Circular flow of income
What is the name of the five (5) sectors in the circular flow model?
Household, Business, Financial, Government, Overseas
The voluntary exchange of goods or services between different actors such as consumers, companies, and nations.
Define a TNC.
A TNC is a business that produces and sells its product in a number of countries throughout the world.
Identify one indicator of economic performance
Economic growth
GDP
Unemployment rate
Inflation & CPI
Define economy.
A system that determines what to produce, how to produce and to production will be distributed to. This can be distributed to households, businesses, financial institutions, overseas and governments.
What are flows into and exiting the economy called?
Injections and leakages
Identify one main reason why countries trade.
- Access cheaper goods and services from overseas
- Access better quality or innovative products
- Access health and education services
- Sell excess products
- Formalise trade agreements with other countries
Identify a feature of a TNC.
•They have their head quarters in one country and they establish subsidiaries in other countries.
•Large companies that operate in many different countries.
•Less centralized management and operational structure as they manage their branches from the country they operate in
•Conduct a large percentage of business outside of their home country.
•Represent the highest level of involvement in global business
•National borders do not represent barriers to trade
Define inflation
Inflation is a general rise in prices across all sectors of the economy and is measured by CPI.
Define import.
A good or service that is produced overseas and then brought into Australia.
What flows into and from the financial sector?
Savings and investment
Identify one benefit of selling exports.
- Brings money into the Australian economy
- Helps local businesses to grow
- Employment increases
Identify a feature of a TNC.
•They have their head quarters in one country and they establish subsidiaries in other countries.
•Large companies that operate in many different countries.
•Less centralized management and operational structure as they manage their branches from the country they operate in
•Conduct a large percentage of business outside of their home country.
•Represent the highest level of involvement in global business
•National borders do not represent barriers to trade
What is the ideal rate % of CPI?
2-3%
Define global supply chain.
The sequence of processes involved in the manufacturing and distribution of a product from producer to consumer.
What flows into and from the government sector?
What countries are Australia's top 2 trading partners?
China & Japan
What is one positive about operating as a TNC?
- Decrease the level of poverty in countries by opening up factories
- Increases employment and standard of living
- Bring money into the economy, therefore growth
- Contribute towards the creation of new transport links which can benefit the local community
Competition is rising, and businesses in the Australia cannot compete, causing them to close. What happens to unemployment?
The unemployment rate rises as a result of dismissal in the workforce.
Define government spending.
Money raised through taxation spent on things such as infrastructure, welfare payments, education and healthcare.
What are the top two flows between the household and business sector?
Economic resources and income.
Identify one negative effect of imports.
- Australian jobs may be lost to countries with cheaper labour.
- Imports can lower employment opportunities for Australian workers.
- Businesses find it difficult to compete with overseas countries.
- Money leaves the Australian economy, affecting the exchange rate.
- Harmful animal species and diseases can be brought into the country.
What is one negative about operating as a TNC?
- TNC's set up production in countries that have high levels of poverty
- They employee children and pay workers the minimum wage
- Profits are returned to the home country rather than the host country
- Many TNC's have a poor record in environmental matters
There is growth in businesses opening. As a result, individuals are being hired for work. How does this affect the unemployment rate and what happens to consumer spending?
The unemployment rate decreases and consumer spending increases as more individuals have disposable income.
Define export.
A good or service that is produced in Australia and sold overseas.