IGCSE 1
What 2 main types of Taxes can the Govt impose?
Direct & Indirect Taxes
Give an example of a Direct Tax and an Indirect Tax
Direct: Personal income tax, Corporation (or profits) tax, Capital gains tax, Wealth (e.g. inheritance and property) tax
Indirect: Value added tax (VAT), Excise duties, Import tariffs, User charges
What is inflation?
Inflation: the sustained rise in price level of goods and services over time
What are the two parts of HDI that are NOT GDP per head?
Health (or life expectancy) and Education (or years of schooling)
What is a recession?
•A recession occurs when real GDP declines over a period of 6 months or more ( two successive quarters)
It is a period of negative output with less being produced than the previous period
What are the 2 main 'instruments' that Fiscal Policy uses to influence Total Demand?
Govt Spending & Tax
Provide a market failure and a tax that can be used to fix
Public Goods /Merit Goods / Goods with external benefit- any tax used to fund provision or subsidies
Demerit Goods / Goods with external costs - indirect tax used to decrease consumption
Why are goods with external benefits a market failure?
Because they are underconsumed/underproduced.
What is the difference between actual and potential economic growth?
Movement towards PPC vs. shift of PPC
OR
Use unemployed resources vs. greater quantity / quality of resources
OR
Using more of current resources vs. increased ability to produce
What could cause a cost-push inflation?
A decrease in AS, a negative supply-side shock, could result from a rise in fuel or raw material costs
Such effects would increase firm’s costs of production which may cause them to produce less
What 2 actions could the central bank take during a period of inflation?
Raise interest rates and decrease the money supply
What is a Progressive Tax System?
Progressive tax is where a higher percentage of tax is levied on the income or wealth of the rich. As income rises so does the tax
What is a Regressive Tax System?
Regressive tax is where percentage tax falls as income rises
What is the difference between Nominal & Real GDP?
Real GDP has been adjusted for inflation, whereas nominal has not
How do we calculate real GDP per capita?
•real GDP per capita = Real GDP/Population
List 4 possible opportunity costs to government spending on education.
Judged by Mr. Cala
Changes in income
Changes in wealth
Changes in interest rates
Changes in confidence
When it comes to products with an inelastic demand, how does revenue change when price goes up?
Revenue goes up.
What happens to the birth rate and the death rate as a country develops?
Birth rate goes down
Death rate goes down.
List 4 causes of a recession (Demand-side shocks):
Consumer expenditure and Investment could decline due to a fall in business and consumer confidence arising from a global financial crisis, The Govt may cut back its spending too much, and net exports could fall as a result of a rise in the exchange rate
List 4 aims of Govt taxation (taxing):
–redistribute from rich to poor
–discourage the consumption of demerit goods
–raise the cost of firms that impose cost on others
–discourage the consumption of imports and hence protect domestic industries
–Influence economic activity e.g. if a country is experiencing high unemployment, its government may cut taxes to stimulate the economy
What are Taxes used for - list 4 things.
•To raise revenue
•To manage the macroeconomy
•To reduce income inequality after tax
•To discourage spending on imports
•To discourage the consumption and production of harmful products
•To protect the environment
What happens to the current account when a currency depreciates?
Current account moves towards surplus.
If the inflation rate decreases from 10% in Year 1 to 5% in Year 2, what happened to the consumer price index in Year 1 and Year 2?
Prices went up 10% in year 1. Prices went up 5% in year 2.
What are the causes of Economic growth in the Long run?
In the LR, an economy can continue to experience economic growth only if the quantity or quality of resources increases
The qty of resources may rise as a result of, for eg, an increase in net investment or the size of the labour force
The qtly of resources may increase due to an improvement in education & training and advances in technology