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Economics National 5 Exam 2019 > Unit 2 > Flashcards

Flashcards in Unit 2 Deck (23)
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Define fixed and variable cost

A cost that does and doesn’t vary due to level of output


The returns for land,labour,capital,enterprise

Land - rent
Labour - wages
Capital - interest
Enterprise - profit


What’s productivity

Productivity is the level of output based on input


Draw a cost curve and an average cost curve



What’s optimum output

Where the firms is most efficient(not profit wise)


Draw a circular flow diagram



What is inflation and gdp

GDP is the value of output within an economy over a year
Inflation is a general rise in the level of prices within a year
Rate of inflation is the percentage rise


Measures of inflation

Cpi takes a measure of a basket of goods and weights it calculating the percentage of inflation
Rpi is the same but includes housing costs


Causes of inflation

Demand pull too much demand for a good causes excess demand which makes prices go up

Cost push costs of production go up so firms put up their product prices


Impacts of inflation on

Individuals - reduces purchasing power if wages don’t keep up
It affects lower income earners as prices are more costly to them
Demands for firms product goes down so people are made unemployed

Costs of production rises so profits decrease
Workers demand pay rise so don’t lose purchasing power


Define unemployment

A person who is willing and able to work but can not find a job


Measures of unemployment

Claimant count - this is the number of people seeking job seekers allowance. It’s not always accurate as not everyone claims

Labour force survey - 150,000 are surveyed about their employment status quarterly. This is then scaled up and represents the country


Causes of unemployment

Technological - people are made unemployed due to an advance in technology
Seasonal - only need work at certain times of the year e.g. a sailing instructor not in winter
Regional - where people are made unemployed in a certain area e,g, Aberdeen for oil


What is economic growth and what’s it measured in

Economic growth is an increase in the level of output within an economy in a year
GDP is used to measure economic growth


Benefits of economic growth are?

Better standards of living
More government tax revenue
Government spend less on benefits


Disadvantages of economic growth

Demand pull inflation
Increased climate change e,g.pollution


Tax is collected for what reasons?

Pay for healthcare and education
Redistribute income
To provide welfare support for those on low incomes


3 types of government spending

Current expenditure - the money spent on day to day things such as the nhs or wages
Capital expenditure is spending in long term basis such as building a new school

Transfer payments are what one person earns and the government gives it to someone else


Define direct and indirect tax

Direct tax - a tax levied on income and wealth e.g, income tax
Indirect tax - a tax levied on expenditure e.g, vat


Reasons for tax

Redistribute income
Reduce demand for goods
To pay for public and merit goods


What’s the físicas policy

This is the use of taxation in order to affect aggregate demand in the economy


What the monetary policy

The use of interest rates or money supply in order to influence ggregate demand. Controlled by Bank of England


Name and define the three sectors of industry

Primary industry - his is industry employed in the extractions if raw material such as oil

Secondary industry this catergory of industry is involved with taking the raw material and manufacturing it into a
product e.g. whisky refining

Tertiary industry this is the selling of manufactured goods if providing a device e.g. retail or banking