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Economics > Unit 3 Money and Banking(3.1-3.5) > Flashcards

Unit 3 Money and Banking(3.1-3.5) Flashcards

1
Q

What does Store of Value mean

A

It can be saved and will retain value

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2
Q

What does Unit of Account mean?

A

It is used to measure the value of goods and services

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3
Q

A medium of exchange?

A

INdividuals and firms are willing to trade goods and services for it because they know they can use it later to purchase other items

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4
Q

a standard of deferred payment

A

Many transactions in an economy are on credit, this works because money is a store of value

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5
Q

what are commercial banks

A

they are financial intermediaries who move funds from lenders to savers

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6
Q

What are central banks

A

manages a countrys currency,money supply and interest rates

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7
Q

main responsibilities of central bank

A

issuing banknotes and managing the currency
providing monetary stability
providing financial stability and ensuring that financial institutions
banker to the government
a lender of the last resort of the banking system

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8
Q

Main functions of commercial banks

A

accept deposits from savers
lend to households and firms
provide efficient means of payment

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9
Q

what do household earn from work

A

income

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10
Q

what is it called when households spend their income and when they do not spend their income

A

consumption and savings

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11
Q

different factors that can affect consumer spending

A

stage in an individuals life cycle
time of the year (holiday or seasons)
Amount of income

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12
Q

why do households save

A

to finance future spending

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13
Q

factors that affect savings

A

Interest rates
Income (the more the income, the more they tend to save and if income is low, more is spent on essentials)
Stage in an individuals life cycle ( younger people tend to save less)
Confidence in the future
Government incentives

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14
Q

Why do people borrow and how

A

when they want to buy something but do not have enough money at the time, they borrow and pay back over time

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15
Q

What factors do an individuals choice of job depend on

A

wage rate
non monetary factors ( is the job dangerous or repetitive)
required skills
the alternatives and opportunity cost

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16
Q

What reasons will earnings likely be higher

A

If supply is limited ( takes many years to train like a doctor)
If demand is high ( business will earn large sums from selling their output)

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17
Q

Why do skilled workers earn more than unskilled workers

A

supply is limited and output is worth more so demand is higher

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18
Q

Why do private sector workers earn more than public sector workers

A

Governments have limited funds and maximising profits arent a priority.( These workers are compensated with good pensions and greater job security)

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19
Q

Why is earnings in manufacturing higher than in agriculture

A

it is easier to increase productivity which leads to more money for the business.Businesses will then reward them more highly

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20
Q

What are trade unions

A

They are organisations that represent employees and hold talks with employers.
They have more power than an individual would have and allows wages and other demands to be met

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21
Q

What is specialisation

A

when jobs are divided into smaller tasks

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22
Q

why is specialisation used

A

it is easier for the worker to learn what to do and by repeating the same task they can become very productive

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23
Q

what is the disadvantages of specialisation

A

the work is repetitive and not very challenging

24
Q

What does specialisation mean for the business

A

It is easy to recruit and train workers to do the jobs and productivity may be high

25
Q

What do employers do with trade unions

A

they may inform trade unions of decisions,consult with the trade unions or negotiate with the trade unions

26
Q

What can trade unions be involved with

A

redundancies(when workers lose their jobs because the job no longer exists)
dismissals(workers get fired)
training
working conditions
payment
terms and conditions of employment
changes to job descriptions

27
Q

what actions can trade unions take

A

representing employee views in meetings or to the media
undertaking a work to rule( workers stop working overtime)
strike( employees stop working but also do not recieve pay

28
Q

Benefits for employees for joining trade unions

A

provides greater protection, expertise(legal advice) and they will bargain for better pay and conditions

29
Q

disadvantages of joining trade union

A

Theres a cost to join
employees prefer to bargain individually
trade union may take actions that an individual employees disagrees with

30
Q

how can trade unions hep employers

A

they can find solutions to problems
gain the agreement and cooperation of employees
understand issues from employee perspectives

31
Q

how can trade unions cause problems for managers

A

pushing up wages and costs
opposing changes
taking strike action

32
Q

What is a private sector firm

A

firms run by individuals, not the government

33
Q

what is a secondary sector firm

A

take raw materials and process them(manufacturing)

34
Q

what are tertiary sector firms

A

they provide services( education or banking)

35
Q

some ways the size of a firm can be measured

A

its sales
what it owns(assets)
Number of employees

36
Q

advantages of being a small firm

A

they can make decisions fast, be innovative and create new products

37
Q

disadvantages of being a small firm

A

lack market power
may lack experience
may lack assets needed to raise funds
may have high unit costs

38
Q

Causes of the growth of firms

A

internally-by selling more goods and investing the profits made
externally-by joining with another business through a merge or a takeover

39
Q

what is a merger

A

two or more firms join and become one firm

40
Q

what is a takeover

A

one business gains control of another(can be hostile)

41
Q

what are the different types of mergers

A

horizontal
backward vertical
forward vertical
conglomerate integration

42
Q

what is horizontal mergers

A

firms at the same stage of production join together( car manufacturer joins with another car manufacturer )

43
Q

what is backward vertical mergers

A

a firm joins with another firm at an earlier stage of production( Starbucks buys coffee bean farms)

44
Q

what is a forward vertical merger

A

a firm joins with a business at a later stage of the production process( car manufacturer joins with car dealership)

45
Q

what is conglomerate integration

A

a firm joins with a business in a different sector

46
Q

what is the purpose of a horizontal integration

A

remove competitors
gain market share

47
Q

purpose of forward vertical integration

A

gain and secure access to the market

48
Q

purpose of backward vertical integration

A

secure supplies

49
Q

purpose of conglomerate integration

A

spread risk by operating in different markets so the firm is less vulnerable

50
Q

what is internal economies of scale

A

when unit costs fall as a firm increases the scale of its production

51
Q

what is a purchasing economy

A

when a firm saves costs through bulk buying

52
Q

what is a marketing economy

A

when advertising and marketing budget is spread over an increasing output

53
Q

what is a technical economy

A

cost savings through mass production techniques

54
Q

what is risk bearing economies

A

when a business operates in different markets( if sales fall in one market, other markets may not be affected so profits are more stable)

55
Q

what are internal diseconomies of scale

A

when unit costs rise as a firm increases the scale of its production( due to communication or control problems

56
Q

what are external economies of scale

A

when unit costs are lower at every level of output due to factors outside the business

57
Q

factors that lead to external economies of scale

A

if the industry grows, there may be a growth in specialist suppliers
being located in an area where there is already a trained workforce so the company has no training costs

Economics (9 decks)

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