The economic and business environment Flashcards
What are the five sectors of the economy?
Household Sector, Firm sector, Financial sector, government sector and the overseas sector
What is leakage? Use example
A leakage is when money leaves the circular flow of the economy, an example of this is when you buy and import something from overseas as it leaves our economy.
What is an injection? Use an example
An injection is when money is injected or added into the circular flow of the economy, an example of an injection is when a country buys goods or services from us.
Does investing expand or contract the economy?
Expand
Does higher taxes expand or contract the economy?
Contract
Does reduced government spending expand or contract the economy?
Contract
What is the household sector made up of?
Consumers
What does the firm sector do?
Sells resources and labour in return for income
How do resources, production and consumption relate?
Resources are sold by the firm sector, which is then used to make goods and services (Production), which is then sold to the household sector which they purchase with their income from the firm sector (Consumption)
What is the financial sector and what does it consist of?
The financial sector consists of financial institutions like banks that provide a middle ground for people and their savings/investments
What is the difference between savings and investments and how do they affect the economy differently?
Savings means to put money away for later use, making it a leakage as that money leaves the economy. An investment is borrowing or spending money to grow something, this grows our economy and it is an injection.
What are the key roles of the government sector?
Taxation: (Leakage) collecting tax from people or businesses when they make a income or profit.
What does the overseas sector invlove?
The overseas sector involves imports and exports
What are exports? Is it an injection or a leakage
Australian businesses selling goods and services to other countries. This is
What are imports? Is it an injection or a leakage?
Buying goods or services from other countries. This is a leakage from the circular flow of the economy as the money leaves our economy.
What happens when there is more injections than leakages?
Economic growth
What happens when leakages are greater than injections?
Economic decline
What does ASIC stand for?
Australian Securities and Investment Commission
What does ASIC do?
Provide a wide range of support services for consumers, some examples include financial advice, insurance disputes and education on the economy
why does the government need to protect the consumers?
Because if they are unable to do so then large sums of money are potentially at risk of being misplaced, misspent, misused or stolen if they do not act
Does a demand graph move downwards or upwards?
Downwards
Does the supply graph move upwards or downwards?
Upwards
What is the law of supply?
The law of supply is that when the price of a good or service increases the quantity supplied will also be increased
What is market equalibrium?
The meeting point of supply and demand in a balanced position that shows the position of the economy.
