unit 6 Flashcards
What are the governments objectives
- low and stable inflation
- low unemployment
- economic growth
- balance of payments between imports and exports
why should inflation be kept stable and low
- allows businesses to expand and create jobs
- prices of goods will decrease
- workers would not demand wage rises
why should countries aim for low unemployment
- no need to pay unemployment benefits
- reduce wastage of resources
why should countries keep their economic output high
- less unemployment
- motive to expand for businesse
- higher living standards
state the parts of the businesses cycle
- growth: GDP rising | unemployment falling and high living standards
- boom: too much spending | prices increase and shortage of skilled workers
- recession: too little spending | GDP falls and falling demands
- slump: serious drawn out recession | high unemployment and prices might fall
state the impacts of higher inflation on businesses
- higher cost (materials + wages + fixed costs)
- reduced demands on luxury items
state the impacts of higher unemployment on businesses
negative:
1. lower consumer demand
positive
1. easier to recruit workers
2. cheaper labor
state the impacts of GDP growth on businesses
- higher consumer demand
- higher demand on luxury products
how do governments achieve economic policies
- fiscal policy: taxation and government spending
- monetary policy: interest rates
what are interest rates
The cost of borrowing money and return for depositing or saving money
what are the effects of high interest rates
- Less profits
- lower opportunities for expansion
- Consumers will save their money
what are the impacts on the business of increased taxation
- lower demand on goods and services
- reduces the demand on luxury products
- reduce the profit
what is globalisation
increase in interconnection between countries in terms of trading good and services
how did globalisation arise?
- increased free trade among countries
- Cheaper travel links
- global recognition of brands
- increase in labor and capital mobility
state opportunities and impacts of globalisation
- open up foreign markets: greater sales but may be more costly
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