The economic environment

Question 1

What are the differences that affect the type of economic activity within countries ?

Answer 1

size
Geography
population
climate
natural resources

Question 2

What is GNI?

Answer 2

Gross National Income = the total income from products and services produced by a national economy

Question 3

What is GDP?

Answer 3

Gross domestic product is the total value of economic activity in a country, including both domestic and foreign producers

Question 4

What is GDP/GNI per capita ?

Answer 4

This takes population into account - representing the average in the country

Question 5

What does PPP mean ?

Answer 5

Purchasing power parity =

Question 6

What is economic growth ?

Answer 6

a countrys increase in national income (GDP) over time

Question 7

What is recession?

Answer 7

Negative economic growth

Question 8

What is a depression ?

Answer 8

contraction of an economy by one tenth

Question 9

What does inequality mean?

Answer 9

the difference in wealth and income between the richest and the poorest

Question 10

What tool can you use to measure income inequality ?

Answer 10

The Gini index

Question 11

What does structural unemployment mean ?

Answer 11

This is when jobs are shifting to people outside of the country and skills are no longer needed, its a fundamental problem

Question 12

What does frictional unemployment mean?

Answer 12

This is when people are between jobs, applying for a new job and its only temporary

Question 13

What is inflation?

Answer 13

This is the continuing general rise in prices in the economy

Question 14

What is deflation

Answer 14

This is a general fall in prices

Question 15

What does CPI mean?

Answer 15

This means consumer price index = it is a measure of a countrys inflation

Question 16

What are the causes of inflation?

Answer 16

1. demand pull

2. cost push

Question 17

What does balance of payments mean?

Answer 17

This is the credit and debit transactions between a countrys residents and other countries

Question 18

What does current account mean ?

Answer 18

S current account focuses on trade in goods and services

Question 19

What does monetary policy mean ?

Answer 19

These policies determine the amount of money on supply eg. interest,taxation and exchange rates

Question 20

What does fiscal policy mean?

Answer 20

Budgetary policies for balancing public spending with income from taxation and other revenues

Question 21

What is national debt ?

Answer 21

the total debt accumulated over the years, usually shown as a percentage of GDP

Question 22

What is the national budget balance ?

Answer 22

This is the extent to which public spending is balanced by receipts in any given year

Question 23

Types of national economic systems ?

Answer 23

1. market based
2. command/planned
3. mixed economies

Question 24

What does socialist mean ?

Answer 24

this means state planned and collectivist - communist

Question 25

What does capitalist mean ?

Answer 25

Free market economies and free societies

Question 26

What is laissez-faire capitalism ?

Answer 26

This is individual freedom to carry out enterprise activities with minimum state interference

Question 27

What is the invisible hand model?

Answer 27

A hand which guides the economy but there is a need for regulation

Question 28

What are command economies ?

Answer 28

Plans the goods and services that a country produces, their quantity and their prices - collectivist

Question 29

What does collectivist mean ?

Answer 29

This is when the society has to do everything for the good of the country and therefore all businesses are state owned etc

Question 30

What is a mixed economy ?

Answer 30

This is an economy with capitalist elements but also collectivist

Question 31

What is process innovation ?

Answer 31

This is innovation in the way things are done such as manufacturing

Question 32

What is innovation?

Answer 32

This is when a new product is brought to the market that actually makes a difference

Question 33

What is invention?

Answer 33

This is creating a new product but not adding value to it

Question 34

What is a patent ?

Answer 34

This protects a product for 10 years

Question 35

What are the different types of innovation ?

Answer 35

1. Disruptive

2. incremental

Question 36

What are developed economies ?

Answer 36

These are democratic and capitalist mature industrial development

Question 37

What are emerging economies ?

Answer 37

These are economies where living standards are rapidly improving and there is a growing middle class

Question 38

What are the least developed economies ?

Answer 38

These are classed as third world countries because productivity if stagnant

Question 39

Why are emerging markets attractive ?

Answer 39

2. huge middle class - income to spend on their products
3. high economic growth rates
4. low-wage, high quality labor
5. large reserves of raw material and natural resources

Question 40

Disadvantages of business in emerging markets ?

Answer 40

1. political instability
2. red tape, lack of transparency
3. poor physical infrastructurw
4. partner availability and qualifications

Question 41

What are conglomerates

Answer 41

These are very large groups of companies that include smaller companies e.g. virgin - virgin media, virgin airways etc.