2.0 how economies operate

Question 1

good and services

2.1

Answer 1

• the results of the production process to satisfy needs and wants

Question 2

4 factors of production

2.1

Answer 2

• land
• labour
• capital
• enterprise

Question 3

land (natural resources)

2.1

Answer 3

• rent - income reward from productive use of natural resources
• limited amount of certain natural resources

Question 4

labour

2.1

Answer 4

• human effort for goods and services
• reward of wages - regular payments
• limited by population size, labour market skill and willingness to work

Question 5

factors that affect labour

2.1

Answer 5

• population
• birth rate
• life expectancy
• immigration
• avg. schooling years
• retirement ago
• social attitudes

Question 6

forms of wages

2.1

Answer 6

• executive salary
• commisssions
• professional fees
• self-employed earnings

Question 7

capital

2.1

Answer 7

• the produced means of production
• tools, machinery, factories, infrastructure (X financial assets)
• reward of interest
• use funds/consumer savings for capital goods
• limited by a firm/entity’s willingness to invest/take risks

Question 8

enterprise

2.1

Answer 8

• organising the factors of production
• return: profit (income recieved over rent, wages and interest)
• limited by the tendancy to take risks and innovate

Question 9

GDP

2.2

Answer 9

(Gross Domestic Produce) total amount of goods and services in a given year

Question 10

Distribution of income

2.2

Answer 10

• income as a reward for production
• worker income based on expertis amount of work, providing incentive

Question 11

Government intervention in distribution of income

2.2

Answer 11

• government intervention to correct inequitable market (unfair income disadvantage)
• taxation and redistribution of G&S

Question 12

mediums for G&S exchange

2.2

Answer 12

• money is the primary median for exchange
• bartering (G&S exchange)
• crypto currencies

Question 13

recessions

2.3

Answer 13

• firms delay plans for investment, reduce production, reduces labout demand and employment falls

Question 14

factors influenced by the business cycle

2.3

Answer 14

• production
• consumption/investment
• employment
• income levels
• standard of living

Question 15

circular flow of income

individuals (household sector)

2.4

Answer 15

• owners of producive resources (FOP)
• primary consumers
• supply the input for income

Question 16

circular flow of income

businesses

2.4

Answer 16

• production of G&S, buy FOP, produce and sell G&S
• businesses and household sector are interdependent

Question 17

circular flow of income

financial institutions

2.4

Answer 17

• the capital market (borrowing and lending money)
• purpose is mobilising savings for investment

Question 18

private secor/domestic sector

2.4

Answer 18

• household sector
• firms sector
• financial sector

Question 19

circular flow of income

government

2.4

Answer 19

on a commonwealth, state and local level.

Question 20

circular flow of income

equilibrium and disequilibrium

2.4

Answer 20

• total leakages = total injetions
• economy generally apporaches equilibrium
  ) leakages > injections - downturn in economic activity, decrease of income leads to less leakages.
  ) injections > leakages - upturn in economic activity, more leakages through individual savings

Question 21

circular flow of income

leakages

2.4

Answer 21

• savings (disrupt equilibrium but vital for capital goods)
• taxation (reduces consumer spending for funds)
• imports (contribuing directly to other economies)

Question 22

circular flow of income

injetions

2.4

Answer 22

• investment (increases economic activity by increasing demand for capital goods)
• government spending (income to gov. employees, pensions and unemploment benefits)
• exports