Keywords
Money that is paid by businesses to whānau/households is called
Income
What does a bank offer to businesses or households?
Financial services (Loans, banking services, term deposits, etc.)
What households/whānau and individuals provide to a business
Labour
Money earned from selling goods or services.
Revenue (Sales is acceptable but revenue is the better term)
A café makes $500 from sales in a day. What is this called?
Revenue
Money left after all costs and expenses are paid.
Profit
Explain how banks help businesses grow.
By providing loans, overdrafts, and financial services.
Money paid to the government by Whānau/households and businesses
Taxes
The money banks pay to savers for keeping money in the bank.
Interest or interest earned
A family pays the bank back $1,000 plus $100 extra. What is the extra $100?
Interest
What is financial interdependence
Financial interdependence means that people, businesses, and organisations rely on each other for money and financial support.
The most common way households borrow money from banks to buy a house
Who pays income tax to the the government
Businesses pay income tax to the government ON BEHALF OF Households/Whānau.
When a business pays its workers’ wages, it takes out some money as PAYE (Pay As You Earn) tax and sends it directly to the government.
The immediate result of an action or decision.
Direct effect
- What one party provides the other
- What the other party provides back
- How this creates a two way relationship
E.g. The Delectable Donuts store relies on the whānau for labour to make donuts allowing the store to sell products and earn revenue.
The whānau relies on the Delectable Donuts store to pay them wages for the labour the whānau provides so that they can purchase goods and services.
What happens because of the direct effect – kind of like a ripple effect.
Flow on effect
Explain the difference between borrowing and saving for households.
Borrowing means taking money from the bank (and paying interest), while saving means putting money in the bank (earning interest).
Define "household" in terms of circular flow.
Households are people who provide labour and other resources to businesses, earn income, and then spend that income on goods and services. This can be a traditional nuclear family (2 adults and 2 kids), flat mates, a house with extended family living together, or any other combination of human beings.
What are the 5 sectors in circular flow?
A shop sells out of stock after a sale. What is one direct effect and one flow on effect?
Direct effect - The shop has no products left to sell which means they can no longer make more revenue.
Flow on effect - Customers will shop at a competitor which will increase the competitors revenue. The shop may also lose future sales.
Explain the difference between revenue, income, profit, and money
Revenue - Revenue is the total money a business earns from sales before paying for any costs.
Income - Income is the money people or households receive in exchange for their labour.
Profit - Profit is the money a business has left over after paying its costs.
Money - Money is what we use to buy and sell things.
It’s the notes, coins, and electronic payments we use as a medium of exchange.
How do banks act as intermediaries between households and businesses?
Banks take savings from households and lend to businesses (and other households).
What is the difference between a subsidy and a benefit?
A benefit is money the government gives to people (households) to help them live.
Example: Jobseeker Support, Student Allowance, or NZ Superannuation.
A subsidy is money the government gives to businesses or industries to help them keep costs lower or produce more.
Example: A fuel subsidy to help farmers, or subsidies for renewable energy.
Local Government:
Looks after the area where you live (your town, city, or district).
They make decisions about local services like rubbish collection, libraries, public transport, local roads, and parks.
Example: Auckland Council
National government
Runs the whole country.
They make laws and decisions about big issues like education, health, defence, tax, and nationwide transport.
Example: The New Zealand Parliament in Wellington.
As a response to concerns about unhealthy eating, the Government decides to start a healthy eating campaign including a tax on unhealthy foods, such as donuts, fast food, and sugary sweets.
Explain ONE positive consequence of the Government’s decision to tax unhealthy food on the interdependent financial relationship between a Healthy Food shop and the government.
A positive consequence of the tax on unhealthy food is that healthy food will become relatively cheaper for consumers to purchase, which will increase the sales and profits of the health food shops in the community.
This means the health food shops will need to pay more company tax to the Government, meaning that the Government will have increased revenue, which they can use to pay for additional subsidies and spending for businesses like the health food shops, which aligns with their healthy eating campaign.