Topic 7.5 - Economic change Flashcards
1
Q
GDP
A
- measures the value of economic activity
- includes consumer spending, business investment and government spending
- economy is growing if GDP is rising
- economy is contracting if GDP falls
- % change is known as rate of economic growth
2
Q
Business cycle
A
- sequence of slump, recovery, boom and recession
- pattern of ups and down
- measure by changes in GDP
3
Q
Quantitative easing
A
- when the central bank boost money supply to give banks the cash to be able to lend to companies or households
4
Q
Inflation
A
A sustained increase in the average price level of an economy
5
Q
Impact of inflation on customers
A
- money loses its value
- people lose confidence as savings reduced
- inflation can get out of control
- consumers fixes incomes fall
6
Q
Effects of inflation on business
A
- industry wide price rises allows revenue to grow
- debt as a source of finance is cheaper
- real assets become worth more
- PED products may not be able to pass price rises to consumers
- disrupt business planning and lead to lower investment
- rising inflation associated with higher interest rates
7
Q
Impact of economic change on corporate strategy and business function
A
- strategy - from profit maximisation to growth to survival
- marketing - to value for money
- production - fall in sales of luxury goods so cut production
- human resources - reduce volume of staff
- finance - introduce budgets
8
Q
Fiscal policy
A
Government spending and tax
9
Q
Monetary policy
A
Interest rates or money supply
10
Q
Different forms of taxation
A
- national insurance
- income tax
- VAT
- excise duties
- corporate tax
11
Q
Impact of high exchange rates
A
Imports cheaper
Exports dearer
12
Q
Protectionism policies
A
- tariffs - taxes on imported goods
- quotas - physical limits on goods imported
13
Q
Globalisation
A
Deeper integration between countries and regions of the world
14
Q
Reasons for globalisation
A
- reduction of protectionism
- increased competition for local producers to be efficient
- ideas to spread across the globe
- skills
- outlets for exports
- allows break away from poverty
15
Q
The importance of globalisation
A
- encourages labour and economies of scale
- competitive markets reduce monopoly profits
- high capita incomes
- freer movement of labour between countries
- gains of sharing ideas / skills / technologies
- allows developing countries to borrow money
- increased awareness of climate change
- competitive pressure
