The External Environment (Part 1) Flashcards
Define business
An organisation or enterprising entity engaged in commercial, industrial, or professional activities.
OR
Organised efforts and activities of individuals to produce and sell goods and services for profit.
What are the common features business organisations have?
Transformation of inputs and outputs i.e., materials, labour etc.
What can businesses be?
Can be profit or non-profit
Define circular flow model?
Demonstrates how money moves through society.
Define economic activity
Flows of resources, output, income and expenditure
OR
The activity of making, providing, purchasing, or selling goods or services.
Define expenditure
The action of spending funds
OR
Amount of money spent
Why do economists use the circular flow of income?
To illustrate the central relationship between households and firms in a market-based economy.
Define market-based economy (MBE)
An economy that is not completely controlled by the government.
Give examples of countries that are not a market-based economy
Countries that are not MBE: China, North Korea etc.
Define gross domestic product
Is the total amount of goods and services produced in an economy.
What is GDP measured in the UK?
GDP is measured in quarters
Define treasury
The management of money and financial risks in a business i.e. making judgements on whether the UK economy is increasing or decreasing.
What happens if spending increases?
If spending increases and the no. of goods and services increases = balance
Define Tariff
Is a tax imposed by one country on the goods and services imported from another country.
Give an example of government spending
E.G. HS2 which will increase connectivity between North and South.
Investing more into wind energy projects to reduce UK emissions (68% by 2030)
An example of inflation
If producing the same amount of goods and services but are required to spend more - inflation.
Why do governments interfere with the market/get involved?
Governments intervene to address inefficiency.
Give examples of what/why the government does to interfere with the market
Tries to combat these/market inequalities through regulation, subsidy, and taxation
To promote economic fairness
Unwillingness of the market to produce public good: defence, social services, infrastructure
Distributing resources fairly
Define macroeconomics
Is a branch of economics that studies the behaviour and performance of an economy as a whole. i.e. using taxes to regulate economy growth/stability
Define aggregation
The act of grouping things or items as a whole.
What are the governments five main macro objectives?
Controlling inflation - don’t want prices to go up
Economic growth - making sure it’s slow and steady
Controlled public borrowing - borrowing from pensions
Reducing unemployment - more people employed more taxes
Favourable balance of payments - more export less import
What is the governments response?
Fiscal policy: Involves the government changing tax rates and levels of government spending to influence the economy. OR Government spending (G) and Taxation (T) set out in the budget
Monetary Policy: Involves changing interest rate and influencing the money supply (controlled by the central bank)
OR
Price of credit within the economy
Define quantitative easing
Is where the government puts money back into the economy
How does quantitative easing work?
Central banks increase the supply of money by buying government bonds and other securities. (doesn’t involve printing more banknotes - create new money digitally)
Define PESTLE
Is a framework to analyse the key factors (political, economic factors, sociocultural factors, technological, legal, and environmental) influencing an organisation from the outside.
Examples for PESTLE
Political: Gov stability, taxation policy
EF: Business cycles, interest rates
SF: Population demographic, lifestyle changes
Technological: Gov spending on research, new discoveries/development
Environ: Environmental protection laws, waste disposal
Legal: Health and safety, product safety
