The Economy

Question 1

The Economic Market

Answer 1

Market through the laws of supply & demand determines what goods & services are produced, their quantity and their price

Question 2

Market Types

Answer 2

• Property
• Financial
• High Street
• Currency
• Drinks
• Commodities
• Global

Question 3

Public Sector

Answer 3

Main role is to provide efficient & adequate services.

Refers to sector run by the state
- gov departments, local gov, NHS, nationalised industries & military.

Any borrowing counts towards the public sector net cash requirement.

Question 4

Private Sector

Answer 4

Main role is to make profit.

Refers to organisations that are privately owned companies.
- From corner shops to the biggest multinational coorporations.

Question 5

Direct taxes

Answer 5

• Taxes on income or gains
• More you earn, more tax you pay
• Progressive taxation
• Income tax/capital gains tax/inheritance tax

Question 6

Indirect taxes

Answer 6

• Taxes on spending
• More you spend, more tax you pay
• Regressive tax = take no account of the ability to pay
• VAT/petrol duty/cigarette/alcohol tax

Question 7

Treasury

Answer 7

Chancellor of Exchequer decides how much gov & other departments will spend - Rishi Sunak

Responsible for overall economic & fiscal policy.

Determines public expenditure levels, taxation policy.

Question 8

Budget & CSR

Answer 8

• Outlines gov plans for public spending.
• Predicts current financial year.
• Announces tax changes & reasons.
• Predicts state of economy for next calendar year.
• Explains previous years accounts.

Question 9

CSR

Answer 9

Comprehensive Spending Review

A 3-year plan of government spending delivered by the chancellor of commons

Question 10

Growth - Deficit

Answer 10

• Govs running overdraft
• Difference between what gov spends & what it raises in taxes
• Cut public spending to reduce the deficit but critics argue it damages the economy
• UK Economic Policy 2010 was designed to cut the huge deficit run up by labour gov

Question 11

Growth - Reflation

Answer 11

• Increasing public expenditure & building new roads, rails & bridge projects to stimulate economy & create jobs
• Policy to combat recession & get economy growing
• Involves cutting interest rates
• Cutting taxes to get consumer spending

Question 12

Banking crisis

Answer 12

• Bad loans to people who could not pay it back
• Mortgages sold as investments around the world
• Many investments sold turned out to be toxic debt
• Investments bought by pension funds, banks & public organisations around the world
• Scale of debt triggered a global banking & financial crisis

Question 13

Inflation

Answer 13

A state of affairs where there’s an increased in the level of prices & values of money

Question 14

Deflation

Answer 14

A policy to combat inflation or a general fall in the level of prices
- push economy into recession

Deflation policy involves:

• Raise interest rates
• Raised taxes
• Cut public spending

Question 15

Recession

Answer 15

State of affairs where there’s been a downturn in business cycles

• output & investment will drop
• demand dropped
• unemployment rose

Question 16

GDP

Answer 16

Gross domestic product

= total value of goods & services produced in a country in one year period

Question 17

GNP

Answer 17

Gross national product

= value of goods & services produced in a country minus profits made by foreign companies operating in that country

Question 18

Balance of Payments

Answer 18

An account that records a country economic transactions with rest of the world

Question 19

Balance of Trade

Answer 19

Difference in value between a country exports & imports of goods