Economic change Flashcards
(19 cards)
Definition : economy
The state of a country or region in terms of the production and consumption of goods and services and the supply of money
What is GDP
The total value of a countries output in a year
Positive impacts of economic growth
Higher revenue and in term higher profits
Gives the potential for economies of scale
Increases confidence l
Helps businesses plan for the future
Negative impacts of economic growth
Fast growth may cause shortages
If growth is too fast it’s usually followed by a recession
What might a business have to do during a economic recession
- close down parts of the business
- develop new products to meet customers decreased disposable income
- lower prices
What might a business have to do in an economic growth
- use existing capacity to meet increased demand
- expand capacity to deal with increase in demand
- develop new products
What is inflation
percentage change in level of prices as measured by the consumer price index
What are exchange rates
The value of one currency measured by how much it will buy of other currencies
Effects of exchange rate changes - strong pound
- bad for businesses exporting as it makes their products expensive
- good for consumers buying imported products as they become cheaper
Effects of exchange rate changes - weak pound
- good for businesses exporting as it makes their products cheaper
- bad for consumers buying imported products as they become expensive
Definition : monetary policy
Influencing the supply and demand for money through interest rates and other monetary tools usually conducted by the central bank
Definition : fiscal policy
Use of government revenue collection (mainly taxes) and expenditure (spending) to influence the economy
Definition : open trade
When imports and exports are not restricted
Definition : protectionism
The extent to which a government uses controls to restrict the amount of imports entering the country
Benefits of open trade
- specialisation leads to more efficient use of resources
- increased competition encouraging greater efficiency
- encourages and rewards innovation
- provides markets for surplus raw materials
- economic growth
- consumer choice
Disadvantages of open trade
- fewer local jobs as multinationals expand abroad
- employee skills are concentrated around certain jobs
- some countries may use sweatshops and child labour to keep their costs down to compete internationally
What might protectionism involve
- tariffs
- non tariff (quotas, embargo, regulations)
Benefits of protectionism
- infant industries : able to compete against established companies
- dumping
- domestic employment
- externalities
Drawbacks of protectionism
- prices of imported goods rise due to decreased supply
- if you restrict a countries trading in your country they may restrict trading in there’s
