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Business studies > Unit 24 > Flashcards

Unit 24 Flashcards

1
Q

Q1. What is balance of payments?

A

A1. Difference between the values of import and export of a country over a year.

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2
Q

Q2. What is inflation?

A

A2. The increase in the price of goods and services over time.

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3
Q

Q3. What is the level of unemployment?

A

A3. The percentage of people who cannot find a job despite wanting to do so.

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4
Q

Q4. What is gross domestic product (GDP)?

A

A4. The value of all goods and services produced within a year.

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5
Q

Q5. What is an interest rate?

A

A5. Cost of borrowing that accumulates over the period until which the loan has been taken.

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6
Q

Q7. What is a direct tax?

A

A7. Tax charged on the profit made by a business or individual.

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7
Q

Q6. What is tax?

A

A6. A fee paid to the government on income, goods, and services.

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8
Q

Q8. What is an indirect tax?

A

A8. Tax charged on the price of goods before being bought.

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9
Q

Q9. What is disposable income?

A

A9. Amount of income left after necessities and taxes have been paid.

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10
Q

Q10. What are exports?

A

A10. Goods sold by a country to another country.

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11
Q

Q11. What are imports?

A

A11. When a country buys goods from another country.

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12
Q

Q12. What is a balance of payments deficit?

A

A12. When a country has more imports than exports.

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13
Q

Q13. What is a business cycle?

A

A13. Change in economic activity as the economy grows and shrinks.

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14
Q

Q14. What is growth in the business cycle?

A

A14. When the economy recovers or grows.

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15
Q

Q15. What is a boom in the business cycle?

A

A15. Peak of the business cycle.

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16
Q

Q16. What is a recession in the business cycle?

A

A16. When the economy shrinks in size.

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17
Q

Q17. What is a slump in the business cycle?

A

A17. When the economy is at its worst.

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18
Q

Q18. What are taxes?

A

A18. Methods used by the government to pay for investments made on behalf of the country.

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19
Q

Q19. What is corporation tax?

A

A19. Taxes paid by businesses on the profit that is made.

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20
Q

Q20. What is VAT (value added tax)?

A

A20. Value added to the products that are bought in the market, which makes the products more expensive and less affordable.

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21
Q

Q21. What is sales tax?

A

A21. Paid by customers on the purchase of items.

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22
Q

Q22. What is excise duty?

A

A22. Paid by manufacturers after producing goods.

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23
Q

Q.23 What is the importance of positive balance of payments?

A

A.23 A balance of payments deficit causes a shortage of foreign exchange, leading the country to borrow currency from another country at an expensive rate of interest. Thus, it is better to have a positive balance of payments.

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24
Q

Q.24 What is the importance of low inflation?

A

A.24 Inflation causes the prices of products and services to begin rising. This makes it difficult for the population to afford products and services. Low inflation leads to a better condition of life. This also leads to less sales.

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25
Q

Q.25 What are the benefits of low unemployment?

A

A.25
(1) Contribute total output of country.
(2) Better standard of living.
(3) Government does not have to spend money on unemployment benefits.
(4) More taxes from wages.

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26
Q

Q.26 What are the types of direct tax?

A

A.26
1) Income tax.
2) Corporate tax.

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27
Q

Q.27 What is the impact of income tax?

A

A.27 The higher the income tax rate, the smaller the amount of disposable income.

28
Q

Q.28 What is the impact of corporate tax?

A

A.28 The higher the corporate tax, the lower the amount of profit after paying expenses. This can be reduced for economic growth.

29
Q

Q.29 What are the solutions that are achieved by increasing tax rates?

A

A.29 In order to achieve a steady growth rate in the economy, the government may increase tax rates if the economy is growing too fast compared to the infrastructure of the state. A high tax rate also means a high amount of unemployment. The government may also change economic policies to encourage growth.

30
Q

Q.30 What are the two types of fiscal policies?

A

A.30
1) Government policies.
2) Government spending

31
Q

Q.31 How does government policy help with fiscal policy?

A

A.31
(1) Taxes.
(2) Borrowing and loans.

32
Q

Q.32 How does government spending help with fiscal policy?

A

A.32
(1) Public services.
(2) Subsidies on goods and services.
(3) Welfare benefits.

33
Q

Q.33 How does income taxes affect shareholders?

A

A.33 Fewer dividends.

34
Q

Q.34 How does income taxes affect businesses?

A

A.34
(1) Smaller profit and funds to reinvest and grow.
(2) Discourage existing and new shareholders.

35
Q

Q.35 How do businesses respond to income tax?

A

A.35
(1) May rethink strategy and relocate.
(2) May increase prices.
(3) Business may find other ways to obtain funds.

36
Q

Q.36 How does the increase of vat/tax affect consumers?

A

A.36
(1) More expensive goods and services.
(2) Demand for related goods and services falls.

37
Q

Q.37 How does the increase of vat/tax affect businesses?

A

A.37 Fewer sales.

38
Q

Q.38 How do businesses react to the increase of vat/tax?

A

A.38
(1) Less production.
(2) More competitive pricing.

39
Q

Q.39 How does the change in tariff and duty fees affect consumers?

A

A.39 Imported goods and goods made with imported raw materials are more expensive.

40
Q

Q.40 How does the change in tariff and duty fees affect businesses?

A

A.40
(1) Lower sales for businesses selling imported goods.
(2) Higher cost of production with imported materials.
(3) Local firms benefit from more demand.

41
Q

Q.41 How do businesses react to change in tariff and duty fees?

A

A. 41
(1) Business may decide to use local raw materials which will cause quality to suffer.
(2) Local firms may set up more branches.

42
Q

Q.42 What is the effect on the business because of increased taxes

A

A.42 Businesses selling essential items are not impacted due to the fact that people will buy these items whether they can afford it or not. However, luxurious items are less likely to be purchased if taxes are high.

43
Q

Q.43 Explain the importance of economic growth?

A

A.43 The growth of GDP in a country means the growth of the economy of a country. The growth of the economy allows people to have a better standard of living and make products more affordable, this results in more demand for products and causes more sales. A fall in GDP will not only cause less sales but also unemployment and a negative impact in the way of life.

44
Q

Q.44 What are the parts of business cycle?

A

A.44
(1) Growth
(2) Boom
(3) Recession
(4) Slump

45
Q

Q.45 What are the factors of business cycle stage: growth?

A

A.45
(1) Positive outlook for new business.
(2) Existing business makes profit and grows.
(3) Growth is measured with GDP.
(4) Unemployment falls due to more jobs.
(5) Raised standards of living.

46
Q

Q.46 What are the factors of business cycle stage: Boom?

A

A.46
(1) Business investments and profits are highest.
(2) Most sectors of the economy are at their best.
(3) High demand for good products and services.
(4) Low unemployment makes it harder to find skilled staff.

47
Q

Q.47 What are the factors of business cycle stage: Recession?

A

A.47
(1) Less business confidence due to less sales and investment with high competition.
(2) Decline in economic activity until slump.
(3) Falling demand causes falling profit.
(4) More redundant employees due to cutting costs.

48
Q

Q.48 What are the factors of business cycle stage: Slump?

A

A.48
(1) Low confidence and little investment.
(2) Low production of goods or shut down.
(3) Low demands for goods and services.
(4) High unemployment due to less business activities.

49
Q

Q.49 What are the methods of indirect taxes?

A

A.49
(1) Value added.
(2) Tariffs and duty.
(3) Sales tax.
(4) Excise duty.

50
Q

Q.50 Explain how this method of indirect taxes functions: value added tax.

A

A.50 Prices added to goods and services that are bought. This is not added to essential items

51
Q

Q.51 Explain how this method of indirect taxes functions: Tariffs and duty.

A

A.51 The government is able to control the amount of certain products leaving and entering the country. An increase in import tariffs may increase costs for businesses that depend on imported products.

52
Q

Q.52 Explain how this method of indirect taxes functions: Sales tax.

A

A.52 Different types of tax rates on different types of items paid by consumers upon purchase.

53
Q

Q.53 Explain how this method of indirect taxes functions: Exercise duty.

A

A.53 Paid by a manufacturer on goods that are produced.

54
Q

Q.54 What is the Usage of government borrowing?

A

A.54 Government may borrow funds from organizations and individuals through investments so that the government can focus on funding initiatives that allow the country to have better infrastructure and facilities. However, the state may also borrow from other countries although this may be expensive.

55
Q

Q.55 What is the Impact of government spending on businesses?

A

A.55 If the government focuses heavily on improving the infrastructure, this will allow a better standard of living and people will be more likely to spend money on products and services. This also creates employment opportunities and business opportunities. This will lead to more business expansion.

However, if there is less focus on improving infrastructure, this may lead to a slower business expansion.

56
Q

Q.56 Effect of increase in interest rates on consumer

A

A.56
(1) Cost of borrowing increases.
(2) Less spending to create better savings.

57
Q

Q.57 What is the effect of increase in interest rates on business

A

A.57
(1) Credit and cost of borrowing increased.
(2) Less spending will lead to a drop in sales.

58
Q

Q.58 How do businesses react to the effects of interest rates?

A

A.58 Firms may delay or cancel plans.

59
Q

Which factors are affected by increasing vat/tax?

A

(1) Consumers’ behavior.
(2) Business behavior.
(3) Business response.

60
Q

What factors are affected by change of tariff?

A

(1) Consumers’ behavior.
(2) Business behavior.
(3) Business response.

61
Q

What is the result of increasing interest long term?

A

(1) Slow economic growth.
(2) High rate of return from savings will encourage foreign financial institutions and individuals to invest in that country.

62
Q

What are the factors impacted by income taxes upon consumers?

A

(1) Consumers’ behavior.
(2) Business behavior.
(3) Business response.

63
Q

How does income taxes on consumers affect consumers?

A

Reduced disposable income to spend on products and services.

64
Q

How does income taxes on consumers affect businesses?

A

(1) Less demand for goods and services, leading to fewer sales.
(2) Less employee motivation leading to less production.

65
Q

How does income taxes on consumers affect business response?

A

(1) Focus on cost reduction.
(2) Reduced production levels.
(3) More fringe benefits and compensations.

Business studies (25 decks)

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