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Economics A Level > Theme 4 > Flashcards

Theme 4 Flashcards

1
Q

Surplus and Deficit specific to the UK (all structural)

A

Elasticity of demand
Decline of manufacturing
Growth of emerging markets
Net importer of food and fuel
Lack of competitiveness

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2
Q

Cyclical and structural, long term short term

A

Cyclical is short term
Structural is long term

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3
Q

Partial auto correction

A

Exchange rate, pound weakens
Wiced - weak pound imports cheap exports deer

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4
Q

What’s an unbalanced economy reliant on

A

Imports

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5
Q

Evaluative points for the surplus and deficit

A

Partial auto correction
Investment and supply side
Capital flows
Financial account

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6
Q

What may the deficit lead to

A

Structural weakness
Unbalanced economy
Loss of output and employment
Money flowing out
Problems financing debt
Exchange rate pressure

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7
Q

Exchange rate policies

A

Widec
Interest rates decrease
Buying more foreign currency (weakens the pound)

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8
Q

Why might exchange rate policies not be effective

A

Liquidity trap
Short and long term - 18 months to be effective
Not a priority compared to inflation
How it impacts other macroeconomic objectives

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9
Q

J curve

A

Sum of elasticities need to be more than 1
Deficit gets worse before it becomes a surplus

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10
Q

Protectionism and where it can be seen

A

Import duty - raise price
Embargo - ban on import
Quota - limits on imports
Can be seen in supply side

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11
Q

Retaliation for evaluation of protectionism

A

Government use subsidies
World trade organisation promote free trade

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12
Q

Reasons for surpluses and deficits

A

Uneven distribution of natural resources
Differential competitiveness
Exchange rates
Inflation
Investment and long term economic growth
Domestic and government spending

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13
Q

Causes of Current Account Deficit

A

Poor price - non price competitiveness
Higher inflation than trading partners
Weakness in design

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14
Q

What does a strong exchange rate mean

A

High currency value
Imports are cheaper

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15
Q

Cyclical values

A

Over valued exchange rate
Boom in domestic demand
Recession in key export markets
Slump in global prices of exports
Increased demand for imported technology

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16
Q

Structural values

A

Under investment
Low productivity
High inflation
Inadequate research and development
Innovation
Lower cost competition

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17
Q

Default meaning

A

We don’t pay it back

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18
Q

UK’s main exports

A

Machinery
Cars
Transport equipment
Chemicals
Oil

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19
Q

UK’s main imports

A

Mineral fuels,
Mechanical appliances
Metal
Cars
Pharmaceutical products

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20
Q

Balance of payments meaning

A

An account showing all of the inflows and outflows of money in a country

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21
Q

Foreign currency positive and negative

A

Inflow of foreign currency - positive
Outflow of foreign currency - negative

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22
Q

Net primary income

A

Incomes from interests
Dividends generated from foreign investment
Profits

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23
Q

Balance of trade in good and services

A

Goods is negative
Services is slightly positive

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24
Q

How to make the balance of payments more balanced

A

Increase interest rates
Sell bonds to foreign countries
Export more than you import
Protectionism - tariffs, subsidies, tight fiscal, monetary

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25
Q

Absolute advantage

A

When a country can produce a good more cheaply in absolute terms than another country

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26
Q

Absolute poverty

A

When people are unable to afford sufficient necessities to maintain life; those on les than $1.90 a day

27
Q

Aid

A

When a country voluntarily transfers resources to another or gives loans on a concessionaire basis

28
Q

Appreciation

A

An increase in the value of the currency using floating exchange rates

29
Q

Asymmetric information

A

When one partly has more knowledge than another, this causes market failure in the financial sector

30
Q

Automatic stabilisers

A

Mechanisms which reduce the impact of changes in the economy on national income.

31
Q

Balance of payments

A

A record of all financial dealings over a period of time between economic agents of one country and another

32
Q

Buffer stock systems

A

When a maximum and minimum price are imposed together in order to bring about price stability

33
Q

Capital account

A

A part of the balance of payments, records debt forgiveness, inheritance taxes, transfers of financial assets and sales of assets

34
Q

Capital expenditure

A

Government spending on investment goods such as new roads, schools and hospitals, which will be consumed in over a year

35
Q

Capital flight

A

When large amounts of money are taken out of the country, rather than being left there for people to borrow and invest

36
Q

Common market

A

Members trade freely in all economic resources and impose a common external tariff

37
Q

Comparative advantage

A

When a country is able to produce a good more cheaply relative to other goods produced, it has a lower opportunity cost

38
Q

Currant account

A

A part of the balance of payments, records payments for the purchase and sale of goods and services as well as incomes and transfers.

39
Q

Customs union

A

The removal of all tariff barriers between members and the introduction of a common external tariff

40
Q

Currant expenditure

A

General government final consumption plus transfer payments plus interest payments

41
Q

Cyclical deficit

A

The part of the deficit that occurs because government spending fluctuates around the trade cycle

42
Q

Depreciation

A

A fall in the value of the currency using floating exchange rates

43
Q

Devaluation

A

When the currency is decreased against another under a fixed system

44
Q

Developed country

A

Countries with a high GDP per capita and a high standard of living

45
Q

Developing country

A

Countries with a low GDP per capita and a low standard of living

46
Q

Discretionary fiscal policy

A

Deliberate manipulation of government expenditure and taxes to influence the economy, expansionary and deflationary fiscal policy

47
Q

Economic development

A

Improvements in living standards

48
Q

Emerging economies

A

A country that is growing quickly and has some characteristics of a developed country but is not fully there yet

49
Q

Exchange rate

A

The purchasing power of a currency in terms of what it can buy of other currencies

50
Q

Financial account

A

A part of the balance of payments, records FDI, portfolio investment and transfer of gold and currency reserves

51
Q

Financial markets

A

When buyers and sellers can buy and trade a range of services or assets that are fundamentally monetary in nature

52
Q

Fiscal deficit

A

When the government spends more than it receives

53
Q

Fixed exchange rate

A

The value of the currency is set against the value of another and that exchange rate does not change

54
Q

Foreign currency gap

A

When a country does not export enough to finance the purchase of goods from overseas

55
Q

Foreign direct investment

A

When a country does not export enough to finance the purchase of goods from overseas

56
Q

Free trade

A

Trade with no barriers or restrictions

57
Q

Free floating exchange rate

A

Value of the currency is determined purely by market demand and supply of the currency

58
Q

Gino coefficient

A

A measure of income inequality, the ratio of the area between the 45 degree line and the Lorenz curve and the whole area under the 45 degree line

59
Q

Globalisation

A

The Godwin got interdependence of countries and the rapid rate of change it brings about

60
Q

Harrod-domar model

A

Savings that provide funds that are used for investment, and growth rates depend on the level of saving and the productivity of investment

61
Q

Human capital

A

The economic value of an individuals skills, experience, training etc

62
Q

Human development index

A

Measures the economy’s development based on income, health and education

63
Q

J curve

A

A current account will worsen before it improves following a depreciation of the currency

Economics A Level (8 decks)

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