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Economics > Unit 2 > Flashcards

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
Q

Inflation on economy

A

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

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26
Q

Unemployment

A

Person who is willing and able to work but cannot find a job

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27
Q

Rate of unemployment

A

Level expressed as a percentage of working population

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28
Q

Ways of measuring unemployment

A

Claimant count

Labour force survey

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29
Q

Labour force survey

A

Sample survey of people asking about employment status

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30
Q

Claimant count

A

Measure of the people claiming unemployment benefits

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31
Q

Advantages and disadvantages of the claimant count

A

Advantages
Give a nationwide result
Provide quick update

Disadvantages
Unemployed are able to claim benefits
Some unemployed people choose not to clean

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32
Q

Advantages and disadvantages of the labour force survey

A

Advantages
Large range of variables
Large sample

Disadvantages
Error present with the data

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33
Q

How to decrease the level of unemployment

A

Invest more money in education
Provide training courses
Subsidise training courses for firms so they can upscale their workers if required

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34
Q

Structural unemployment

A

Labour is no longer required in that sector

35
Q

Cyclical unemployment

A

Demand fo goods and services decrease normally during an economic recession

36
Q

Frictional unemployment

A

This is when people are moving between jobs

37
Q

Seasonal unemployment

A

When work is seasonal

38
Q

Technological unemployment

A

Labour are replaced by capital

39
Q

Unemployment effect on individuals

A 
Lower income
Lose skills
Harder to find employment
May become socially excluded
Mental and physical health problems
40
Q

Unemployment on firms

A

Lower profits
Less demand
Can afford Laura wages as more workers are available

41
Q

Unemployment on government

A

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
Q

Economic growth

A

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
Q

Factor is improving economic growth

A

Increasing productivity with machinery
Increase skills of labour
Taxbreaks to firms
Increase demand on UK exports

44
Q

Benefits of economic growth

A

Increased standards of living
Increased employment opportunities
Increased job security
Government can easily reduce income inequalities due to incomes rising

45
Q

Disadvantages of economic growth

A

Higher demand pull inflation
Reduced imports
Increase climate change pollution
Increase stress on workforce

46
Q

Threat to economic growth

A

Changes in exchange rates
Natural disasters
Financial instability

47
Q

Why does the government collect taxes

A

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
Q

Main areas of government spending

A

Healthcare
Education
Defence
Welfare payments including benefits and pensions

49
Q

Current expenditure

A

Money spent on day-to-day running e.g. NHS on maintenance and wages

50
Q

capital expenditure

A

Money spent on long-term projects e.g. building schools hospitals and roads

51
Q

Transfer payment

A

Money which one person earns and the government gives to another with an exchange of goods and services

52
Q

How can the government alter national income

A

Adjusting taxation

53
Q

Main sources of government income

A

Income tax

VAT

54
Q

Direct tax

A

Taxes on income and wealth eg income tax

55
Q

Indirect tax

A

Tax on spending eg VAT

56
Q

Progressive tax

A

Goes on higher incomes pay propromotionetly more tax than those on the low incomes

57
Q

Regressive tax

A

I was on the other incomes pay proportionately more in tax than those in higher incomes

58
Q

Reasons for taxation

A

Redistribute income from the rich to poor
To prevent the consumption of term dermerit goods
To fund public and merit goods

59
Q

Advantages and disadvantages of tax

A

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
Q

Increase in national income

A

Government reduce taxation
Households have more disposable income
Firms expand output to meet this demands

61
Q

Decrease the national income

A

Government increased taxation
Less disposable income
Firms produce less output

62
Q

Deficit buagdet

A

Government spending is grater than taxation revenue

63
Q

Blalanced budget

A

Government spending is equal to taxation revenue

64
Q

Surplus deficit

A

Government spending is less than taxation revenue

65
Q

Fiscal policy

A

Use of government spending or and or taxation in order to affect demand in the economy

66
Q

Subsidy

A

This is when the government lend money to aid firm

67
Q

Increasing government spending

A

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
Q

Multiplier affect

A

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
Q

Decrease tax

A

More disposable income for households
Demand for goods and services increases
Firms supply more making more profit
Reducing unemployment

70
Q

Advantages of the fiscal policy

A

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
Q

Disadvantages of the fiscal policy

A 
Increases unemployment
Reducing and I will get the man
Increased tax
Reducing government spending
Sterling falls less demand for exports
72
Q

Monetary policy

A

Using interest rates or money supply in order to influence Aggregate demand in the economy
This is controlled by the Bank of England

73
Q

Interest-rate

A

Cost of borrowing and lending

74
Q

Interest rates on savers and borrowers

A

Savers
Get less return

Porridge
Low interest rates means it is cheaper to borrow

75
Q

What happens if the bank of England reduce interest rates

A

Other banks will also lower interest rate
Consumer confidence will arise
More photos will invest

76
Q

Impact of low interest rates on individuals firms and economy

A 
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
Q

Supply-side policy

A

Shifts countries PPF outwards without association with a rise in inflation

PPF- effientrly supplying goods and services

78
Q

Policies

A

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
Q

Primary sector

A

Extraction of raw materials e.g. coal and oil

80
Q

Secondary industry

A

Involved with taking the raw materials and manufacturing it into a product e.g. whiskey bottling

81
Q

Tertiary

A

Selling of manufactured goods are providing a service e.g. banking

82
Q

Main Scottish industries

A

Energy including oil gas and renewables
Financial services e.g. banking and insurance
Food and drink industry e.g. whiskey
Life sciences

83
Q

EU main exporters

A 
Netherlands
Germany
France
Denmark
Belgium
84
Q

Advantages of entrepreneurial activity in Scotland

A

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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