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Economics A Level > Theme 2 > Flashcards

Theme 2 Flashcards

(70 cards)

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1
Q

What are the seven government objectives

A

Debt, sustainability, inflation, inequality, economic growth (gdp), balance of payments and unemployment

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2
Q

What are some supply side economic interventionist policies

A

Spending on healthcare
Building business parks
Increased education and training
Improving transport and infrastructure
Invest in council housing

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3
Q

What are some supply side market policies

A

Reducing power of trade unions
Privatisation of the state industry
Lower tariff barriers
Remove unnecessary red tape
Reduce corporation tax
Reduce state welfare benefits
Deregulation
Provide better info about jobs

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4
Q

How would reducing the power of trade unions help

A

Makes it much easier for firms to hire and fire employees

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5
Q

How would privatisation of state industry help the supply side policy

A

It makes them more profit oriented which can lead to a more efficient allocation of resources

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6
Q

How would lowering tariff barriers help supply side

A

helps firms become more efficient and be more innovative

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7
Q

How does removing unnecessary red tape help supply side

A

Makes trade quicker and easier as they don’t have to go through all of the quality checks when they’re trusted

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8
Q

How does reducing corporation tax help supply side

A

firms can keep more of their profits and don’t have to increase the prices of their goods or services to the consumer

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9
Q

How does reducing state welfare benefits help supply side

A

It makes people more likely to get a job as they’ll get more money so reducing unemployment leading to a reduction on government spending and increase in economic growth

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10
Q

How does deregulation help supply side

A

opening up of state monopoly this market is now open to competition

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11
Q

Free market economy pros

A

Efficiency- best value in demand only - incentive to be better
Entrepreneurship- rewards for innovation
Choice- increased consumer choice due to innovation

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12
Q

Free market economy cons

A

Inequalities - huge income differences
Non profitable goods - drugs
Monopolies - market dominance

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13
Q

Pros of a command economy

A

Maximise welfare - prevent inequality and distribute income fairly
Low unemployment - economic growth
Prevent monopolies - market dominance is prevented by the government

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14
Q

Command economy cons

A

Poor decision making - lack of information means poor decisions
Restricted choice - consumers have a limited choice
Lack of risk taking and efficiency - no incentive to increase efficiency, take risks or innovate

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15
Q

In a mixed economy what’s the government known as

A

Public sector

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16
Q

What makes up the private sector

A

Privately owned businesses

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17
Q

What are the four main macroeconomic indicators

A

rate of economic growth, rate of inflation, level of unemployment and the state of the balance of payments

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18
Q

Why might comparing the gdp of two countries not be accurate

A

A high gdp suggests a strong economic performance but high gdp per capita suggests a high standard of living

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19
Q

What’s inflation

A

The sustained rise in the average price of goods and services over a period of time

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20
Q

Define disinflation, hyperinflation and negative inflation

A
  1. When the rate of inflation slows down
  2. When the prices rise extremely quickly
  3. When the average price falls
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21
Q

What’s the claimant count

A

The number of people claiming benefits

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22
Q

What are the two main measures of unemployment

A

The claimant count and the labour force survey

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23
Q

What’s the labour force survey

A

The number of people in a survey who aren’t working but are seeking employment

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24
Q

What’s the circular flow of income

A

a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents.

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25
When would the circular flow of income be in equilibrium
When the injections and withdrawals are equal
26
What happens when an injection is made into the circular flow of income
The actual change in the national income is greater than the initial injection due to the multiplier effect
27
What’s aggregate demand
The total spending on goods and services
28
What’s the formula for aggregate demand
AD = C + I + G + X - M Consumption + investment + gov spending + exports - imports
29
What factors affect consumption and saving
Income, interest rates, consumer confidence, wealth effects, taxes and unemployment
30
What factors affect investments made by firms (aggregate demand)
Risk Government incentives and regulations Interest rates Access to credit Technical advances Business confidence (animal spirits)
31
What causes budget deficit/ surplus
If the government is spending greater/ less than its revenue
32
What does it mean if aggregate demand is low
Economic growth is slow so the government may overspend to increase ad and boost economic growth
33
What is trend growth?
The estimated rate of growth of a nations productive potential
34
What are the different types of unemployment?
Frictional, structural, cyclical and seasonal
35
What is frictional unemployment?
When your out of work due to personal short term unemployment - made redundant
36
What is structural unemployment?
When your skills are no longer relevant
37
What is cyclical unemployment?
When you become unimportant due to economic reasons
38
What is seasonal unemployment?
When parts of the year when there is no work in your job.
39
Causes of unemployment (supply side)
Frictional Structural - mismatch of skills Geographical immobility Real wage unemployment Technological change
40
Causes of unemployment (demand deficient)
High interest rates Global recession Negative multiplier effect Financial crisis
41
What are the types of measuring unemployment
Claimant count LFS survey
42
Explain claimant count and the characteristics.
This include people who are eligible to claim the jobs seekers allowance - out of work - available for work - actively seeking employment - aged 18 - 66 - excluded various people
43
What are the benefits of using claimant count?
Up to date Cheap Easy to understand/compare
44
Problems with claimant count?
Misses some people Some people will refuse to claim benefits Not used in Europe
45
What are the characteristics of LFS survey
- survey of 80,000 people across society - without any kind of job in the four weeks and are able to start in the next two weeks - aged 16-70 - includes unemployment - used in Europe, good for comparisons
46
Benefits of using LFS survey
- used in Europe - wider criteria - measures ‘students’ and ‘retirees’
47
Problems with using LFS survey?
- Can be out of date - people may lie - expensive to make
48
What does the balance of payments do?
It measures all the international economic transactions between the uk and trading partners.
49
What is the current account?
How much we import or export and if we’re in surplus of deficit
50
What is a remittances
Someone who works here from another country and send most of the money back to their home country
51
What are the interventionist policies?
Spending on healthcare Building business parks Increased education and training Improving transport and infrastructure Invest in council housing
52
What are the interventionist policies?
Spending on healthcare Building business parks Increased education and training Improving transport and infrastructure Invest in council housing
53
What are the market policies?
Reducing the power of trade unions Privatisation of state industry Lower tariff barriers Remove unnecessary red tape Reduce corporation tax Reducing state welfare benefits Providing better information about jobs Deregulation
54
What is a problem of state monopoly?
They can raise prices as high as they want
55
What are the advantages of deregulation?
Increased competition More efficiency More price competition Greater customer choice
56
What are the disadvantages of deregulation?
Creates a private monopoly Duplication of services Private firms cut costs Can hold the government to account
57
What is deregulation of labour markets
Where the government reduces the amount of employee rights. This makes it easier for firms to hire and fire workers, as well as flexible workforces
58
Budget
Where the government lays out their spending and taxation plans
59
Consumer price index
Official measure used to calculate the rate of inflation
60
Cost push inflation
Inflation caused by a decrease in AS
61
Current account deficit
When more money leaves the country than enters
62
Cyclical unemployment
Caused by a lack of AD
63
Deflation
A persistent fall in prices of goods and services
64
Direct tax
Taxes paid straight to the government by the individual taxpayer
65
Disinflation
A reduction in the rate of inflation
66
Disposable income
The money the consumer has to spend after taxes have been paid
67
GDP
The value of goods and services produced by a country in a given time period
68
GNI
GDP plus net overseas interest payments and dividends
69
LRAS
the total output an economy can produce when operating at full output
70
Output gap
The difference between the long term rate of growth and actual growth

Economics A Level (9 decks)

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