section 6 Flashcards
(49 cards)
balance of payments
the difference between the values of export and import goods and services of a country over a year
government objectives
- a healthy balance of payments
- low unemployment rate
- low inflation rate
- economic growth
inflation
sustained increase in the country’s average price level
level of unemployment
the percentage of the population that are willing and able to work but unable to find a job
gross domestic product (GDP)
the value of all goods and services produced by a country in a year
the business cycle
- growth
- boom
- recession
- slump
characteristics of a growth stage
economy recovers or grows
- existing businesses grow and make profits
- falling unemployment
- higher standard of living
characteristics of a boom stage
peak of the business cycle
- business investments and profits are at their highest levels
- inflation rises, high levels of demand for goods and services cause prices to rise
- very low unemployment rates, increased wage costs for business
characteristics of recession stage
sustained reduction in GDP
- decline in economic activity until it reaches a minimum (slump)
- falling demand by consumers leads to falling profits
- unemployment rises as businesses are not doing well and have to cut costs
characteristics of a slump stage
recession stage of the economy is at its worst
- low production of goods and services, many close down
- low demand
- high unemployment
interest rate
the cost to a person or business of borrowing money from a lender such as a bank
tax
a charge/fee paid to the government on income, goods and services
how government meets economic objectives
through government policies
types of government policies
- demand
- supply
demand-side policies
fiscal policies:
- gov. income: taxes, borrowing
- gov. supply: subsidies, public services
monetary policies:
- adjusting the interest and foreign exchange rates.. to influence the demand and supply of money in the economy
expansionary= grow economy
contractionary= slow down the economy
supply-side policies
- privatisation: selling gov. organisations to private individuals= increases efficiency= increases supply
- improve training and education: spend more money on education so people can become more skilled= increases productivity
- increased competition: deregulation increases competition and therefore productivity
direct tax
the tax charged on personal income or tax on the profit made by a business
- income tax
- corporation tax
indirect tax
the tax charged on the price of goods and services, which is added to the price of goods and services before they are bought
- VAT
- import tariffs
disposable income
the amount of income left for individuals after taxes have been paid
how business activity can affect us and our environment
- pollution
- waste
- emission of greenhouse gases
- use of energy
- use of natural resources
why businesses want to be environmentally-friendly
- sense of CSR
- better brand-image
- consumers are becoming socially aware and are only willing to buy environmentally-friendly products
- using non-renewable resources will raise their prices in the future
why businesses don’t want to be environmentally friendly
- expensive, reduces profits
- firms will have to increase prices= demand falls
- businesses claim it is the gov.’s duty to clean up
externalities
costs or benefits that affect third parties not involved in the consumption or production activity causing these costs or benefits
social cost
the negative impact of a business decision on society
