1.6 Government objectives and policies Flashcards
(15 cards)
What are government objectives in relation to the economy?
Goals set by the government to improve economic performance and social welfare.
Name four common government economic objectives.
Economic growth, low unemployment, price stability (low inflation), and a balanced trade position.
What is economic growth?
An increase in the production of goods and services in an economy over time.
Why is economic growth important for businesses?
It leads to higher demand for goods and services, creating opportunities for expansion.
What is unemployment?
The situation when people who are willing and able to work cannot find jobs.
How does low unemployment benefit businesses?
It increases consumer spending and reduces social costs.
What is inflation?
The general rise in prices over time.
How does high inflation affect businesses?
It increases costs and creates uncertainty for planning.
What is meant by a balanced trade position?
When the value of exports is roughly equal to the value of imports.
What is fiscal policy?
Government decisions on taxation and public spending to influence the economy.
What is monetary policy?
The use of interest rates and money supply by a central bank to control inflation and stabilize the economy.
How can tax policies affect businesses?
Higher taxes can reduce profits; lower taxes can encourage investment.
What are subsidies?
Government payments to businesses to lower their costs and encourage production.
Why do governments regulate businesses?
To protect consumers, workers, and the environment.
How do government policies impact business decision-making?
They influence costs, consumer demand, and business confidence.
