the operation of an economy - topic one Flashcards
What are the four factors of production?
Natural resources, labour, capital, enterprise
These factors are essential for the production of goods and services.
Define natural resources in the context of production.
All naturally occurring materials used in the production process, including soil, water, forests, mineral deposits, and fishing areas.
Natural resources are the foundation for many industries and economic activities.
What does labour encompass in the production process?
All human effort, both physical and mental, used to produce goods and services.
Factors affecting labour include population, birth rate, life expectancy, and attitudes towards women in the workforce.
What is capital in economic terms?
Produced means of production used to produce other goods and services, such as machinery, tools, factories, and computers.
Capital increases productivity and the level of production.
What role does enterprise play in production?
Organising natural resources, labour, and capital for the production of goods and services.
Enterprise is crucial for successful business operations.
What is GDP?
The total amount of goods and services produced in the economy over a certain period.
GDP is a key indicator of economic performance.
True or False: Market economies distribute output equally within society.
False
Market economies reward individuals based on their contributions rather than distributing income equally.
Fill in the blank: ‘Bartering’ is the exchange of goods and services between two or more parties without the use of _______.
money
Bartering is considered the oldest form of commerce.
Describe the circular flow of income.
The movement of money between individuals, businesses, financial institutions, governments, and international trade.
It illustrates how the economy functions.
What do individuals supply in the economy?
Factors such as labour and enterprise to businesses.
Individuals are also consumers in the economy.
What activities do businesses engage in?
Production and sales of goods and services, buying factors of production, and using them to produce and sell.
Businesses rely on individuals for their existence.
What are financial institutions?
Institutions engaged in borrowing and lending money, including banks, credit unions, and insurance companies.
They facilitate savings and investments for individuals and firms.
What is the role of governments in the economy?
Satisfy collective wants and obtain resources by collecting taxes.
Governments operate at three levels: Commonwealth, state, and local.
What does international trade and financial flow cover?
All economy transactions with the rest of the world, including imports and exports.
It is essential for economic growth and development.
How does employment and quality of life fluctuate?
They fluctuate with the business cycle, improving during expansion and declining during recessions.
The peak marks slowed job growth, while the trough indicates the lowest point before recovery.
What is the significance of the business cycle?
It impacts job opportunities, wage increases, job security, and overall quality of life.
Understanding the business cycle is crucial for economic planning.
