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Unit 2 Flashcards

1
Q

National income

A

The value of goods and services produced in an economy in a year

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2
Q

What is national income affected by

A

Leakages are grater than injections - more money is flowing ou of the circular flow than in.

National flow of income will fall until they are eaqual

Vice Vera

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3
Q

Measures of national income

A

GDP - value of output in the economy in a year by all firms located in the UK

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4
Q

Real and nominal

A

Normal - don’t consider inmpact of inflation on national income

Real - include inflation

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5
Q

Methods of measuring national income

A

Output method - calculated by totalling the value of the output of all firms goods and services in a year

Income method - adds all income earned from the factors of production in a year

Expenditure method - money spent in a year in the economy

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6
Q

Consumer expenditure

A

Money spent by households on goods nad services

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7
Q

Government spending

A

Money spent on goods and services excluding welfare payments

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8
Q

Exports

A

Money spent by foreign firms and citizens on British goods and services

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9
Q

Imports

A

Money spend by britches citizens and firms on foreign goods and services

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10
Q

Aggregate demand

A

Total demand for goods and services in an economy over a period of time

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11
Q

Trasfer payment

A

When money is exchanged from one person to another without the exchange of goods and services e.g social security JSA

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12
Q

Double counting

A

Counting the value imput and finished goods

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13
Q

Cash in hand work

A

This is when a person receives mone but does not declaim it to the tax athorities

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14
Q

Shadow economy

A

The money made fron crime eg drug dealing

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15
Q

Why does the government measure national income

A

Compare living standard

Calculate the rate of economic growth in a country

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16
Q

Balance payment

A

The money for when out of the UK abroad is equal to the money flowing into the UK from abroad

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17
Q

Redistribution of income

A

Is when the government try to reduce inequality

Texting high income earners more than those on the income

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18
Q

Inflation

A

The rise of the general level of prices in a year

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19
Q

Purchasing power

A

The power consumers have for purchasing goods and services

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20
Q

Demand pull

A

Excess demand for goods and services

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21
Q

Cost push

A

Firms cost of production rises

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22
Q

Monetary policy

A

This is when money supply increases

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23
Q

Inflation on individuals

A 
Wages do not rise with inflation
Purchasing power decreases
Erodes the value of savings
Fall in living standards
 Unemployment
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24
Q

Inflation on firms

A 
Fall in profits
Cost of production increases
Inflation rate may be higher than profit
Workers may demand pay rise
Experience become less competitive
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25
Inflation on economy
Businesses are less likely to invest Government may have to pay more jobseekers allowance Increase in unemploymen businesses are less likely to invest Government may have to pay more jobseekers allowance Increase in unemployment UK imports more and export less
26
Unemployment
Person who is willing and able to work but cannot find a job
27
Rate of unemployment
Level expressed as a percentage of working population
28
Ways of measuring unemployment
Claimant count | Labour force survey
29
Labour force survey
Sample survey of people asking about employment status
30
Claimant count
Measure of the people claiming unemployment benefits
31
Advantages and disadvantages of the claimant count
Advantages Give a nationwide result Provide quick update Disadvantages Unemployed are able to claim benefits Some unemployed people choose not to clean
32
Advantages and disadvantages of the labour force survey
Advantages Large range of variables Large sample Disadvantages Error present with the data
33
How to decrease the level of unemployment
Invest more money in education Provide training courses Subsidise training courses for firms so they can upscale their workers if required
34
Structural unemployment
Labour is no longer required in that sector
35
Cyclical unemployment
Demand fo goods and services decrease normally during an economic recession
36
Frictional unemployment
This is when people are moving between jobs
37
Seasonal unemployment
When work is seasonal
38
Technological unemployment
Labour are replaced by capital
39
Unemployment effect on individuals
``` Lower income Lose skills Harder to find employment May become socially excluded Mental and physical health problems ```
40
Unemployment on firms
Lower profits Less demand Can afford Laura wages as more workers are available
41
Unemployment on government
Spend more money on unemployment benefits Get less tax revenue Rise in crime NHS may require more money Ball demand so national income could fall
42
Economic growth
Economic growth Occurs when there is an increase in the total level of output of goods and services in the economy over a period of time
43
Factor is improving economic growth
Increasing productivity with machinery Increase skills of labour Taxbreaks to firms Increase demand on UK exports
44
Benefits of economic growth
Increased standards of living Increased employment opportunities Increased job security Government can easily reduce income inequalities due to incomes rising
45
Disadvantages of economic growth
Higher demand pull inflation Reduced imports Increase climate change pollution Increase stress on workforce
46
Threat to economic growth
Changes in exchange rates Natural disasters Financial instability
47
Why does the government collect taxes
Provide healthcare education in defence Welfare support to those on low income is Redistribute income from the richest to the poorest in the Welfare support to those on low income is Redistribute income from the richest to the poorest in the call me economy
48
Main areas of government spending
Healthcare Education Defence Welfare payments including benefits and pensions
49
Current expenditure
Money spent on day-to-day running e.g. NHS on maintenance and wages
50
capital expenditure
Money spent on long-term projects e.g. building schools hospitals and roads
51
Transfer payment
Money which one person earns and the government gives to another with an exchange of goods and services
52
How can the government alter national income
Adjusting taxation
53
Main sources of government income
Income tax | VAT
54
Direct tax
Taxes on income and wealth eg income tax
55
Indirect tax
Tax on spending eg VAT
56
Progressive tax
Goes on higher incomes pay propromotionetly more tax than those on the low incomes
57
Regressive tax
I was on the other incomes pay proportionately more in tax than those in higher incomes
58
Reasons for taxation
Redistribute income from the rich to poor To prevent the consumption of term dermerit goods To fund public and merit goods
59
Advantages and disadvantages of tax
Advantages Reduce demand for other products e.g. cigarettesProvide an incentive to stay with and enables greater investment Disadvantages Indirect taxes are regressive indirect taxes and cause cost push inflation and black market will avoid them
60
Increase in national income
Government reduce taxation Households have more disposable income Firms expand output to meet this demands
61
Decrease the national income
Government increased taxation Less disposable income Firms produce less output
62
Deficit buagdet
Government spending is grater than taxation revenue
63
Blalanced budget
Government spending is equal to taxation revenue
64
Surplus deficit
Government spending is less than taxation revenue
65
Fiscal policy
Use of government spending or and or taxation in order to affect demand in the economy
66
Subsidy
This is when the government lend money to aid firm
67
Increasing government spending
Increase subsidies to firms this will supply more goods and services this means that more demand for factors of production unemployment decreases this means households get more income increases aggregate demand
68
Multiplier affect
This means one thing leads to another and to another e.g. providing work training will decrease unemployment levels meaning government spend less on jobseekers allowance
69
Decrease tax
More disposable income for households Demand for goods and services increases Firms supply more making more profit Reducing unemployment
70
Advantages of the fiscal policy
Demand for goods and services fall Firms reduced prices Reduce inflation National income falls Demand for imports follows And this improves balance payment positions
71
Disadvantages of the fiscal policy
``` Increases unemployment Reducing and I will get the man Increased tax Reducing government spending Sterling falls less demand for exports ```
72
Monetary policy
Using interest rates or money supply in order to influence Aggregate demand in the economy This is controlled by the Bank of England
73
Interest-rate
Cost of borrowing and lending
74
Interest rates on savers and borrowers
Savers Get less return Porridge Low interest rates means it is cheaper to borrow
75
What happens if the bank of England reduce interest rates
Other banks will also lower interest rate Consumer confidence will arise More photos will invest
76
Impact of low interest rates on individuals firms and economy
``` Individuals Less to pay back on mortgage Greater consumption Increase in disposable income Less returns on pensions Increase in employment opportunities as investments and consumption increase ``` ``` Firm Cheaper investments Increasing cost of production Greater demand for goods and services Increasing profit ``` Economy Your unemployment Greater national income Higher inflation
77
Supply-side policy
Shifts countries PPF outwards without association with a rise in inflation PPF- effientrly supplying goods and services
78
Policies
Cutting benefits so more people are encouraged to work Increase minimum wage so more people have more disposable income Investments in training and education some more people have more skills for work Lower corporation tax so firms Can supply more
79
Primary sector
Extraction of raw materials e.g. coal and oil
80
Secondary industry
Involved with taking the raw materials and manufacturing it into a product e.g. whiskey bottling
81
Tertiary
Selling of manufactured goods are providing a service e.g. banking
82
Main Scottish industries
Energy including oil gas and renewables Financial services e.g. banking and insurance Food and drink industry e.g. whiskey Life sciences
83
EU main exporters
``` Netherlands Germany France Denmark Belgium ```
84
Advantages of entrepreneurial activity in Scotland
Create implement Create well by providing people with income Increase in tax revenue for government Increase economic growth

Economics (10 decks)

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