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Economics > Unit 4(4.6-4.8) > Flashcards

Unit 4(4.6-4.8) Flashcards

1
Q

what is employment

A

the number of people in work

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2
Q

what is pattern of employment

A

the type of jobs that people do

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3
Q

what are some changes in employment patterns

A

changes in the number of women
changes to the age at which people retire
shifts between private and public sector

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4
Q

what is labour force

A

the population that can work(all people of working age)

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5
Q

what is the dependent population

A

people who are not in the labour force and depend on the labour force to supply them with goods

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6
Q

what is full employment

A

situation where entire labour force is employed

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7
Q

what is level of unemployment

A

measures the number of people who are willing and able to work but are not employed at the time

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8
Q

what is unemployment rate and formula

A

the number of people employed as a total number of the workforce
number of people unemployed/number of people in the workforce X 100

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9
Q

what can unemployment be measured by

A

the claimant count(number of people entitled to unemployment benefits)
labour force survey

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10
Q

what is seasonal unemployment

A

people that are unemployed at certain times of the year(farming)

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11
Q

what is frictional unemployment

A

when people are between jobs
doesnt necessarily have to be a concern

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12
Q

what is structural unemployment

A

due to long term change in the structure of the economy, people are unable to find a new job due to geographical or occupational mobility

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13
Q

what is cyclical unemployment

A

there is a lack of aggregate demand in the economy
with less demand for products, firms cut their production and labour

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14
Q

why is it bad for people to be unemployed

A

they lose their working skill and can cause the standard of living to fall
they can be demotivated
can lead to poverty and rise in crime rates
purchasing power will fall

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15
Q

why is unemployment bad for firms

A

they will have to retrain workers
pay redundancy payments
they are left with spare machinery leading to higher average costs

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16
Q

why is unemployment bad for the country

A

people will rely on unemployment benefits and the burden on taxpayers will rise
public expenditure will have to be cut down meaning public goods cannot be provided
the economy will be inefficient on the PPC

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17
Q

how will demand side policies reduce unemployment

A

reduce cyclical unemployment by increasing aggregate demand

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18
Q

how will supply side policies reduce unemployment

A

they will reduce structural and frictional unemployment

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19
Q

what are expansionary policies to increase demand

A

cutting taxes and increasing government spending to boost demand and keep employment high
however there is a time lag and they may not work

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20
Q

how does depreciating exchange rate reduce unemployment

A

causes exports to be cheaper which increases demand and increases production and employment

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21
Q

how does controlling inflation reduce unemployment

A

if the government controls incflation it will reduce firm costs and increase employment

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22
Q

how does cutting unemployment benefits reduce unemployment

A

gives an incentive for people to find work
however goes against welfare principle of the government

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23
Q

how does removing labour market regulations

A

makes it easier to hire and fire workers which improves labour market flexibility
but this can cause temporary unemployment and greater job insecurity

24
Q

how does training workers reduce unemployment

A

eliminates structural unemployment and improves occupational mobility
requires large amounts of money and is only seen long term

25
Q

how does promoting industry in unemployed areas reduce unemployment

A

governments provide subsidies when factories are set up in certain areas

26
Q

what is economic growth

A

the increase in the amount of good and services produced over a period of time

27
Q

what is gross domestic product(GDP)

A

the total market value of all final goods and services provided by the factors of production in a period of time

28
Q

what is nominal GDP

A

the value of output produced in an economy without any adjustments for inflation

29
Q

what is Real GDP

A

the value of output produced in an economy that is adjusted for inflation

30
Q

what is GDP per head/capita

A

measures the average output or income of each person in an economy
provides a measure of the living standards in a country

31
Q

what does an increase in real GDP indicate

A

it indicates economic growth since goods have increased and economies are utilizing their resources properly

32
Q

causes of economic growth

A

discovery of more natural resources
investment in new capital and infrastructure
technical progress
reallocation of existing resources

33
Q

benefit of economic growth

A

greater availability of goods and services to satisfy consumer wants and needs
increased employment
living standards may improve
increased sale, profit
investment in capital goods will increase(Beneficial for long term)
low and stable inflation if growth in supply meets demand
increased tax revenue to be used for public goods and services

34
Q

drawbacks of economic growth

A

increase in capital may replace labour causing an increase in unemployment
resources may get depleted over time
negative externalities(pollution,global warming) are increased
if demand is more than output, inflation may be caused
widening income inequalities because may not be evenly distributed

35
Q

what do governments aim for in economic growth

A

sustainable economic growth which can be maintained without creating significant problems

36
Q

what is recession

A

when there is no economic growth and read GDP is falling
happens when there is rapid economic growth that causes high inflation

37
Q

what are the causes of recession

A

banks reduce lending
rise in interest rates(reduces demand)
fall in real wages(income doesnt increase at same rate as inflation)
fall in consumer/business confidence
cut in government spending
trade wars
supply side shocks

38
Q

consequences of recession

A

firms go out of business
unemployment(cuts in production)
fall in income(cuts in production)
rise in poverty and inequality
fall in asset prices(stock market crashes and shares lose value)
higher budget deficit(fall in tax revenue)
economy moves inwards on PPC

39
Q

what policies are used to promote demand for economic growth

A

expansionary fiscal and monetary policies

40
Q

what do supply side polices do to promote economic growth

A

implemented if factors of production are affecting the economy

41
Q

why are demand side polices dangerous in promoting economic growth

A

policies that increase the rate of demand can lead to a recession if not controlled properly

42
Q

why are supply side policies less effective in promoting economic growth

A

take time to have an effect
wont solve the fundamental problem of deficiency of aggregate demand

43
Q

what is inflation

A

the general and sustained increase in the level of prices of goods and services over a period of time
measured with the Consumer Price Index

44
Q

how is the CPI calculated

A

take weight of goods and multiply with base year price
take weight and multiply with next year
new year - base year = inflation

45
Q

what is the CPI

A

the selection of goods and services normally purchased by a household
the prices are then monitored

46
Q

what is demand pull inflation

A

inflation caused by an increase in aggregate demand
price rises since aggregate demand is larger than aggregate supply

47
Q

what is cost push inflation

A

caused by an average increase in cost of production causing prices of goods to increase
supply curve will shift left

48
Q

consequences of inflation

A

lower purchasing power
exports are less internationally competitive
inflation will cause more inflation(cost of living goes up causing workers to demand higher wages causing cost push inflation)
fixed income groups, lenders and savers will lose(lenders who recieve the money after inflation has lost value on their money)

49
Q

how does contractionary monetary policy control inflation

A

interest rates are raised to reduce spending and investing to reduce demand
has a time lag

50
Q

how does contractionary fiscal policy control inflation

A

raising taxes to reduce income and demand
cutting down of government spending
unpopular policy and only used in severe situations

51
Q

how do supply side policies control demand

A

allows supply to catch up to demand
done through deregulation and incentives to reduce average costs of production

52
Q

how does exchange rate policy control inflation

A

appreciating domestic currency can lower import prices which reduces cost push inflation
export also becomes expensive whcih lowers export demand

53
Q

what is deflation

A

a general fall in the price level

54
Q

causes of deflation

A

aggregate supply exceeding aggregate demand(excess output causing prices to fall)
demand falls
labour productivity rises(higher output leads to lower average costs)
technological advance(reduced cost of production)

55
Q

consequences of deflation

A

lower prices can discourage production and cause unemployment
investors are discourages to invest
can cause recessions
tax revenue of government will fall
borrowers will lose money since debt becomes higher
increase real debt burden of the government

56
Q

how does expansionary monetary policy control deflation

A

cutting interest rates to encourage more spending and investing

57
Q

how does expansionary fiscal policy control deflation

A

increase government spending to increase demand
cutting taxes

Economics (9 decks)

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