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Economics OCR GCSE Paper 2 > Unit 3 - Economic Objectives And The Role Of The Government > Flashcards

Unit 3 - Economic Objectives And The Role Of The Government Flashcards

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1
Q

Economic growth

A

Growth in GDP (value of output) over time

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2
Q

Determinants of economic growth

A

Investment (spending on capital goods), changes in technology, education, labour productivity, size of the workforce, natural resources and government policies (i.e. infrastructure development)

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3
Q

Economic growth benefits

A

A rise in material lifestyles
A reduction in poverty (through tax revenue)
A rise in the welfare of the population
A rise in employment

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4
Q

Economic growth costs

A 
Pollution (Air, land etc)
Carbon emissions 
Congestion 
Loss of renewable resources 
Inflation 
A lower quality of life
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5
Q

Employment

A

The use of labour in the economy to produce goods and services

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6
Q

Claimant count

A

The method of measuring unemployment according to the number of people claiming unemployment related benefits

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7
Q

Level of unemployment

A

The number of people in the working population who are unemployed

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8
Q

Rate of unemployment

A

The % of the country’s workforce that is unemployed

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9
Q

Four types of unemployment

A

Seasonal
Frictional
Structural (Permanent decline of an industry)
Cyclical (Fall in total demand in an economy)

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10
Q

Benefits of unemployment

A

Wage inflation kept down
Firms can be more competitive on price
Inflation kept under control

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11
Q

Individual consequences of unemployment

A

Loss of self-esteem
Lower living standards
Family issues
Become deskilled

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12
Q

Government consequences of unemployment

A 
Wasted labour resources
Paying out more in unemployment related benefits 
Less tax revenue 
Leads to further unemployment (cyclical)
Budget deficit
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13
Q

Regional consequences of unemployment

A

‘Depressed areas’
Falling house values
Crime

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14
Q

Distribution of income

A

How incomes are shared out between households

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15
Q

Distribution of wealth

A

How wealth shared out between households

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16
Q

Income

A

A flow of money over times includes wages, rent, interest, profits (dividends) and benefits (incl. pensions)

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17
Q

Wealth

A

The combined value of a stock of assets at a particular point of time including property, land and money in the bank

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18
Q

Causes of uneven income distribution

A 
Income earning assets are unevenly distributed 
Differences in wages
Reliance on benefits (includes pensions)
Age
Gender
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19
Q

Causes of uneven wealth distribution

A

Inheritance
Savings
Purchase of property
Enterprise

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20
Q

Consequences of uneven income and wealth distribution

A

Poverty and deprivation (Distinguish between absolute and relative)
Poor housing
Poor health
Inequality of opportunity

21
Q

Cost of living

A

The price level of goods and services bought by the average family

22
Q

Price stability

A

When the general level of prices stays constant, or grows at an acceptably low rate

23
Q

Nominal values

A

The value of something in money

24
Q

Real values

A

Pay adjusted for inflation (Shows purchasing power comparable to other years)

25
Q

CPI Key Points

A

Measured using index

Basket is weighted

26
Q

Consequences of inflation for consumers

A

Shoe leather costs
Loss of consumer confidence
Fall in real incomes

27
Q

Consequences of inflation for producers

A 
More flexibility setting wages
Menu costs
Conflicts (i.e. with trade unions)
Less internationally competitive 
Make workers redundant 
Reduced business confidence (leading to less investment)
28
Q

Consequences of inflation for savers

A

Savings worth less (value falls)

29
Q

Consequences of inflation for the government

A

Policy needed to combat inflation
More spending on benefits and public sector wages (index linked)
More tax revenue (i.e. VAT)

30
Q

Government spending

A

The total amount of money spent by the government in a given period of time

31
Q

Government revenue

A

The source of finance for government spending

32
Q

Budget deficit/surplus - key point

A

The government might deliberately budget for a deficit/surplus to achieve objectives

33
Q

Macro economic objectives

A

Low unemployment
Economic growth
Price stability
Balance in the balance of payments

34
Q

Fiscal policy tools

A

Taxes

Government spending

35
Q

Costs of budget deficit

A

No guarantee workers will spend extra money
Extra income may be spent on imports
Inflation could rise
Opportunity costs

36
Q

Government action to redistribute income and wealth

A 
Taxes
Benefits 
Progressive taxes
Inheritance tax
Means tested benefits 
Education spending
37
Q

Progressive tax

A

A tax which takes a greater % of tax the higher the income

38
Q

Evaluating consequences of measures to redistribute income and wealth

A

People may not work in post tax income is not much better than benefits
Workers may not seek promotion
Businesses may not/invest in the UK
High earners may move abroad

39
Q

Monetary policy

A

A policy that aims to control the total supply of money in the economy to try to achieve the government’s macro economic objectives - in particular, price stability

40
Q

Monetary policy tools

A

Interest rates

Quantitative easing

41
Q

Quantitative easing

A

The central bank makes more money available for High St banks to lend

42
Q

Other impacts of reduced interest rates

A

Fall in the value of the %

Asset (i.e. houses) prices rise

43
Q

Supply side policies

A

Policies that increase the productive capability of the economy i.e. increase the output

44
Q

Supply side policies examples

A 
Education and training
Subsidies 
Spending on infrastructure
Reducing power of trade unions
Competition policies
Reduction in benefits 
Reduction in direct taxes 
Privatisation (encourages efficiency)
45
Q

Benefits of supply side policies

A 
Targets specific markets
Combats inflation 
Increases employment 
Improves the balance of payments
Increases growth
46
Q

Evaluation of supply side policies

A 
Times lags
Costly 
Resistance i.e. trade unions 
Affects distribution of income negatively 
Unintended effects i.e. more P/T workers
47
Q

Externality

A

An effect of an economic activity on a third party

48
Q

Government policies to impact externalities

A 
Taxes
Subsidies
Information provision 
State provision 
Legislation
49
Q

State provision

A

Goods and services provided directly by the government i.e. education and healthcare

Economics OCR GCSE Paper 2 (2 decks)

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