The economic environment Flashcards
What are the differences that affect the type of economic activity within countries ?
size Geography population climate natural resources
What is GNI?
Gross National Income = the total income from products and services produced by a national economy
What is GDP?
Gross domestic product is the total value of economic activity in a country, including both domestic and foreign producers
What is GDP/GNI per capita ?
This takes population into account - representing the average in the country
What does PPP mean ?
Purchasing power parity =
What is economic growth ?
a countrys increase in national income (GDP) over time
What is recession?
Negative economic growth
What is a depression ?
contraction of an economy by one tenth
What does inequality mean?
the difference in wealth and income between the richest and the poorest
What tool can you use to measure income inequality ?
The Gini index
What does structural unemployment mean ?
This is when jobs are shifting to people outside of the country and skills are no longer needed, its a fundamental problem
What does frictional unemployment mean?
This is when people are between jobs, applying for a new job and its only temporary
What is inflation?
This is the continuing general rise in prices in the economy
What is deflation
This is a general fall in prices
What does CPI mean?
This means consumer price index = it is a measure of a countrys inflation
What are the causes of inflation?
- demand pull
2. cost push
What does balance of payments mean?
This is the credit and debit transactions between a countrys residents and other countries
What does current account mean ?
S current account focuses on trade in goods and services
What does monetary policy mean ?
These policies determine the amount of money on supply eg. interest,taxation and exchange rates
What does fiscal policy mean?
Budgetary policies for balancing public spending with income from taxation and other revenues
What is national debt ?
the total debt accumulated over the years, usually shown as a percentage of GDP
What is the national budget balance ?
This is the extent to which public spending is balanced by receipts in any given year
Types of national economic systems ?
- market based
- command/planned
- mixed economies
What does socialist mean ?
this means state planned and collectivist - communist
What does capitalist mean ?
Free market economies and free societies
What is laissez-faire capitalism ?
This is individual freedom to carry out enterprise activities with minimum state interference
What is the invisible hand model?
A hand which guides the economy but there is a need for regulation
What are command economies ?
Plans the goods and services that a country produces, their quantity and their prices - collectivist
What does collectivist mean ?
This is when the society has to do everything for the good of the country and therefore all businesses are state owned etc
What is a mixed economy ?
This is an economy with capitalist elements but also collectivist
What is process innovation ?
This is innovation in the way things are done such as manufacturing
What is innovation?
This is when a new product is brought to the market that actually makes a difference
What is invention?
This is creating a new product but not adding value to it
What is a patent ?
This protects a product for 10 years
What are the different types of innovation ?
- Disruptive
2. incremental
What are developed economies ?
These are democratic and capitalist mature industrial development
What are emerging economies ?
These are economies where living standards are rapidly improving and there is a growing middle class
What are the least developed economies ?
These are classed as third world countries because productivity if stagnant
Why are emerging markets attractive ?
- huge middle class - income to spend on their products
- high economic growth rates
- low-wage, high quality labor
- large reserves of raw material and natural resources
Disadvantages of business in emerging markets ?
- political instability
- red tape, lack of transparency
- poor physical infrastructurw
- partner availability and qualifications
What are conglomerates
These are very large groups of companies that include smaller companies e.g. virgin - virgin media, virgin airways etc.