3.7.5 Analysing The External Environent To Assess Opportunities And Threats: Economic Change

Question 1

GPD formula

Answer 1

Total consumer spending + business investment+ government spending + the value of exports - the value of imports.

Question 2

What is GPD used to measure

Answer 2

Economic performance of a country

Question 3

What is economic growth

Answer 3

Means there’s more demand in the market economy and more output to meet that demand.

Question 4

What does fiscal policy do?

Answer 4

Sets tax rates and the amount of government spending

Question 5

What does fiscal policy help with?

Answer 5

Cutting taxes Helps lower unemployment as it gives people more to spend and increased consumption boosts production and creates jobs.

Question 6

What is monetary policy? And what are its aims?

Answer 6

Controls the interest rate. To control inflation and exchange rates.

Aims to:
-control inflation
-control the overall rate of economic growth.
-influence foreign exchange rates.

Question 7

What is protectionism?

Answer 7

When the government protects domestic businesses and jobs from foreign competition by giving them subsidies.

Question 8

What is open and free trade.?

Answer 8

When imports and exports are not restricted.

Question 9

Advantages of protectionism

Answer 9

Allows small businesses to grow as they don’t have to compete with multinationals .

Question 10

Disadvantages of protectionism

Answer 10

If a country restricts a country’s trading they might do the same and restrict their trading.

Question 11

Open trade advantages

Answer 11

Countries specialised in what they are good at.
Countries also benefit from economies of scale.

Question 12

Open trade disadvantages

Answer 12

-Fewer local jobs as multinationals expand abroad.
-some counties may use cheap labour eg child labour to keep their costs down to compete internationally.

Question 13

If the government raises taxes on individuals how are businesses affected?

Answer 13

Consumers spending decreases as they will have less disposable income which some businesses sales may suffer and struggle to expand.

Question 14

What is globalisation?

Answer 14

The increase in how interconnected the world is. Globalisation allows businesses to make strategic decisions about where to get their raw materials from, as well as manufactured goods.

Question 15

Three reasons for increase in globalisation?

Answer 15

-giant cargo ships make it cheaper to transport goods around the world
-cheap fast air travels means good and people can move around the world easily to work.
-the internet allows businesses to communicate between countries very quickly and cheaper. Allows for jobs to be outsourced across the world.

Question 16

3 benefits for businesses in investing in emerging economies and why is it risky?

Answer 16

-offer good returns due to the rapid growth. Labour is usually cheaper in emerging countries.
-people move out of poverty due to jobs being created therefore wil spend more good for businesses selling luxurious goods.
-less stable there might be currency fluctuations or infrastructure issues