Definitions
Components
Calculations
Adv/Disadv
Random
100
Inflation
Sustained rise in general price levels over a period of time
100
The four factors of production
Capital, Enterprise, Land, Labour
100
Calculate the Government budget if:
Government revenue = $128 million
Government expenditure = $230 million
-$102 million
100
State one disadvantage of the government using fiscal policy
1. Policies can fluctuate significantly when new governments are elected, Long term infrastructure projects may lack follow-through
2. Increased government spending can create budget deficits
3. Conflicts between objectives E.g. Cutting taxes to increase economic growth may cause inflation
100
State two determinants of demand
Consumer income
Taste/fashion/Advertising
Price of related goods (substitutes/complements)
Economic boom/recession
Population and demographic change
Weather
200
Opportunity Cost
The next best alternative given up for making a choice
200
The four components of Aggregate Demand (AD)
Consumption, Investments, Government Spending, Net exports
200
Calculate the disequilibrium when the product is priced at $30
Excess demand of 1400 units
200
State one disadvantage of the government using monetary policy
1. Time lags – takes a long time for the interest change to have effect on the economy
2. Other factors such as consumer and business confidence affect economic growth
3. Might cause negative effects on other macroeconomic aims
200
Maria resigns from her accounting job to look for one in a different city, and is unemployed for two months while searching.
Which type of unemployment is this?
Frictional unemployment
300
De-merit goods
Goods that create external costs to third parties when consumed or produced
300
The four different types of unemployment
Cyclical, Structural, Seasonal, Frictional
300
Calculate the unemployment rate if:
Population = 250 million
Number of employed = 132 million
Number of unemployed = 28 million
17.5%
300
State two reasons why low unemployment is important
Increase standard of living
Promotes economic growth
Increase tax revenue
Reduce government spending on welfare benefits (e.g. unemployment benefits)
Prevents brain drain
Improve equality
300
Explain the difference between absolute and relative poverty
Absolute: Income level is insufficient to afford basic necessities
Relative: Income level is insufficient to afford the average living standard of the economy
400
Deregulation
the reduction or removal of government control in a particular industry to create competition
400
The five macro-economic objectives
Economic Growth, Low unemployment, Low and stable inflation, Income equality, Balance of payments stability
400
Calculate the change in the balance of payments from 2021 to 2022
2021: -$42.06 billion
2022: -$43.39 billion
Worsened for -$1.43 billion
400
State two advantages of operating as a small firm
Personalised service- building relationship with customers, custom-made products
Niche market (cater to specific tastes)- smaller market size, no close substitutes, can be sold in small quantities at high prices
Adapt quickly to consumers’ tastes (Respond quickly to changes in market)
400
Explain two measures of Supply-side policy
Education and training
Labour market reforms
Deregulation
Privatisation
Incentives to work
Incentives to invest
500
Market Failure
When market forces of demand and supply are unsuccessful in allocating resources efficiently and causes external costs OR benefits
500
The seven types of internal Economies of Scale
Managerial, Research and Development, Marketing, Risk-bearing, Purchasing, Financial, Technical
500
The PED of the product is -1.25
The original price is $40 and original quantity is 120. After a change in price, the quantity decreased to 90.
Calculate the new price of the product.
New Price = $48
500
State one advantage and one disadvantage of a backward vertical merger
Advantages: Reduce COP, reduce risk to supply chain, control distribution, increase profits
Disadvantages: Diseconomies of scale, increase transportation costs, lack of expertise, overlap of resources, communication/cultural barriers
500
The four functions of money
Medium of exchange
Unit of account (measure of value)
Store of value
Means of deferred payments