Topic 34 - Topic 35 Flashcards
What is an economic indicator?
An Economic Indicator is a statistic that can be used to analyse how well a particular area of the economy is performing and predict how the economy might perform in the future.
What is inflation?
Inflation is a general increase in prices in a country from one period to the next.
List the causes of inflation?
- An increase in the cost of producing goods. For example, the cost of wages, materials, oil or taxation has increased, would mean that selling prices have to be increased in order to make the same profit.
- The demand for certain goods is greater than the quantity of goods available. Foe example a shortage of houses to rent, causes rent to rise, as landlords try to make as much profit as they can by renting to those who can pay the most. This is known as demand-pull inflation, because demand is pulling the price of goods and services up.
What is the employment rate?
The percentage of the labour force who are employed or self-employed is referred to as the employment rate.
What is the unemployment rate?
The percentage of the people who are unemployed is referred to as the unemployment rate.
What is economic growth?
Economic growth refers to the change in the total value of goods and services produced in a country from one year to the next.
What is the national income?
National income refers to the total amount of income earned within a country during a year.
What is national debt?
The national debt is the total amount of money that the country owes to domestic lenders and foreign lenders. National debt accumulates when a country has a deficit on their national budget.
What do high inflation rates indicate?
- Irish goods will become more expensive and will become more difficult to sell abroad AND imported goods will become cheaper, which is not good for the balance of payments.
- Trade unions will look for pay rises to keep in line with inflation, so workers do not have to spend more of their wages on necessary goods such as food.
- Irish goods and services become more expensive, meaning less goods are manufactures, and jobs are lost.
What do high employment rates indicate?
- Households have more money to spend, which means more goods are manufactured, and more jobs are created.
- There is an increase in government revenue from taxation and a reduction on social welfare payments.
- More young people will stay in Ireland if there are jobs for them.
What do high unemployment rates indicate?
- Household income decreases, leading to a reduction in the demand for certain goods and services.
- There will be increased demands on social welfare payments.
- There will be a reduction in income collected by the government in the form of income tax etc.
- The country may see an increase in emigration as young people leave to find work abroad.
How do low interest rates impact the economy?
- Low interest rates encourage people to borrow money, as the cost of repayment is low.
- Low interest rates can lead to an increase in employment as extra staff are hired to meet the increased demand for goods and services.
- People are less likely to save money when interest rates are low, as there is very little reward for doing so.
How does an increase in interest rates impact the economy?
- High interest rates discourage people from borrowing money, which leads to decrease in the demand for goods and services.
- High interest rates can lead to reduced investment and business expansion and a reduction in job creation.
- People are more likely to save if interest rates are high. This leads to a reduction in consumer spending and reduced inflation.
What is an economic policy?
An economic policy is a plan of action put in place by the government to achieve a particular aim, in relation to the economy.
What is a fiscal policy?
Fiscal policy refers to changes made by the government to either their revenue or their expenditure. For example:
• Taxes could be increased in order to provide additional income for spending on education and health.
• Taxes could be decreased in order to encourage consumer spending and job creation.
• Social welfare payments could be increased in order to increase the standard of living of the less well-off.
