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GCSE Economics > Unit 2 > Flashcards

Unit 2 Flashcards

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1
Q

Macro-economics

A

The study of the whole economy

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2
Q

The four main macro-economic objectives of the government

A

Full employment
Economic growth
Achieving price stability
Balancing exports and imports

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3
Q

Full employment

A

Everyone who is able and willing to work has a job. The workforce includes only those who are working plus the unemployed who are looking for a job

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4
Q

Economic growth

A

Growth in output of the economy over time - a growth of real GDP over time

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5
Q

Price stability

A

Keeping inflation low

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6
Q

Balancing exports and imports

A

A balance between exports and imports over time

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7
Q

Aggregate demand

A

The total demand

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8
Q

Interest rate policy

A

Using interest rates to change the level of AD in the economy

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9
Q

Gross Domestic Product

A

The total value of goods and services produced in the country in a year

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10
Q

Economic Growth rate =

A

(change in GDP / original GDP) x 100

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11
Q

What are the causes of economic growth?

A

Investment
Changes in technology
A larger workforce
Education and training
Natural resources
Government policies

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12
Q

How does investment cause economic growth?

A

More investment (spending on capital goods) means the economy has the capacity to produce more goods and services in the future

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13
Q

How does a large workforce cause economic growth?

A

The economy can produce more if it has more workers

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14
Q

How do changes in technology cause economic growth?

A

Technical progress means the quality of capital goods improves, and a given quantity of capital can now produce more output than before

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15
Q

How does education and training cause economic growth?

A

The more educated, trained and skilled the workers, the higher the output of the country is likely to be

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16
Q

How do natural resources cause economic growth?

A

The discovery or development of natural resources can be a stimulus to economic growth

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17
Q

How do government policies cause economic growth?

A

The government takes responsibility for the macro-economic management of the economy

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18
Q

Benefits of economic growth

A

A rise in material living standards
A rise in the welfare of the population
A rise in employment and a fall in unemployment
A reduction in poverty

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19
Q

Costs of economic growth

A

Enviromental costs
Congestion
Loss of non-renewable resources
Lower quality of life
Inequalities of income and wealth
Inflation

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20
Q

How does economic growth cause a rise in material living standards?

A

If the GDP rises at a faster rate than the population, the GDP per capita rises. This means everyone has more output available to consume on average

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21
Q

How does economic growth cause a rise in the welfare of the population?

A

The government is able to devote more resources to services such as health and education

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22
Q

How does economic growth cause a rise in employment and a fall in unemployment?

A

As output rises, more workers will be required to produce it, and the unemployment rate will fall

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23
Q

How does economic growth cause a reduction in poverty?

A

As output and incomes rise, the government can raise living standards of those with lower incomes by providing benefits from progressive taxes

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24
Q

How does economic growth cause environmental costs?

A

Greater output and consumption can lead to more pollution and global warming

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25
How does economic growth cause congestion?
Economic growth is often concentrated in certain urban areas, which can become overcrowded and congested
26
How does economic growth cause a loss of non-renewable resources?
Economic growth uses resources that can't be replaced, including oil, natural gas, natural environments (rainforests), metals and other minerals
27
How does economic growth cause inequalities of income and wealth?
The benefits of growth are unevenly spread. Some people become better off, while others are 'left behind'
28
How does economic growth cause inflation?
Sometimes the rate of economic growth is too fast for the economy to respond without a rise in the general price level
29
Unemployment
When workers who are able and willing to work are unable to find employment
30
How can unemployment be measured?
Claimant Count Labour Force Survey
31
Claimant Count
Counts the number of people claiming unemployment related benefits (such as JSA)
32
Labour Force Survey
A survey of a sample of households, counting people as unemployed if they are actively seeking work but do not have a job (in the week of the survey)
33
What are the six types of unemployment?
Voluntary Seasonal Frictional Structural Technological Cyclical
34
Voluntary unemployment
This is caused by people choosing not to work
35
Seasonal unemployment
This is caused by seasonal workers not being employed at other times of year, for example in the tourist industry
36
Frictional unemployment
This is caused by workers moving between jobs
37
Structural unemployment
This is caused by long-term changes in the structure of industry when some industries decline
38
Technological unemployment
This is caused by capital taking the place of labour
39
Cyclical unemployment
This is caused by a fall in aggregate demand in the economy. If the demand for goods and services falls, then fewer workers are needed to produce the output, and some will be laid off
40
Consequences of unemployment
Labour resources are wasted Lower living standards Excluded workers Costs to taxpayers A budget deficit Regional problems
41
How does unemployment cause labour resources to be wasted?
The economy is not using all of its resources to full capacity. This means that the economy could produce more output than it is currently producing
42
How does unemployment cause lower living standards?
Workers and their families suffer a lower standard of living as unemployment causes their incomes to fall
43
How does unemployment cause excluded workers?
Some people are unemployed for so long that they become excluded from the workforce
44
How does unemployment cause costs to taxpayers?
The unemployed are entitled to JSA and other benefits. The more unemployed people there are, the greater the costs to taxpayers
45
How does unemployment cause a budget deficit?
The government loses tax revenue from workers when they become unemployed. Spending in the economy falls, and the government receives even less tax revenue
46
How does unemployment cause regional prblems?
Unemployment is unlikely to be spread out evenly in the economy. Some locations tend to suffer much more than others, and may become 'depressed areas'
47
Depressed areas
Unemployment in these regions is well above the national average, and the lack of demand in the area leads to even more unemployment
48
Inflation
A sustained rise in the general price level over time
49
Consumer Price Index (CPI)
This is the official measure of the rate of inflation for both the UK government and governments of other European Union countries
50
What types of inflation are there?
Monetary Demand-pull Cost-push
51
Monetary inflation
Inflation caused by growth in the economy’s money supply
52
Demand-pull inflation
Inflation caused by excess demand in the economy
53
Cost-push inflation
Inflation caused by a rise in costs in the economy
54
Shoe leather costs
If prices are not stable, consumers and firms spend more time shopping around to find a reasonable price. This extra time and effort is known as “shoe leather costs”
55
Menu costs
Firms have to adjust their price lists more often when there is inflation, for example restaurants increasing the prices on their menus
56
Hyperinflation
A rate of inflation so high that the value of money becomes close to worthless
57
Tax
A compulsory payment to the government
58
Direct tax
A tax on income or wealth
59
Indirect tax
A tax on spending, often defined as a tax on goods and services
60
Income tax
A tax paid on wages and salaries
61
Corporation tax
A tax on the profits of companies
62
Inheritance tax
A tax on the transfer of wealth at the time of death
63
Value added tax
A tax on a wide range of goods and services
64
Excise duties
Taxes on a specific range of goods
65
External cost
The negative impact of an economic transaction on a party who is not directly involved in the transaction
66
Demerit good
A good or service whose consumption is considered unhealthy or undesirable due to its bad effects on the consumers
67
Distribution of income
How incomes are shared out among the people of the country
68
Redistribution of income
A policy to reduce the inequalities of income so that incomes are distributed more evenly
69
Inequalities of income
Incomes are distributed unevenly so some people have a much higher income than others
70
Transfer payments
Benefits to citizens which are paid out of tax revenue
71
Regressive tax
Takes a greater proportion of income from lower incomes, or takes a smaller percentage of a higher income
72
Proportional tax
Takes the same proportion of income from all income levels
73
Progressive tax
Takes a greater proportion of income from higher incomes, or takes a smaller percentage of a lower income
74
Market failure
When the market fails to allocate resources in the best interests of society as a whole
75
Externalities
The effects on people in society who are not part of the production process
76
Fiscal policy
A policy that uses taxation and government spending to try to achieve the objectives of the government
77
Multiplier effect
A process by which an original change in incomes in the economy leads to a total change in incomes which is a multiple of the original change
78
How does the government use fiscal policy to inflate the economy?
It deliberately aims for a budget deficit, which leads to a positive multiplier effect, and therefore increases employment and economic growth
79
How does the government use fiscal policy to deflate the economy?
It deliberately aims for a budget surplus, which leads to a negative multiplier effect, and therefore decreases inflation and the balance of payments deficit
80
Interest rate
The reward for saving and the cost for borrowing
81
Bank rate
The interest rate set by the Bank of England, which affects all interest rates in the economy (also called the base rate)
82
Why are there different interest rates?
Competition between banks and building societies Other factors affecting savings rates Factors affecting rates on loans
83
Supply-side policies
Policies that increase the ability of the economy to supply more goods and services
84
Monetary policy
A policy aimed at affecting the total supply of money in the economy
85
Why does competition between banks and building societies affect interest rates?
These institutions are competing for customers, so some of them may try to attract customers by having higher saving rates
86
What are the other factors that affect savings rates?
The minimum deposit for the account The time that the money is tied up When the saver is committed to a regular saving plan
87
What are the factors that affect rates on loans?
The greater the risk, the higher the rate of interest The greater the security offered by the borrower
88
The types of supply-side policies
Education and training Reducing direct taxes Reducing benefits Encouraging enterprise Encouraging new technology and innovation Reducing monopoly power

GCSE Economics (3 decks)

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