Stuff

Question 1

Cyclical unemployment

Answer 1

The impact of economic recession or expansion on employment level

Question 2

Frictional unemployment

Answer 2

Voluntary employment transitions within an economy

Question 3

Real wage unemployment

Answer 3

When wages are set above the equilibrium causing supply of labour to be greater than demand

Question 4

Natural unemployment

Answer 4

The minimum unemployment rate resulting from real or voluntary economic forces

Question 5

Productivity

Answer 5

The output produced per factor input in a period of time

Question 6

Production

Answer 6

Converting factors of production into outputs (something to sell)

Question 7

What can a reduction on productivity cause

Answer 7

Output per worker decreases

Increased average costs so may increase prices of goods to maintain same level of profit

Question 8

3 advantages of higher productivity

Answer 8

• decrease in price of goods as there is a decrease in AC which may also lead to increased employment

-higher profits to be re-invested back into the business for long term growth

-higher wages for workers

Question 9

3 ways in which productivity can be increased

Answer 9

-specialisation

-lnvestment to increase human capital

-subsidise firms to upgrade their technology or engage in r&d

Question 10

Define living standards

Answer 10

The qty and quality of material goods and services available to a given population

Question 11

How are living standards normally measured

Answer 11

They are normally measured with Gdp

Question 12

5 reasons why an increase in gdp may not cause a rise in living standards

Answer 12

-increase in production from firms reinvestment -> increase in pollution

Question 13

What is a better measure of living standards

Answer 13

Purchasing power parity

Adjusts GDP to account for the cost of living.

Question 14

4 reasons for inflation

Answer 14

-indirect taxes -> cost passed onto consumer

-fall in exchange rate -> increased costs of production -> cost passed onto consumer

-decreasing interest rates -> less incentive to save -> increase in AD -> Demand pull inflation

Question 15

3 reasons why inflation above 2% is regarded as bad

Answer 15

Idk

Question 16

Give 5 reasons for unemployment

Answer 16

-occupational immobility

-geographical immobility

-cyclical unemployment

-frictional unemployment

-real wage unemployment

Question 17

3 reasons why unemployment is regarded as bad

Answer 17

-high levels of unemployment -> decrease in consumption -> decrease in GDP

-burden on government with unemployment benefits

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Question 18

What Graph would be used to show the relationship between inflation and unemployment

Answer 18

Keynsian LRAS

Question 19

Reasons to raise taxes

Answer 19

-redistribute income to benefit LIH

-increase spending on public sector e.g. NHS, public transport

-to regulate behaviour e.g. sugar tax to stop spending on sugary foods and drinks to reduce obesity

Question 20

What is a direct tax

Answer 20

A tax that is directly paid to an individual or entity e.g. income tax

Question 21

What is an indirect tax

Question 22

Purchasing power parity

Answer 22

How many units of one countries currency are needed to buy the same basket of goods and services as can be bought with a given amount of another currency

E.g. Norway (high cost of living) there is a downward adjustment to a nations purchasing power parity

Question 23

Real GDP

Answer 23

The value of national output adjusted for inflation and measured at constant prices

Question 24

Gross Domestic product

Answer 24

The total value of goods and services produced within a country

Question 25

Gross national product/Gross national income

Answer 25

The total value produced by factors of production owned by a country, no matter the location GDP + income from overseas assets E.g. overseas property investment

Question 26

How is standard of living measured and how is it improved upon

Answer 26

Measured with real GDP per capita Improves when a country sustains a rise in real income per capita Benefits: Inc human capital More people in properly paid work Living wage can help to lift labour productivity Accessible and high quality public services

Question 27

Marginal propensity to consume

Answer 27

The proportion of an increase in income that gets spent on consumption

Question 28

Customs union

Answer 28

Free trade areas where there are also standard tariffs imposed on non-members

Question 29

Yield

Answer 29

The annual return an investor will get from the bond The less someone pays for a bond, the higher its yield Yield = (coupon / market price) x 100

Question 30

Interest in bonds

Answer 30

The amount that is paid to the bondholder per annum The amount paid is the coupon

Question 31

Bank rate

Answer 31

The interest rate a nations central bank charges to its domestic banks to borrow money in order to stabilize the economy

Question 32

Financial market

Answer 32

a market where financial assets or securities are traded E.g. bonds, real estate, stock market

Question 33

Financial institution

Answer 33

a company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange

Question 34

Personal loans

Answer 34

Loans to individuals to be paid back over a small number of years Secure - bank can force sale of asset if the loans cost isn't repaid Unsecured- much riskier loan therefore higher rate of interest

Question 35

Equity finance

Answer 35

Raised by selling shares in a company Person providing finance becomes a shareholder and claims some ownership. Entitles to a share of the firms profits in the form of dividends

Question 36

Debt finance

Answer 36

Borrowing money that has to be paid back (usually with interest) Can be borrowed from financial institutions e.g. banks

Question 37

Money markets

Answer 37

Provide short-term finance to e.g. banks, individuals etc. Short term debt will have a maturity upto 1 year (can be as little as 24 hours)

Question 38

Capital markets

Answer 38

Provide firms, governments with medium- longterm finance Can raise capital by issuing bonds or shares, borrowing from banks

Question 39

Primary market

Answer 39

For new share and bond issues

Question 40

Secondary market

Answer 40

Where existing securities are traded(e.g. stock exchange). This increases their liquidity (selling them makes it easier to 'convert them to spendable cash')

Question 41

Foreign exchange markets

Answer 41

Where different currencies are bought and sold Usually done to allow international trade and investment Split into 2 markets - Spot market - transactions happening now Forward market - transactions that will happen at an agreed time in the future

Question 42

Main roles of commercial banks

Answer 42

Accept savings To be financial intermediaries (move funds from lenders to borrowers) To lend to individuals and firms To allows payments from one person or firm to another Split into 2 types: Retail banking - providing services for individuals and smaller firms (e.g. savings accounts, mortgages) Wholesale banking - dealing with large firms banking needs Help firms grow by providing loans and financial advice, and facilitiating overseas trade

Question 43

Main roles of investment banks

Answer 43

Don't take deposits from customers -arrange share and bond issues -offer advice on raising finance, and on mergers and aqusititions -buy and sell securities (bonds, shares) Investment banks also engage in higher risk, but potentially very profitable activities

Question 44

Name different financial institutions

Answer 44

Pension funds - collect peoples pension savings and invests them into securities. When the client returns, it pays out their savings and the returns generated. They also provide longterm, large scale investment in companies Insurance firms - charge customers fees to provide insurance cover against all kinds of risk. It is important to the economy e.g. business can ensure against the risk of customers not paying (encouraging trade) Hedge funds - firms that invest pooled funds

Question 45

Market bubble

Answer 45

High estimates of future asset prices can lead to market bubbles Investors expecting price of asset to continue to rise -> investors overpay -> market bubble (prices in the market are much greater than the assets true worth) Investors lose confidence -> bubble will burst as investors will rush to sell their assets to avoid large losses -> leads to price plummeting ->leaving investors with large debts