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higher economics 2023 > unit two > Flashcards

unit two Flashcards

1
Q

what is a direct tax

A

a tax which is payed directly to the government For example, income tax

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2
Q

what is an indirect tax

A
  • tax which is imposed on a transaction and paid to the government by the firm after purchasing. For example, VAT
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3
Q

what is a progressive tax

A

a tax which takes a higher percentage of tax from people with higher income. For example Income tax

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4
Q

what is a regressive tax

A

a tax which takes a higher percentage of tax from people with lower income. For example VAT

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5
Q

what is current spending

A

Spending on running costs such as workers wages (public sector) or raw muterials like, Oil, gas or wood

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6
Q

what is capital spending

A

spending on property or equipment
such as hospitals, machinery or new roads

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7
Q

what are transfer payments

A

welfare payments such as child benefits. housing benefits, state pension Jobseckers allowance

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8
Q

what is a budget deficit

A

when the government spend more that it collects in tax per year

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9
Q

what is a budget surplus

A

when the government brings in more tax than it spends annudly This can be used to recuce the national debt

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10
Q

what is a balanced budget

A

when the government bring in the same amount of tax as they spend annually

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11
Q

what is austerity

A

measures taken by the government to reduce the delicit or create/increase a budget surplus.

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12
Q

what is the national debt

A

the total amount that the public sector owes to those who have loaned it money

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13
Q

what is the PSNCR

A

the public sector net cash requirement is the amount that the government must borrow each year

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14
Q

what is inflation

A

-a rise in the general level of prices over a given period of time
- it reduces the value of money
- the government aim for 2% inflation (+/-1%)

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15
Q

what are the types of inflation

A
  • cost push- when prices rise due to increased costs of production
  • demand pull - when prices rise due to a rapid increase in demand (when there is too much money chasing to little goods)
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16
Q

how is inflation measured

A
  • Consumer price index (CPI)
  • Retail price index (RPI)
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17
Q

describe the CPI and RPI

A

CPI
- basket of goods
- items are weighted
- announced quarterly
-percentage increase from the previous year
- doesn’t include housing costs
-target of 2%
- more common

RPI
- similar to CPI
-included some housing costs
- target of 2.5%

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18
Q

what is the difference between real and nominal income

A

real - income after inflation
nominal - income before inflation is considered

19
Q

what are the problems caused by inflation

A
  • reduces real incomes
  • reduces the value of savings
  • goods become more expensive which decreases exports
  • individuals and businesses are uncertain which discourages Spending and investments
  • decline in competition
  • menu costs - changing price lists.
20
Q

what is deflation and what problems does it cause

A
  • a rise in the general level of prices over a given period of time
  • it increases the value of money
  • makes it harder for firms to make a profit
  • decreases the likelihood of investment
21
Q

what is fiscal policy and who controls it

A
  • controlled by the government
  • taxation
    -government spending
22
Q

what is monetary policy and who controls it

A
  • controlled by the bank of england
  • interest rates
23
Q

how is unemployment measured

A
  • claimant count- number of people collecting unemployment benefits
  • the labour force survey- a questionnare of 60,000 people monthly - more accurate
24
Q

what does it mean to be economically inactive

A

people that are not working but are not seeking work

25
Q

what fiscal/ monetary policies can be used to reduce unemployment

A

FISCAL
- cut taxes
- increase government spending

MONETARY
- reduce interest rates

26
Q

why may people be economically inactive

A
  • retired
  • housewife/husbands
  • between jobs
  • prisoners
  • volunteer worker
27
Q

what are the effects of unemployment on individuals

A
  • reduced income
  • reduced efficiency, loss of skill, fitness or motivation
  • Social exclusion
  • health problems
28
Q

what are the effects of unemployment on firms

A

CONS
-decrease in demand of products
- Loss os customers causing a decrease in profits and sales

PROS
- more job applicants
- less pressure to pay staft high wages
- Less risk of industrial action- strikes

29
Q

what are the effects of unemployment on government

A
  • reduced tax revenue
  • Increased burden on taxpayers to fund training and benefits
  • Increase in crime and costs of emergency services
  • Increased burden on the NHS
  • Civil unrest Likely to occur - protests, demonstrations.
30
Q

what are the types of unemployment

A
  • Cyclical
  • Seasonal
  • frictional
  • Structural
31
Q

what is full employment

A
  • the natural rate of unemployment
  • 2/3%
  • number of unemployed people = number of vacancies
  • allows for frictional unemployment
32
Q

what is economic growth and how is it calculated

A

economic growth is a way to show how well an economy is performing and is shown by GDP. It is calculated by measuring all the income of a country and is announced quarterly in the UK.

GDP shows the size of the economy and can be calculated per capita to show the richness of a country

33
Q

what is the difference between a contraction/shrinkage and a recession

A

contraction/shrinkage- one quarter of negative GDP
recession - two consecutive quarters of GDP

34
Q

What is GNP

A

GNP is another way to calculate the success of a countries economy

it measures the total value of goods and services produced by the citizens of a country no matter where on earth. Eg cadburys factory in australia

35
Q

how is GDP calculated

A

C+I+G+(X-M)

C- consumer spending
I- business investment
G- Government spending
X- exports
M- Imports

36
Q

what are the pros and cons of economic growth

A

PROS
- increases employment, more money, better standard of living
- increased government revenue for government.
- Less spending on unemployment benefits

CONS
- money is not equally distributed amoung people - increases inequalities
- negitive environmental impacts
- GDP includes spending on weapons and prisons which is not good for society
- GDP doesnt consider how long people work for
- growth could be caused by over spending which could create debt
- can cause inflation

37
Q

what are the four stages of the business cycle

A
  • boom
  • recession
  • trough
  • recovery

axis - GDP and time

38
Q

draw/describe the circular flow of income diagram

A

Households
Firms

  • labour
  • wages
  • consumer spending
  • goods and services

Injections and leakages

39
Q

what are the leakages and injection on the circular flow of income diagram

A

LEAKAGES
- tax
- imports
- savings

INJECTIONS
- gov spending
- exports
- investments

40
Q

what are some examples of devolved powers

A
  • income tax rates - 45% vs 47%
  • education - higher vs GCSE
  • housing
  • agriculture forestry and fishing
41
Q

what are national income stats used for

A
  • measure growth and standard of living
  • to help government with decision making
  • comparing to other countries
  • helps to identify countries in need of aid
  • calaulate contributions that should be made to the world bank
42
Q

why might national income stats not always be accurate

A
  • methods of calculating NIS may change between countries or over time
  • population figures must be exact at it is measured per head
  • do not show working hours on conditions
  • doesnt consider environmental damage on pollution
  • Spending on defence or prisions is included which does not improve the standard of living
    -black market
  • errors
  • inflation is not considered
43
Q

what is the multiplier effect

A

the multiplier is when an injection or leakage causes a greater change in the value of the economy than the initial amount spent

higher economics 2023 (3 decks)

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