capitalism Flashcards
1
Q
why is capitalism a good thing for economic growth(3)
A
- capitalists invest money in economy
- positive multpiplier effect
- profit incentive improves productivity and output shifting LRAS
2
Q
How does capitalism lead to income inequality
A
buisness owners decide their own wages
decide to pay themselves higher wages and the workers lower wages
3
Q
How does capitalism lead to wealth inequality
A
- buy more assets with high profits
- workers may not have enough money
- If R>G owners of capital will grow richer than regular workers
4
Q
how does inequality limit growth(5)
A
- capitalists motivated by profit
- pay workers very little wages
- these workers have little saving
- cannot make their own investment into economy
- limiting growth
5
Q
why are some people against capitalism
A
- creates winners and losers
- rich people may just save their money leading to a withdrawal - less consumption
6
Q
market-based policy to decrease unemployment (5)
A
- reduction in income tax
- reduction in corporation tax
- reduction in transfer payments
- reduction in trade union power
- privatisation
7
Q
interventionist policies to decrease unemployment
A
- gov spending to increase training
- increase in wage
- protectionism to reduce competition for foreign firms
