Business/Economics Flashcards
(48 cards)
Why do we measure national income?
To track economic performance, compare with other countries, and guide policy decisions.
. What is meant by counter-cyclical economic policy?
It’s when the government increases spending or cuts taxes during a downturn and does the opposite during a boom.
. In measuring national income using the expenditure method there are four components. List them.
Consumption (C), Investment (I), Government Spending (G), and Net Exports (Exports - Imports).
. Name five things that the measurement of GDP misses.
It misses unpaid work, black market activity, inequality, environmental damage, and quality of life.
- What is inflation?
A general increase in prices over time, reducing the purchasing power of money.
Explain what is meant by a ‘business cycle’ as according to ABCT.
Austrian theory says cycles are caused by too much cheap credit leading to unsustainable booms and inevitable busts.
What is meant by comparative advantage in terms of international trade?
When a country can produce something at a lower opportunity cost than another country.
. List three protectionist strategies.
Tariffs, quotas, and subsidies to domestic producers.
Draw a supply and demand curve for the labour market identifying the minimum wage.
Show a horizontal line above equilibrium; it causes excess labour supply and unemployment.
List two types of cost with an example of each.
Fixed cost (e.g. rent) doesn’t change with output; variable cost (e.g. materials) does.
List and explain the types of market structure.
Perfect Competition – Many firms sell identical products and none can influence the price.
Monopolistic Competition – Many firms sell similar but slightly different products, giving them some price control.
Oligopoly – A few large firms dominate the market and are affected by each other’s decisions.
Monopoly – One firm controls the entire market and sets prices without competition.
. Explain Hirschmann’s Exit, Voice, Loyalty.
Exit means leaving, voice means complaining or trying to fix, and loyalty means sticking with it.
. What is the principal reason that companies go out of business?
Running out of cash – they can’t pay expenses even if they’re profitable on paper.
. How do you calculate profit?
Profit = Total Revenue – Total Costs.
. What is a balance sheet, list the main elements of a balance sheet.
A snapshot of financial position showing assets, liabilities, and equity.
List two news outlets that focus specifically on business and finance.
The Financial Times and The Economist.
When we measure GDP what is it made up of in terms of C+I+G+NX?
GDP = Consumption + Investment + Government Spending + Net Exports (Exports - Imports).
Who loses and who gains as a result of rising inflation?
Savers and fixed-income earners lose; borrowers and some asset owners can gain.
To tackle inflation what do Central Banks do with interest rates?
They raise interest rates to reduce spending and slow down inflation.
. Name three things that the measurement of GDP misses.
Unpaid work, black market activity, and environmental costs.
List three protectionist strategies that countries engage in.
Tariffs, import quotas, and domestic subsidies.
. Explain what is meant by perfect competition, versus, say a monopoly?
Perfect competition has many firms and no control over price; monopoly has one firm that controls price.
When the government increases taxation what impact does this have on the size of the economy?
It reduces disposable income and spending, which can shrink the economy.
Explain Hirschman’s Exit, Voice, Loyalty.
Exit means leaving, voice means speaking up to fix things, and loyalty delays exit.
