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Econ (SQA accurate) PPQS > Unit 2 > Flashcards

Unit 2 Flashcards

(93 cards)

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1
Q

What are the different sources of government income?

A

Various sources including taxes, fees, and grants

Examples include income tax, corporate tax, VAT, etc.

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2
Q

What is the difference between direct and indirect taxation?

A

Direct taxation is on income and wealth, while indirect taxation is on expenditure

Direct taxes are paid directly to the government, whereas indirect taxes are collected by intermediaries.

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3
Q

Name three types of taxes.

A
  • Income tax
  • Corporation tax
  • VAT

Additional examples include excise duty and road tax.

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4
Q

What impact does government taxation have on the UK economy?

A

It affects disposable income, consumption, and overall economic activity

Changes in tax rates can influence consumer behavior and business investments.

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5
Q

Describe public goods.

A

Goods/services where consumption by one person does not reduce availability for others

Examples include street lighting and flood defences.

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6
Q

What are merit goods?

A

Goods that are under-consumed if paid for, often subsidized or free at the point of use

Examples include healthcare and education.

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7
Q

What is the circular flow of income in a closed economy?

A

The continuous movement of income between households and firms without injections or withdrawals

It illustrates how money circulates in the economy.

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8
Q

State two reasons why the government may wish to tax fizzy drinks.

A
  • To discourage/decrease consumption
  • To raise tax revenue

Additional reasons could include reducing healthcare pressure related to obesity.

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9
Q

Describe the features of an indirect tax.

A
  • Levied upon goods and services
  • Collected by an intermediary
  • Part of the price paid by consumers

Examples include VAT and excise duties.

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10
Q

What is the main rate of corporation tax in the UK?

A

19% or 25%

The rate may vary based on profits.

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11
Q

What is the effect of reduced income tax on consumers?

A

Increases disposable income, leading to a higher standard of living

Consumers may also increase savings.

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12
Q

What is the impact of increased income tax on firms?

A

Decreases demand for goods and services, leading to reduced sales

Firms may have to cut costs or increase prices.

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13
Q

What is the difference between capital expenditure and current expenditure?

A
  • Capital expenditure: long-term spending on non-current assets
  • Current expenditure: day-to-day spending on consumables

Capital examples include building infrastructure, while current examples include paying wages.

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14
Q

Give an example of government capital spending.

A

Building a hospital

Other examples include constructing roads or schools.

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15
Q

Give an example of government current spending.

A

Paying healthcare staff’s wages

Other examples include buying medical supplies or cleaning materials.

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16
Q

What is one main area of UK Government spending?

A
  • National Health Service
  • Education
  • Defence
  • Welfare spending/state pensions
  • Debt repayment

These areas represent significant allocations of government resources.

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17
Q

Explain one reason for government spending on education.

A

To create an employable workforce

This investment can lead to improved productivity and economic growth.

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18
Q

Describe the impact of reduced VAT on consumers.

A

Prices fall, allowing consumers to buy more or better-quality goods

This can lead to increased overall consumption.

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19
Q

What is the purpose of excise duty?

A

Tax levied on specific goods, especially those harmful to health or the environment

Examples include taxes on tobacco and alcohol.

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20
Q

True or False: Direct taxes are paid through intermediaries.

A

False

Direct taxes are paid directly by individuals and firms to the government.

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21
Q

Fill in the blank: A _______ tax is a tax on spending.

A

indirect

Examples include VAT and excise duties.

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22
Q

What is a tariff?

A

An example of an indirect tax on imports

Tariffs can influence trade and consumer prices.

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23
Q

What is the difference between government capital spending and government current spending?

A

Capital spending is long-term spending on non-current assets, while current spending is regular day-to-day spending.

Examples of capital spending include building highways and schools, while current spending includes salaries of public sector workers and health care costs.

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24
Q

Provide two examples of government capital spending.

A
  • Building highways
  • Constructing hospitals
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25
What are transfer payments?
Income given by the government to individuals without receiving economic activity in return. ## Footnote Examples include social security, old age pensions, and child benefits.
26
List three examples of transfer payments.
* Social security * Old age pensions * Child benefit
27
What are two disadvantages of increased government spending on childhood health problems for the UK economy?
* Less spending on other areas, e.g., education * Increased government spending may lead to a budget deficit
28
Name two ways the UK government may redistribute income.
* Increase income tax for high earners * Increase spending on welfare payments
29
Explain the effects of a decrease in government spending.
* Reduced government subsidies may lead to reduced economic growth * Cutbacks on public services may lead to higher unemployment * Reduced social security support may lead to increased poverty
30
What is one reason for government spending on education?
To create an employable workforce.
31
What is a budget deficit?
The difference between government spending and government revenue when spending exceeds revenue.
32
State two causes of inflation.
* Demand-pull * Cost-push
33
Describe the method of calculating inflation in the UK.
Complete the Living Costs and Food Survey to create a basket of goods, assign weights, gather prices, check against the base year, and calculate the average change in prices.
34
What is nominal income?
Income excluding the effect of inflation.
35
What is real income?
Income including the effect of inflation; represents purchasing power.
36
True or False: Real income increases when the inflation rate is lower than the wage increase.
True.
37
What happens to prices during demand-pull inflation?
Prices rise due to increased demand outpacing supply.
38
What causes cost-push inflation?
Increases in production costs that are passed onto consumers.
39
What is the effect of rising oil prices on inflation?
Rising oil prices increase production costs, leading to higher prices and inflation.
40
What occurred to CPI inflation rates after September 2011?
CPI inflation rates generally fell from just over 5% to just over 2%.
41
What is the effect of increased real income on consumers?
* Increased purchasing power * Potentially higher standard of living * Ability to buy more goods and services
42
What happened to real income in October of 2014?
Real income increased because average income overtook the CPI rate of inflation ## Footnote CPI stands for Consumer Price Index, a measure of inflation.
43
What effect did the increase in real income have on UK consumers?
Consumer purchasing power rose * Standard of living may increase * Consumers may buy more goods and services/luxuries * Consumers may save more
44
What effect did the increase in real income have on the UK government?
VAT receipts to the government will rise * Decreasing unemployment due to increased consumer spending
45
Describe the trend in the rate of inflation from August 2016 to December 2016.
Fell from 0.3% in August to 0.1% in October * Rose from 0.1% in October to 0.5% in December * Changed from 0.3% in August to 0.5% in December
46
Have prices increased or decreased between August 2016 and October 2016?
Prices have increased ## Footnote As long as the rate of inflation is positive, prices are rising.
47
Describe the trend in the rate of inflation between July 2011 and July 2012.
Rate of inflation increased between July 2011 and October 2011 * Fell between October 2011 and July 2012
48
Have prices increased or decreased between June 2012 and July 2012?
Prices have increased ## Footnote The rate of inflation measures an increase in the general level of prices.
49
Describe the trend in the rate of inflation shown in the graph.
Rose from 5.5% in January to 10.1% in July * Fell from 10.1% in July to 9.9% in August
50
What are the negative effects of a rise in inflation on the economy?
Purchasing power falls * Standard of living falls * Value of savings decreases * Non-unionised workers may not get pay rise * Increased production costs * Menu costs increase with frequent changes in price * People on fixed incomes/pensioners disproportionately impacted
51
What are the positive effects of a rise in inflation on the economy?
Borrowers have lower value of repayment * Assets (for example houses) appreciate in value
52
Identify one group of people that might be significantly affected by inflation.
People on fixed incomes * Pensioners * Students * Workers who do not have a strong bargaining position
53
Explain one way in which inflation might affect people on fixed incomes.
Prices are rising but their incomes are not, so they are worse off.
54
What are the effects of inflation on households?
Reduces purchasing power of incomes * Reduces real incomes for citizens whose money income does not rise in line with prices * Reduces competitiveness in domestic and foreign markets * Reduces demand for goods and services * People save less if interest rate is less than inflation rate * Increased savings due to uncertainty
55
What are the effects of inflation on firms?
Increased price of exports * Higher wage demands * Businesses may be forced to cut costs * Firm’s revenue drops * Reduces willingness to invest * Increases uncertainty about the future
56
Define unemployment.
Unemployment is when someone of working age is seeking employment but is unable to get a job.
57
Define the term level of unemployment.
The number of people unemployed.
58
Define the term rate of unemployment.
The number of people unemployed expressed as a percentage of the working population.
59
Describe two methods of measuring UK unemployment.
Claimant count - number of people claiming Universal Credit/Job Seekers Allowance * Labour force survey - samples people and asks their employment status
60
What are possible causes of an increase in the level of unemployment?
Cyclical - a downturn in the trade cycle * Structural - a change in the make-up of the economy * Seasonal - workers unemployed at certain times of year * Frictional - workers are between jobs * Technological - workers replaced by machines
61
Describe seasonal unemployment.
Seasonal unemployment is where people are unemployed during certain times of the year, for example, a ski instructor.
62
Describe structural unemployment.
Unemployment caused by the decline in industry, for example, coal mining in the north of England.
63
What is seasonal unemployment?
Unemployment during certain times of the year, such as ski instructors being unemployed in the summer. ## Footnote Seasonal unemployment is caused by a 'change in the season'.
64
What is structural unemployment?
Unemployment caused by the decline in industry, such as coal mining or shipbuilding. ## Footnote Structural unemployment is caused by a 'change in the structure' of the industry.
65
List two effects of unemployment on individuals.
* Reduced income * Fall in standard of living * Unable to meet spending commitments (e.g., mortgage, credit agreements) * Loss of skills * Potential increase in crime/divorce rates/worsening mental health/lower life expectancy * Loss of social status * Fear of losing job
66
List two effects of unemployment on UK firms.
* Loss of sales/profits due to less consumer spending * Increase in sales of inferior goods/cheaper brands * Increasing business failure due to lack of demand * Potential labour becoming de-skilled * Increased risk of shop-lifting/pilfering * Increased pool of labour * Wage rates are kept low * Reduce likelihood of industrial action
67
List two effects of unemployment on the UK government.
* Loss of tax revenue (income tax, VAT, corporation tax) * Increased spending on Universal Credit * Lower economic growth
68
What are two ways to describe the effect of unemployment on individuals?
* Reduced income * Fall in real living standards * Loss of skills * Lack of purpose in life/deteriorating mental health
69
What is economic growth?
An increase in total output over a period of time using the same or fewer resources. ## Footnote It can also refer to an increase in real national income, real GDP, or the real value of goods and services.
70
Identify one year during which the UK economy was in recession.
2008 ## Footnote The trend in GDP between 2007 and 2010 showed a decline in 2008.
71
What is one characteristic of a recession?
Negative GDP/economic growth for 2 consecutive quarters. ## Footnote Other characteristics include rising unemployment and low business confidence.
72
List three possible ways for any country to increase its rate of economic growth.
* Promote entrepreneurial activity * Introduce legislation to encourage competition * Invest in technology infrastructure
73
Describe how a rise in the retirement age may affect a country's economic growth.
* Positive effects: output will rise, more people earning an income, reduced cost of pensions. * Negative effects: increased costs of production, fewer jobs for younger workers.
74
What is a fall in the standard of living?
A decrease in the quantity/quality of goods/services available to an individual or society.
75
Suggest two ways in which a fall in the standard of living can be measured.
* Survey results show a decrease in the level of material goods owned by individuals * Statistics show a decrease in real GDP
76
Identify two factors which affect the standard of living in the UK.
* Employment * Inflation * Taxation * Income * Health care
77
Describe the three sectors of industry.
* Primary: exploiting/extraction of natural resources * Secondary: converting natural resources to finished products * Tertiary: providing services
78
Give an example of an industry in the tertiary sector.
Insurance, banking, or retail.
79
Identify two of Scotland’s main industries.
* Oil * Whisky * Tourism
80
Explain a reason for Scotland specialising in the oil industry.
There are natural resources which mean high profits for oil firms.
81
Identify an industry which makes a significant contribution to Scotland’s GDP.
Oil, whisky, tourism, financial services, computer software, agriculture/fishing, food processing, electronics, pharmaceuticals, scientific equipment, textiles ## Footnote These industries leverage Scotland's natural resources, heritage, and workforce.
82
Explain a reason for Scotland specialising in the oil industry.
There are natural resources which means high profits for oil firms ## Footnote High-quality products are created due to these resources.
83
Explain a reason for Scotland specialising in the tourism industry.
There is history, heritage and landscape which attracts tourists ## Footnote This creates export revenue for Scotland.
84
Identify 2 Scottish industries.
Whisky, financial services ## Footnote Other examples include banking, insurance, and tourism.
85
Describe in what way the whisky industry contributes to the Scottish economy.
Increased output of goods leading to increased economic growth/increased profits for firms ## Footnote This also benefits other industries due to increased demand.
86
Name a famous Scottish entrepreneur.
Duncan Bannatyne ## Footnote Other notable entrepreneurs include Stewart Milne and Michelle Mone.
87
Describe 2 benefits a business might bring to the UK economy.
Decrease in unemployment, increase in national income/growth ## Footnote This can lead to less government spending on Universal Credit.
88
Explain ways entrepreneurs contribute to the Scottish economy.
Provide more jobs, increase government revenue from income tax ## Footnote Entrepreneurs also increase exports and invest in training.
89
Explain 2 benefits of entrepreneurism to the Scottish economy.
Increased employment opportunities, increase in national income/growth ## Footnote This leads to less government spending on benefits.
90
Describe one benefit an entrepreneur’s business brings to the Scottish economy.
Increased employment opportunities ## Footnote This results in a decrease in unemployment.
91
Explain how entrepreneurial activity can help an economy achieve economic growth.
More people will start businesses which will lead to an increase in production ## Footnote New business ideas may create ways to increase productive potential.
92
Describe a reason for Scotland’s high level of employment in the tourism industry.
Rich in history/great outdoors/tourist attractions ## Footnote This includes sporting events and whisky tours.
93
Describe a reason for Scotland’s low level of employment in the shipbuilding industry.
Can’t compete with foreign yards on price/delivery ## Footnote There are also fewer government orders.

Econ (SQA accurate) PPQS (3 decks)

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