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Economic Indicators
BUS JC 3RD YR
| Question | Answer |
|---|---|
| What is inflation | Inflation measures the rise in the prices of goods and services over time in an economy |
| How is inflation measured | CPI - The Consumer Price Index tracks over 600 everyday items and compares their prices from previous periods. This lets us calculate if the cost of living is going up or down |
| What are the 3 causes of inflation | Demand Pull, Cost Push, and Government Induced |
| What is Demand Pull | When demand is greater than supply, scarcity causes prices to rise. |
| What is Cost Push | When production costs increase, firms raise prices to maintain profit levels. |
| What is Government Induced | When taxes e.g. VAT increase, businesses pass the cost onto consumers, increasing prices. |
| What is the affect of inflation stable at 2% | Stable prices mean the cost-of-living does not rise sharply. This allows households to maintain their standard of living. This also makes it easier to plan and budget |
| What is the affect of high inflation | Rising inflation may make people struggle to pay their bills as the things they buy cost more. They also have less disposable income |
| What are the 2 ways employment can be measured | The Employment rate and the Unemployment rate |
| What is the employment rate | The percentage of the working-age population (15–64) who are currently in paid employment. |
| What is the unemployment rate | The percentage of the labour force (aged 15–74) who are without a job but are available for and seeking work. |
| Why is a fall in unemployment/rise in employment a good thing for: Economy, Households, Government | Economy -> More demand for goods and services due to consumers having more disposable income Households -> Better standard of living, more disposable income Government -> More employment tax e.g. PAYE. Less social welfare payments e.g. Jobseekers |
| Why is a rise in unemployment/fall in employment a bad thing for: Economy, Households, Government | Economy -> Less spending due to lower disposable income in consumers Households -> Lower standard of living and disposable income Government -> More social welfare supports will be needed e.g. Jobseekers, subsidies etc. |
| What affect do interest rates have on: 1. Savings 2. Borrowing | Savings: Interest is the reward given by banks and financial institutions for saving money with them. Borrowing: Interest is the financial cost/fee charged for borrowing money. |
| What affect do high interest rates have on saving | Savings increase because banks pay a higher return on deposits. |
| What affect do high interest rates have on borrowing | Borrowing decreases because the cost of loans become more expensive to repay. |
| What affect do low interest rates have on saving | Savings decrease because banks pay less interest on deposits. |
| What affect do low interest rates have on borrowing | Borrowing increases because the cost of loans are cheaper to repay. |
| Who sets exchange rates. | The European Central Bank (ECB) sets and adjusts interest rates for the EU. |
| Why would the ECB 1. Raise interest 2. Lower interest | Raise -> To reduce inflation by making borrowing more expensive and slowing down spending. Lower -> To encourage economic growth by reducing the cost of borrowing and increasing spending in the economy. |
| What is the effect of low interest rates on 1. Individuals 2. Economy 3. Businesses | 1. Lower repayments on loans, increasing their disposable income and standard of living. Reduced saving due to low returns 2. Lower repayments, so have more ability to expand. 3. More economic growth due to increased spending due to more borrowing |
| What is the effect of high interest rates on 1. Individuals 2. Economy 3. Businesses | 1. higher repayments, decreasing disposable income and standard of living. increase in savings as the return is higher, 2. higher repayments, so expansion becomes more expensive. 3. Less borrowing reduces spending, which can slow economic growth |
| What is national income | The total income earned by individuals and businesses in a country over a period of time. This lets us see changes in the standard of living |
| What is GDP | (Gross Domestic Product): the total value of goods and services produced within Ireland in a given period. |
| What is GNP | (Gross National Product): GDP plus income earned by Irish companies abroad, minus income earned in Ireland by foreign companies. |
| What is Economic growth | The change in national income over time. It is usually shown as a percentage change from one year to the next. |
| When economic growth is negative what happens | Reccesion |
| What is the effect of positive economic growth on 1. Individuals 2. Businesses 3. Economy | 1.More jobs, Increased standard of living and disposable income 2. Increase in demand for goods and services, Increased investor confidence 3. Higher tax revenue, Lower social welfare spending |
| What is the effect of negative economic growth on 1. Individuals 2. Businesses 3. Economy | 1. Job losses, Reduced standard of living and disposable income 2. Fall in profit and investor confidence, Risk of closure or downsizing 3. Lower tax revenue and increased social welfare spending |
| What is the national debt and what is it called when we pay it | The total amount of money the government owes after borrowing to cover deficits. When we pay it it is called Debt Servicing |
| What causes budget deficits increasing national debt | Tax revenue falls, e.g. during a recession when fewer people are working and less income tax is collected. Government spending rises, e.g. during an economic crisis or a global emergency e.g. COVID-19. |
| What is the impact of low national debt for 1. Individuals, 2. Businesses and 3. Economy | 1. More money to spend on improving public services such as health and education. 2. More stable economy which gives businesses confidence to invest and create new jobs. 3. Better credit rating, making it cheaper and easier to borrow in the future. |
| What is the impact of rising national debt for 1. Individuals, 2. Businesses and 3. Economy | 1. Increase in taxes (e.g. PAYE) hence lower disposable income 2. Greater economic uncertainty, making businesses less likely to expand. 3. Tax revenue is spent on interest on the debt, making it harder to improve budget deficits. |
Created by:
georgejoseph
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