firms banking needs

Help firms grow by providing loans and financial advice, and facilitiating overseas trade

43
Q

Main roles of investment banks

A

Don’t take deposits from customers

-arrange share and bond issues

-offer advice on raising finance, and on mergers and aqusititions

-buy and sell securities (bonds, shares)

Investment banks also engage in higher risk, but potentially very profitable activities

44
Q

Name different financial institutions

A

Pension funds - collect peoples pension savings and invests them into securities. When the client returns, it pays out their savings and the returns generated. They also provide longterm, large scale investment in companies

Insurance firms - charge customers fees to provide insurance cover against all kinds of risk. It is important to the economy e.g. business can ensure against the risk of customers not paying (encouraging trade)

Hedge funds - firms that invest pooled funds

45
Q

Market bubble

A

High estimates of future asset prices can lead to market bubbles

Investors expecting price of asset to continue to rise -> investors overpay -> market bubble (prices in the market are much greater than the assets true worth)

Investors lose confidence -> bubble will burst as investors will rush to sell their assets to avoid large losses -> leads to price plummeting ->leaving investors with large debts

Economics (38 decks)

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