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Economics A Level > Theme 2 > Flashcards

Theme 2 Flashcards

1
Q

What are the seven government objectives

A

Debt, sustainability, inflation, inequality, economic growth (gdp), balance of payments and unemployment

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2
Q

What are some supply side economic interventionist policies

A

Spending on healthcare
Building business parks
Increased education and training
Improving transport and infrastructure
Invest in council housing

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3
Q

What are some supply side market policies

A

Reducing power of trade unions
Privatisation of the state industry
Lower tariff barriers
Remove unnecessary red tape
Reduce corporation tax
Reduce state welfare benefits
Deregulation
Provide better info about jobs

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4
Q

How would reducing the power of trade unions help

A

Makes it much easier for firms to hire and fire employees

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5
Q

How would privatisation of state industry help the supply side

A

It makes them more profit oriented which can lead to a more efficient allocation of resources

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6
Q

How would lowering tariff barriers help supply side

A

helps firms become more efficient and be more innovative

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7
Q

How does removing unnecessary red tape help supply side

A

Makes trade quicker and easier as they don’t have to go through all of the quality checks when they’re trusted

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8
Q

How does reducing corporation tax help supply side

A

firms can keep more of their profits and don’t have to increase the prices of their goods or services to the consumer

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9
Q

How does reducing state welfare benefits help supply side

A

It makes people more likely to get a job as they’ll get more money so reducing unemployment leading to a reduction on government spending and increase in economic growth

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10
Q

How does deregulation help supply side

A

opening up of state monopoly this market is now open to competition

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11
Q

Free market economy pros

A

Efficiency- best value in demand only - incentive to be better
Entrepreneurship- rewards for innovation
Choice- increased consumer choice due to innovation

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12
Q

Free market economy cons

A

Inequalities - huge income differences
Non profitable goods - drugs
Monopolies - market dominance

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13
Q

Pros of a command economy

A

Maximise welfare - prevent inequality and distribute income fairly
Low unemployment - economic growth
Prevent monopolies - market dominance is prevented by the government

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14
Q

Command economy cons

A

Poor decision making - lack of information means poor decisions
Restricted choice - consumers have a limited choice
Lack of risk taking and efficiency - no incentive to increase efficiency, take risks or innovate

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15
Q

In a mixed economy what’s the government known as

A

Public sector

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16
Q

What makes up the private sector

A

Privately owned businesses

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17
Q

What are the four main macroeconomic indicators

A

rate of economic growth, rate of inflation, level of unemployment and the state of the balance of payments

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18
Q

Why might comparing the gdp of two countries not be accurate

A

A high gdp suggests a strong economic performance but high gdp per capita suggests a high standard of living

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19
Q

What’s inflation

A

The sustained rise in the average price of goods and services over a period of time

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20
Q

Define disinflation, hyperinflation and negative inflation

A
  1. When the rate of inflation slows down
  2. When the prices rise extremely quickly
  3. When the average price falls
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21
Q

What’s the claimant count

A

The number of people claiming benefits

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22
Q

What are the two main measures of unemployment

A

The claimant count and the labour force survey

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23
Q

What’s the labour force survey

A

The number of people in a survey who aren’t working but are seeking employment

24
Q

What’s the circular flow of income

A

a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents.

25
Q

When would the circular flow of income be in equilibrium

A

When the injections and withdrawals are equal

26
Q

What happens when an injection is made into the circular flow of income

A

The actual change in the national income is greater than the initial injection due to the multiplier effect

27
Q

What’s aggregate demand

A

The total spending on goods and services

28
Q

What’s the formula for aggregate demand

A

AD = C + I + G + X - M
Consumption + investment + gov spending + exports - imports

29
Q

What factors affect consumption and saving

A

Income, interest rates, consumer confidence, wealth effects, taxes and unemployment

30
Q

What factors affect investments made by firms (aggregate demand)

A

Risk, government incentives and regulations, interest rates and access to credit, technical advances and business confidence (animal spirits)

31
Q

What causes budget deficit/ surplus

A

If the government is spending greater/ less than its revenue

32
Q

What does it mean if aggregate demand is low

A

Economic growth is slow so the government may overspend to increase ad and boost economic growth

33
Q

What is trend growth?

A

The estimated rate of growth of a nations productive potential

34
Q

What are the different types of unemployment?

A

Frictional, structural, cyclical and seasonal

35
Q

What is frictional unemployment?

A

When your out of work due to personal short term unemployment - made redundant

36
Q

What is structural unemployment?

A

When your skills are no longer relevant

37
Q

What is cyclical unemployment?

A

When you become unimportant sue to economic reasons

38
Q

What is seasonal unemployment?

A

When parts of the year when there is no work in your job.

39
Q

Causes of unemployment (supply side)

A

Frictional
Structural - mismatch of skills
Geographical immobility
Real wage unemployment
Technological change

40
Q

Causes of unemployment (demand deficient)

A

High interest rates
Global recession
Negative multiplier effect
Financial crisis

41
Q

What are the types of measuring unemployment

A

Claimant count
LFS survey

42
Q

Explain claimant count and the characteristics.

A

This include people who are eligible to claim the jobs seekers allowance
- out of work
- available for work
- actively seeking employment
- aged 18 - 66
- excluded various people

43
Q

What are the benefits of using claimant count?

A

Up to date
Cheap
Easy to understand/compare

44
Q

Problems with claimant count?

A

Misses some people
Some people will refuse to claim benefits
Not used in Europe

45
Q

What are the characteristics of LFS survey

A
  • survey of 80,000 people across society
  • without any kind of job in the four weeks and are able to start in the next two weeks
  • aged 16-70
  • includes unemployment
  • used in Europe, good for comparisons
46
Q

Benefits of using LFS survey

A
  • used in Europe
  • wider criteria
  • measures ‘students’ and ‘retirees’
47
Q

Problems with using LFS survey?

A
  • Can be out of date
  • people may lie
  • expensive to make
48
Q

What does the balance of payments do?

A

It measures all the international economic transactions between the uk and trading partners.

49
Q

What is the current account?

A

How much we import or export and if we’re in surplus of deficit

50
Q

What is a remittances

A

Someone who works here from another country and send most of the money back to their home country

51
Q

What are the interventionist policies?

A

Spending on healthcare
Building business parks
Increased education and training
Improving transport and infrastructure
Invest in council housing

52
Q

What are the interventionist policies?

A

Spending on healthcare
Building business parks
Increased education and training
Improving transport and infrastructure
Invest in council housing

53
Q

What are the market policies?

A

Reducing the power of trade unions
Privatisation of state industry
Lower tariff barriers
Remove unnecessary red tape
Reduce corporation tax
Reducing state welfare benefits
Providing better information about jobs
Deregulation

54
Q

What is a problem of state monopoly?

A

They can raise prices as high as they want

55
Q

What are the advantages of deregulation?

A

Increased competition
More efficiency
More price competition
Greater customer choice

56
Q

What are the disadvantages of deregulation?

A

Creates a private monopoly
Duplication of serves
Private firms cut costs
Can hold the government to account

57
Q

What is deregulation of labour markets

A

Where the government reduces the amount of employee rights. This makes it easier for firms to hire and fire workers, as well as flexible workforces

Economics A Level (5 decks)

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