unit 6 economy Flashcards
(24 cards)
What are the governments objectives
- low and stable inflation
- low unemployment
- economic growth
- balance of payments between imports and exports
why should inflation be kept stable and low
- allows businesses to expand and create jobs
- prices of goods will decrease
- workers would not demand wage rises
why should countries aim for low unemployment
- no need to pay unemployment benefits
- reduce wastage of resources
why should countries keep their economic output high
- less unemployment
- motive to expand for businesse
- higher living standards
state the parts of the economic cycle
- growth: GDP rising | unemployment falling and high living standards
- boom: too much spending | prices increase and shortage of skilled workers
- recession: too little spending | GDP falls and falling demands
- slump: serious drawn out recession | high unemployment and prices might fall
state the impacts of higher inflation on businesses
- higher cost (materials + wages + fixed costs)
- reduced demands on luxury items
State the advantages and the disadvantages of higher unemployment on businesses
negative:
1. lower consumer demand
====================
positive
1. easier to recruit workers
2. cheaper labor
state the impacts of economic growth on businesses
- higher consumer demand
- higher demand on luxury products
how do governments achieve economic policies
- fiscal policy: taxation and government spending
- monetary policy: interest rates
what are interest rates
The cost of borrowing money and return for depositing or saving money
what are the effects of high interest rates
- Less profits
- lower opportunities for expansion
- Consumers will save their money
what are the impacts on the business of increased taxation
- lower demand on goods and services
- reduces the demand on luxury products
- reduce the profit
what is globalisation
increase in interconnection between countries in terms of trading good and services
how did globalisation arise?
- increased free trade among countries
- Cheaper travel links
- global recognition of brands
- increase in labor and capital mobility
state opportunities and impacts of globalisation
- open up foreign markets: greater sales but may be more costly
- operations in different countries
- importing products
- importing resources to make products at home
threats by globalisation
- competition might force businesses to innovate or fail
- employees may leave for higher paying companies
what is protectionism
when a government is trying to protect domestic goods from foreign competition by imposing tariffs
what are tariffs
a tax imposed by government on goods from other countries
what are import quotas
restriction of quantity of goods that can be imported
why do governments have tariffs and quotas
- increase demand for domestic goods
- improve exchange rate
- reduce balance of payment deficit
- protect start ups
how do currency appreciation affect a country
- make imports cheaper
- currency appreciation makes exports expensive on other countries
- opposite for depreciation.
why do come businesses chose to become multi-national
- low costs such as taxes
- increase sales
- avoid trade restrictions
- spread risks
- increase competitiveness
advantages of multinationals for the country
- job creation
- new investment
- tax
- increase product choice
- increase competition
disadvantages of multinationals for the country
- local firms might run out of business
- profits are sent back to home country
- use up scarce resources
- powerful influence on the govenment
