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Theme 4

What is GDP? GDP is the value of all newly produced final goods and services produced in an economy within a given time period
What does GDP measure? Gross Domestic Product (GDP) measures if and how much the economy is growing.
What are the benefits of higher economic growth? Greater economic growth brings with it higher incomes/ It should also mean more funds are available to the Government through taxation
What is the formula for GDP per capita? National Income/Population
What is a key indicator of growth? Literacy
What is the Human Development Index? A measure of economic development and economic welfare.
What are the three elements in the Human Development Index? life expectancy, education and income levels
What does a HDI score of 1 indicate? 1 indicates a high level of economic development,
This measures how long a person is likely to live till at birth Life Expectancy Index
What are the negative implications of growth? Financial – especially the effects upon cash flow and gearing Managerial – problems of co-ordination and control Operational – difficulty of boosting supply in line with demand
Exports The selling of goods and services to other countries e.g. if the UK sells a car abroad the money flows in to the UK
Imports The buying of goods and services from other countries e.g. If a UK business buys raw materials from abroad the money flows out of the UK
Balance of Payments Exports minus imports
What factors affect imports and exports? Exchange rates/Price Elasticity/ State of the economy/Non-price factors e.g. wage rises
How does a countries inflation rate affect its imports and exports? If the country has a relatively high rate of inflation, domestic households and firms are likely to buy a significant number of imports
How does a countries domestic GDP affect its imports and exports? If incomes rise at home, more imports may be bought. Firms are likely to buy more raw materials and capital goods, and some of these will come from abroad.
What is specialisation? This occurs when economic units such as individuals, businesses, regions or countries concentrate on producing specific goods or services
What is the division of labour? Specialised use of workers within an organisation
What are the benefits of specialisation? Likely to lead to increased output per worker (productivity) as the workforce have a better understanding of their job role
How can specialisation occur in a country? Bangladesh is a major producer and exporter of textiles
How can specialisation occur in a region? For many years the West Midlands has been a centre for motor car assembly, there has been huge investment in recent years in the Mini plant at Oxford
What is Foreign Direct Investment? investment made by a business or other entity from one country into the production capacity of a business or other entity from another country e.g. factories.
What is Globalisation? The process of greater integration and inter-connectedness between countries
What are three features of Globalisation? Free movement of goods and services Free movement of labour Free movement of capital
What is Trade Liberalisation? Involves removing barriers to trade between different countries and encouraging free trade
What does Trade Liberalisation involve? Reducing tariffs, reducing/eliminating quotas and reducing non-tariff barriers e.g. factors that make trade difficult and expensive.
What are Trade Barriers? Government policies which place restrictions on international trade. Trade barriers can either make trade more difficult and expensive (tariff barriers) or prevent trade completely (e.g. trade embargo)
What are Trading Blocs? The governments of a group of countries agree to trade together freely i.e. normally with no trade barriers.
What are Preferential Trade Areas? Members agree to either reduce or eliminate trade barriers for a select number of goods or services, resulting in partial trade liberalisation
What does an Economic Union consist of? It comprises of the features of both a customs union and a common market, including common economic policies.
What is a Common Market? Members agree to the removal of trade barriers as well as the freedom of movement of factors of production within the bloc.
What is a Free Trade Area? Members agree to either reduce or eliminate trade barriers for all goods and services, resulting in trade liberalisation
What are the features of a Free Trade Area? A group of countries that have removed most or all tariffs and/or quotas
What is meant by a Tariff? A tax or duty that raises the price of imported products
What are Tariffs used for? To protect declining industries and to protect “Infant Industries”
What are Quotas? Quantitative (volume) limits on the level of imports allowed or a limit to the value of imports permitted into a country in a given time period
Why are Quotas not popular? Quotas are not popular with consumers because they limit consumer choice. This makes products more expensive. The main beneficiaries of quotas are the workers, managers and shareholders who will face less competition from foreign companies.
What are Government Subsidies? Involve government help (state aid) for domestic businesses facing financial problems e.g. subsidies for car manufacturers
What is an embargo? A total ban on imported products.
What is Financial Protectionism? When a national government instructs banks to give priority when making loans at favourable interest rates to domestic businesses
What is per capita? This means looking at the data per head of population, to make it easier to compare statistics from countries of different sizes.
What are invisible exports? The sale of a service to an overseas customer e.g. India running English Speaking Call Centres
Fixed Capital Formation Investment in long term assets e.g. roads and buildings. In China the Government has started to invest heavily in fixed capital formation.
Balance of payments deficit Imports outweighs exports; if it continues indefinitely, it means ever greater build up foreign currency debt
Purchasing Power Parity Adjusting income levels to allow for differences in the cost of living e.g. a dollar might buy three times more groceries in India than in America.
Inward Foreign Direct Investment investment into a country such as the UK from companies abroad, perhaps in the form of buying up one of our businesses, or buying up property assets
Outward Foreign Direct Investment Investment from a country such as the UK, perhaps buying a factory in Brazil or buying property in Nairobi.
Regulations Rules created as a result of laws passed by Parliament
Structural Unemployment Potentially long term unemployment as a fundamental economic shift makes an industry and therefore the skills of its workers obsolete e.g. the closure of coal mines in the 1980s.
Created by: durquhart1



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