Commerce Flashcards
(16 cards)
What are the five sectors in the circular flow model?
Households (Consumers), Businesses, Government, Financial Institutions, and the Overseas Sector.
What is the role of consumers in the circular flow model?
Consumers provide labor and receive income; they also spend money on goods and services.
What is the role of businesses in the circular flow model?
Businesses produce goods and services and pay wages to households.
What is the role of government in the circular flow model?
The government collects taxes, provides public goods and services, and supports income redistribution.
What is the role of financial institutions in the circular flow model?
They facilitate savings and investment by linking savers with borrowers.
What is the role of the overseas sector in the circular flow model?
It involves trade—exports bring money into the economy, imports send money out.
How does the government protect consumers?
Through regulation, setting safety standards, consumer protection laws, and fair trading policies.
How does the financial sector help businesses?
By providing access to capital for investment through loans, credit, and other financial services.
What are the four main phases of the business cycle?
Expansion, Peak, Contraction (or Recession), and Trough.
What happens during the expansion phase?
Economic activity increases, unemployment falls, and GDP grows.
What happens during a contraction or recession?
Economic activity declines, unemployment rises, and GDP shrinks.
What is the price mechanism?
The system where prices are determined by supply and demand, guiding resource allocation.
What happens when demand exceeds supply?
Prices rise, encouraging producers to supply more and consumers to demand less.
What happens when supply exceeds demand?
Prices fall, encouraging consumers to buy more and producers to supply less.
What is a market?
A place or system where buyers and sellers interact to exchange goods, services, or resources.
What are examples of different types of markets?
Retail markets, labour markets, financial markets, and stock markets.
