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GCSE: Economy & Economics

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What are the government's economic objectives?

  1. 1 The government has four main objectives for the economy. These are called macroeconomic objectives. The relative importance of each varies from time to time and they are all interlinked.
  2. 2 Economic growth as measured by an increase in Gross Domestic Product (GDP) which the total value of everything produced in a country. This means that income will be increasing across the country.
  3. 3 Low unemployment means that fewer people are actively seeking employment. It is likely to come at the same time as rising growth. There will always be some unemployment as there will be people between jobs but the government usually likes to minimise it as it is expensive, unpopular and a waste of human resources for the economy.
  4. 4 Low inflation means that prices are only rising slowly. High prices means that goods of the country become less competitive compared to foreign countries and so will lead in the long run to lower growth and more unemployment. Inflation usually increases as growth increases so to achieve both is a difficult balancing act for a government.
  5. 5 Balance of payments equilibrium means that the value of goods and services imported equals the value of goods and services exported. This has become less important as an objective in recent years. Higher growth usually means more imports so the balance of payments also worsens as the economy grows.

What are the government's policies to achieve these objectives?

  1. 1 The government has several weapons it can use to adjust the economy to achieve the best balance of the economic objectives. Some of these are used at any time and some announced in the annual budget.
  2. 2 Interest rates can be increased or reduced to affect the amount of money in the economy. If interest rates are high, it becomes more expensive to borrow money so there will not be as much spent. This is mainly used to reduce inflation. Strictly speaking this is not a government action as the Bank of England decides on the best interest rate in the UK.
  3. 3 If interest rates are reduced, it will increase the amount of money in the economy as it becomes cheaper to borrow and there is less inclination to save money. There should therefore be more investment and spending which should lead to more growth.
  4. 4 The government can change the amount that it taxes and spends. By reducing tax, spending more and borrowing the difference it can increase spending in the economy so stimulating growth. It can increase tax or reduce spending to reduce inflation.
  5. 5 Recently, the Bank of England has tried quantitative easing to increase growth in the economy. This involves increasing the amount of money in circulation, again stimulating spending.

What are the long term policies for growth?

  1. 1 In the long run, the government would like to increase growth without having to use the above measures too much. This involves the use of supply side policies which aim to increase the amount that the economy can produce without setting off inflation.
  2. 2 Policies to increase productivity include privatisation (selling off government owned business so that it can be run competitively), deregulation (making it easier for businesses to compete in certain markets) and stronger competition laws. The aim is that increased competition will force businesses to become more efficient.
  3. 3 Encouraging investment and new businesses should increase growth. The government can give tax breaks for research and development, reduce corporation tax and give encouragement to new businesses.
  4. 4 Making the labour market more competitive should also improve the economy. Measures taken here include reducing the power of trade unions. Improved education and training should also make the workforce more productive.
  5. 5 Tax and spending is used as an incentive for people to work by for instance reducing rates of income tax and reducing welfare payments so people are more inclined to work.

  • Marked by Teachers essays 5
  • Peer Reviewed essays 24
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  1. Free essay

    Do high house prices in Trafford deter key public sector workers from seeking a job in the area?

    The supply and demand diagram above shows the relationship between demand and price. Supply Supply is the quantity of a product or service that is offered for sale by the market at a certain price. If all other factors remain equal, the higher the price of a product or service, the more will be supplied. This is because if prices are higher, more profit can be made by suppliers so they will supply more. The supply and demand diagram above shows the relationship between supply and price. Equilibrium Equilibrium is the price at which demand is equal to supply.

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  2. Macroeconomic Objectives and their impact on Business Activity

    A good example of this would be due to oil prices rising. Costs can rise for several reasons: 1. Higher wage costs. This is where wages rise by more than any productivity gains inflating unit costs of production. Strong trade unions in the past have been blamed for forcing up wages that have not be warranted by productivity gains - in turn triggering cost - push inflationary pressure. 2. Imported good prices could rise. A trigger for this is often the exchange rate.

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  3. Free essay

    The Economic Impact of the London 2012 Olympics

    incr???? r?v?nu?? ?nd ?c?n?mic imp?ct? p?rf?rm?nc? ?f th? G?m?? ?rg?ni??r? i? ? v?ry n?rr?w d?finiti?n ?f th? ?c?n?mic b?n?fit? fr?m h??ting th? ?lympic?. Th? wid?r ?c?n?mic imp?ct ?f th? ?lympic G?m?? includ?? th? ?ff?ct? th?t th? vi?it?r? t? th? G?m?? h?v? ?n th? l?c?l ?c?n?my thr?ugh th?ir ?xp?nditur?? in th? h??t city, th? d?v?l?pm?nt?l b?n?fit? ?f t?rg?t?d infr??tructur?l inv??tm?nt? in d?priv?d ?r??? ?nd th? l?ng-t?rm 'l?g?cy' b?n?fit? th?t th? incr????d ?xp??ur? t? th? int?rn?ti?n?l m?di? bring? thr?ugh incr????d t?uri?t ?rriv?l? ?nd t?uri?m r?c?ipt? in th? y??r? ?ft?r (?nd b?f?r?) th? G?m??. Th? c?mbin?ti?n ?f th??? ?ff?ct? i? v?ry c?mpl?x, ?nd c?nn?t b? d?t?rmin?d pur?ly fr?m th? fin?nci?l p?rf?rm?nc? ?f th? G?m?? ?rg?ni??r? ?r ?f th? ?dditi?n?l r?v?nu??

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  4. US Financial Crisis vs. Economic Crisis

    As in previous periods of depression, lower rates of profit reduced business investment, which in turn leads to slower growth and higher rates of unemployment. An important factor in the postwar period is that many governments in the 1970s sought to reduce unemployment by adopting expansionary fiscal and monetary policy (more than public spending, lower taxes and lower rates interest). However, these policies have generally resulted in higher rates of inflation, capitalist enterprises, the government has responded to the stimulation of demand by rapidly increasing prices in order to restore the rate of profit, instead of increasing production and employment.

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  5. Free essay

    From an economic perspective should my council do more to recycle a greater proportion of our waste

    Taxes are charges imposed by the government on people and firms, so supply decreases. The price rises as a result so that means less demand too. Subsidies are payments by the government to the producers and consumers. They reduce cost of supplying which means more is produced and sold at lower prices which also results in an increase in demand. A household is the group of people living in one house. The council (legislative) is the local governing authority of a town or county. Waste is anything rejected as useless, worthless, or in excess of what is required.

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  6. Free essay

    business aims

    The shifts that the employees do are from 8 00 to 6 00 Mrs Khera works then from 6 00 to 9 30/10 Mr Khera takes over. The rest of the employees have different shifts, depending on there responsibilities The business sells alcohol, Jamaican food, sweets, crisps, tins (soup etc), cigarettes, freezer food, ice creams, fruits and general house products (kitchen cleaner etc). Other items that this business sells are: sim cards (O2, t-mobile, Orange) Phone Cards and newspaper. Also in the shop is has a PayPoint and Pay Zone where customers can pay all of their bills such as, gas bills, electricity bills, water bills and any other bills that they want to pay off.

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  7. Free essay

    Globalisation & changing career patterns

    Recent technological developments have also contributed to globalisation. Because of these developments the world is a smaller place; communication is almost instant to many parts of the world. Such changing patterns throughout the globe have affected the way services are delivered, resulting in a significant impact on the career choices of many individuals. For the purpose of this report, I will be looking at the changing career patterns of employees in the IT industry, and the effect globalisation, and in particular, emerging markets, has had on these choices.

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  8. how the changes of the working environment affect employee relations

    the employees could not go back from the way that they came from and were trapped, they became severely burned and died on the way to hospital. This is a clear violation of the health and safety Act 1974. http://news.bbc.co.uk/1/hi/uk/1443939.stm As a result, three directors were fined in total of �373,000 for their role in this accident and the managing director John Bridson, the production director Brian Jones and the chief engineer Dennis Masters accepted responsibility. The effect that this example has had on the employee relation is very important because it effect more than the employer because when the

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  9. Major Economic Organizational Issues

    Also organizations are usually hit by a fall in sales as consumers with mortgage or bank loans reduce their spending in response to high interest rates. Hence high interests rates tend to reduce demand in the economy. Low interests rates tend to stimulate demand for the opposite reason. * Exchange Rates Exchange rates can affect the relative prices, and thereby the competitiveness, of domestic and foreign producers. A significant appreciation of the domestic currency can make domestic goods expensive relative to foreign goods.

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  10. analyze an organization (ba)

    According to Porter, five areas of the external environment affect the profitability of the firm. The following image shows the relationship between the different competitive forces. (www.quickmba/strategy/porter.html) 2.1.1 Supplier power This is how much pressure suppliers can place on a business. If one supplier has a large enough impact to affect a company's margins and volumes, then they hold substantial power. Weak suppliers may have to accept the terms that the firm offers; this allows the firm to appropriate some of the value of the product for itself effectively taking some of the profit from a firm higher up the production chain.

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  11. Global Imbalances

    Under the light of these ideal/perfect circumstances, as economies grow, we would expect to see a certain amount of shift in the flood of savings into those regions where opportunities for investment compare to others are particularly strong and from where you can expect a positive return. This kind of floods of savings would develop an era of current account surpluses or deficits, but these are not the threats from which would worry, till mechanism of adjustment present in the market to resolve them.

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  12. analysis of hsbc

    This will make borrowing more expensive, and less attractive to investors who would refrain from borrowing for investment purposes. HSBC may probably advance less credit causing its profit to dwindle and shareholders' earning would equally be reduced. Money supply This is simply the total amount of money circulating in the economy (Anderton, A. 2006). In the UK, there are two types of money supply which are namely narrow and broad money with narrow money acting as a medium of exchange while broad is narrow plus near monies. Money supply is important because it has a link with inflation. This is illustrated as Velocity * Money supply = real GNP * GNP deflator.

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  13. Creating a Limited Liability Co. to import coffee into Ukraine directly. Economic and financial analysis

    As it was mentioned above, the company does not purchase suppliers but purchases coffee directly from manufacturers. However, it requires hiring employees in the US for them to work with manufacturers and control shipping, and in Ukraine to manage distribution. Hence, some expenses are in Ukrainian currency - hryvnas (UAH). This money is to be spent for paying salaries to Ukrainian employees, for advertisement, office rental, taxation and other purposes required by the Ukrainian legislation in force. Any multinational company is exposed to risks such as change of foreign currency exchange rate, commodity prices and interest rates because it denominates its transactions in foreign currencies.

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  14. Chinese car market overview. Citroen case study

    (Kevin C,2003) C) ECONOMIC SITUATION In late 1978 the Chinese leadership began moving the economy from a sluggish, inefficient, Soviet-style centrally planned economy to a more market-oriented system. Whereas the system operates within a political framework of strict Communist control, the economic influence of non-state organizations and individual citizens has been steadily increasing. The authorities switched to a system of household and village responsibility in agriculture in place of the old collectivization increased the authority of local officials and plant managers in industry, permitted a wide variety of small-scale enterprises in services and light manufacturing, and opened the economy to increased foreign trade and investment.

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  15. Industry sector: coffee exporting

    We will have to open a branch or division in Ukraine in order for it to deal with the sales and marketing directly. This, in its turn, will allow us to get more profit than through a distributor, and enable to keep total control over marketing and sales of our coffee. Such an idea is likely to be successfully realized because the experience of work within the foreign market, under foreign legislation, with foreign currency and national culture we will have gained by that time is sure to help in future work.

    • Word count: 3721
  16. Briefly explain why initial levels of GDP might influence subsequent economic growth.

    And if we use a small amount of them it will be the marginal production high .so a country with a low level of GDP has the potential to achieve fast rates of growth because small changes in the level of national output will be high percentage increases. The coefficient on initial level of GDP measures the percentage rate of Convergence to the economys long run or target level of income. The interpretation is that initial income has a negative impact on residual growth.

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  17. What makes a country wealthy.

    In one study professor Bauer has pointed out that the main determinants of economic development are notably aptitudes, abilities, qualities, capacities and faculties, aptitudes mores, values, objectives and motivations and institutions and political arrangements. Economists regard factors of production as the main economic forces that influence development. NATURAL RESOURCES: The principal factor affecting the development of an economy is the natural resources or land. Land includes natural resources such as fertility of land, its situation and composition forest wealth, minerals, climate, water resources, sea resources etc.

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  18. Use game theory to analyze an oligopoly competition of two great rivals, Wal-Mart and Carrefour, in the Chinese market.

    At the same time Wal-Mart was developing a new concept called the NEIGHBOURHOOD market. Such markets used to sell and store fruit and vegetables, pharmacy, offered a 24-hour photo shop service and a selection of classic Wal-Mart hard goods. The purpose of these Neighborhood markets was to keep on attracting surrounding neighbors who might be in a hurry or want only a few items. Apart from Wal-Mart's everyday low prices strategy, the company has also established highly automated distribution centers accompanied with a wide-ranging commercial support and implemented a computerized inventory system.

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  19. Morrison's and Safeway Acquisition

    Loss of competition also affects the nature of innovation and product range a retailer offers.4 In terms of Morrisons the Competition Commission concluded that the proposed acquisition of Safeway is likely to lead to adverse affects, however, not to the severity as of the other bidders named above. There is likely to be a negative effect on particular local areas through a reduction in the number of one-stop shops and smaller stores fascias in those areas to the extent that competition and choice would be reduced.

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  20. Kingfisher is the largest home improvement retailer in Europe and the third largest in the world. Kingfisher is a pure DIY business and is a market leader in the UK with B&Q (figure 6).

    Strategic Supplier Management Programme created innovate products at lowers prices Cost Price Reduction Programme (CPR) Helped them to deliver a reduction in the cost of goods due to lower supplier fees. This has allowed their suppliers to invest in their operations to create the opportunity to reduce costs due to the increase in the volume of goods demanded. These new strategies have resulted in pre-tax profits before exceptional and goodwill to increase by 17% in 2004. It is impossible to choose an appropriate benchmark to assess Kingfisher performance due to there dominance in the market and restructuring in the last five years.

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  21. Bellway Plc is a holding company with subsidiaries; its main subsidiary company is Bellway Homes.[1] Bellway's principal activity is the construction of houses, bungalows and flats primarily in the private market

    Strategic Analysis Broad Environment The housebuilding industry has recently experience strong growth, driven by an increasing demand in the market arising because of social and demographic pressures facilitated by lower interest rates; the inability of supply to meet demand, has forced house prices to rise. Supply is being constrained by heavy restrictions on construction on greenfield sites in an attempt to conserve the environment and regenerate industrial and urban sites. The lack of availability of skilled labour and lengthening planning delays together with the current economic climate largely due to increasing in oil prices, raw material costs, cost inflation

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  22. Competition Theory A. Outline the role of competition in a free market. B. Outline/Explain the model of perfect competition (p.c.) Include competition spectrum

    The market has to be free from government intervention in order for it to perform in the way it does. 2. Competition has to exist for a free market to operate. Competition in the free market allows the distribution of resources to be allocated efficiently wherever possible. In a free market businesses compete consequently reducing prices and benefiting the consumer. Competition in the free market increases the quality of products, as substitute goods would be purchased which rival firms would produce due to homogeneous product being produced.

    • Word count: 3324
  23. Tourism market analysis Polish economy

    was made in 2003 and 2.5% real growth in 2004 which has contributed 4.3% of total GDP; 1.1% real growth of Travel & Tourism Employment (Direct) in 2003 and 1.2% real growth with 1,287,635 jobs for T&T industry which has contributed 4.8% of total employment in 2004. (Source: www.oecd.org/statsporta) Looking at the current CEE tourism market, vacations are becoming shorter as people break down their annual holidays and tourist are very price sensitive and prefer to wait until the last moment before making a buying decision.

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  24. Corporate strategy of Arcelor: how to penetrate the Chinese market?Second world largest steel maker, Arcelor is the result of the merger between three European steelmaking companies in 2002.

    Developing the steel output, China is forecasted to be self-sufficient on steel in 2006. The steelmakers not only fear to lose of one of their more interesting customer but they now also have to fight against the extremely low-cost Chinese competition. Apparently this increase in Chinese production is not curbed either by the skyrocketing price of raw materials or by the Chinese Government directives. Considering that China is the first steel consumer, if the Chinese growth is lower than expected the market would be overflowed with metal and prices might fall. From a shortage, the steel market is now flooded with too many products, overproduction is lurking...

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  25. China or India? Many companies ask themselves this question. Due to saturated markets, increasing costs and low growth rates in the developed western countries, going to Asia might be the only possibility to sustain healthy growth rates

    The worldwide demand is more homogeneous than ever before. It is also important to obtain first mover advantages to be ahead of competitors. Half of the world's population is living in the newly developed countries. Cavusgil (2002) states that in these countries one target group is bigger than the population of an individual country in the western world. The growth rates are impressing in comparison to what we are used in Europe or North America. The emerging middle class that desires western products creates a huge consumer market. Cavusgil (2002)

    • Word count: 6436

Conclusion analysis

Good conclusions usually refer back to the question or title and address it directly - for example by using key words from the title.
How well do you think these conclusions address the title or question? Answering these questions should help you find out.

  1. Do they use key words from the title or question?
  2. Do they answer the question directly?
  3. Can you work out the question or title just by reading the conclusion?
  • "China was able to survive its crisis in communism (after 1976) because it went for economic reforms and not political reforms." To what extent is this accurate?

    "In conclusion, it is plain to see that Deng Xiaoping's introduction of economic reform greatly aided China's progress and alleviated the crisis of communism. No political reform was initiated by him but this was the very reason why communism remained intact in China, whilst it was obliterated elsewhere."

  • Over the years some theories have been said to influence the foreign exchange rates - Discuss each of these theories and critically evaluate their significance.

    "The theories covered above are relevant in explaining systematic patterns of exchange rate behaviour or long-run behaviours such purchasing power parity or the Fisher effect. The value of these theories for predicting exchange rates is limited basically for the propensity of the unexpected to happen. The real world is characterised by unpredictable unexpected events or "shocks" that are referred to as news. Interest rates, prices and incomes are affected by "news" and the same is true for exchange rates. Periods dominated by unexpected events will result in great fluctuations in spot and forward exchange rates. Since exchange rates are financial asset prices that respond quickly to new information, news on prices will have an immediate impact on exchange rates. Periods dominated by news, observe exchange rates varying a great deal relative to prices, such as periods as the 1970's the 1980's and he early 1990's, where many unexpected economic events occurred and consequently oil prices rose and debt problems appeared. In conclusion exchange rates will remain volatile, while world political events remain unpredictable and therefore no theory will be able to explain or predict exchange rate fluctuations with complete accuracy."

  • Discuss the role Singapore can play in helping her ASEAN neighbours develop their economies, and how this can benefit Singapore in the long run.

    "In conclusion, the development of the other ASEAN economies benefits Singapore greatly as it creates endless opportunities and opens up new markets and generates employment that tap on the managerial and administrative expertise of Singapore. Strong regional economic performance is definitely desirable for Singapore as it promises a vibrant economy and prevents our economy from stagnating. It also gives foreign investors greater confidence in Singapore and gives us brighter economic prospects. Singapore will also prosper in helping these economies develop because of the business opportunities that they present."

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