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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.

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  1. Peer reviewed

    Using AD/AS analysis, describe and illustrate two cases where economy gets stuck in recession and does not return quickly to its natural level of output.

    3 star(s)

    Demand shock In this essay, we assume in short-run, all prices are fixed. Therefore, the aggregate supply curve (SRAS) is horizontal. Also the level of output is determined by the amounts of capital and labour, so in long-run the AS curve (LRAS) is vertical and the output is at its natural level. Suppose there is a increase of the real interest rate and this encourages people to save more instead of spending-causes the decrease of aggregate demand and the AD curve shifts inward from AD1 to AD2(Point A to B).

    • Word count: 572
  2. China and Economic growth, Case Study

    in 2005; and a further 51.1% of the population receiving a smaller income than US$2 per day. This causes the mean years of schooling to be only 7.5 years and an average life expectancy at birth of 73.5 years when in comparison with developed countries. Globalisation has strengthened growth via increased trade and as a result has created more jobs. This has allowed for the amount of people below the poverty line to reduce due to more employment opportunities and in turn, causing the HDI value to rise from 0.368 in 1980 to 0.663 in 2010.

    • Word count: 1327
  3. Research the Causes of financial crisis in 2008 & 2011 and compare those with classical and Keynesian approaches.

    to really believe that sustained strong growth is coming, which is like solving a problem by presuming its solution. Economic meltdown and learning * Unprotected banking system combined with monetary authority and Federal Reserve made the situation to worsen. They didn't understand what to be done, result is banking collapse. The government also failed in money supply and fiscal policy did not worked well. Capital inflows did not sufficiently feed into productive investment, and the competitiveness of economies was not upgraded to assure sustainable growth. Changing the drivers of growth and its sources of financing. IMF forecasts is built on faulty theory Governments have overspending Political and big corporation influence on big banks made it a problem for them to write legislations there on behalf.

    • Word count: 1182
  4. Free essay

    In this case study, I will be doing research on how is Chinas economy growing so crazy, and how it affects the world as well as China.

    has comparable strengths and is poised to remain a global leader: Why is their economy growing so fast? The reason why their economy is growing dramatically, we will have to start from 1978, when the government executed a bunch of strategies for economy reform. These programs are including, encouraged rural enterprises, private businesses, liberalized foreign trade, investment, less control over prices, invested in industrial production, educate their workforce. Their economy had an annual growth of 6% initially, and peak of 17 percent, plus every capital income was quadruple in last 15 years. In 1997, some experts had already predicted that the China economy would sure be bigger than the US in less than 20 years.

    • Word count: 898
  5. Discuss the extent to which rapid economic growth in India and China is beneficial.

    This allows them to gain more revenue which can be distributed in improving areas such as education and healthcare. In China for example a healthcare reform is taking place allowing people on lower incomes to benefit from healthcare. Not only does this lead to that private benefit, a healthier population can be more productive due to increased live expectancy. This is desirable for the economy as it will lead to increased growth over a long period of time. Crime could also lessen as people lower down the social order such as the working class would earn enough removing the incentive to steal.

    • Word count: 623
  6. Economic Systems - free markets and mixed economies.

    The needs of the public are provided by the firms, which are based solely on supply and demand. The market itself chooses the best goods to produce and in return, it will create a win-win situation because it allows both themselves and the people to benefit. People's consuming habits and competition between firms will determine the price of the goods and meet the needs of the public, and firms will have the chance to gain a maximum profit. This can also allow the economy to respond quickly. Under a free-market economy, people who work harder will gain more in return.

    • Word count: 832
  7. 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.

    • Word count: 5479
  8. Outline how consumer sovereignty determines patterns of production in an economy and discuss the factors that influence consumer choice.

    If a product is not sold, it will not continue to be produced. Therefore, buyers ultimately decide what is produced. Consumer sovereignty therefore is important in the role of determining patterns of production in an economy. Through the operation of consumer sovereignty, consumer income levels determine the types of production that occur. As an economy becomes more wealthy and income levels rise, demand for luxury good also rises as well as the production of luxury goods.

    • Word count: 435
  9. he main factors that affect the consumers expenditure are level of income, price of the good or service, the price of substitute and complement goods, consumer tastes and preferences and advertising. and services

    Thus, the consumer the demand of Coke. Thus if there is an increase in price and no change in the amount of income available to spend on the good, there will be an elastic demand will be sensitive to a change in price. Another factor that affects an individuals demand is the price of the good or service itself. For example, if the price of basic food increases, people will reduce their spending on gourmet foods that aren't necessities and staples. The price of substitute and complement goods is also a factor affecting individual demand.

    • Word count: 609
  10. 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.

    • Word count: 4951
  11. Fernando Cardoso and World Economic Crisis

    As� pues teniendo en cuenta ya la cultura financiera de los americanos, podemos revisar que la cuesti�n de las hipotecas si no fue la causa m�s importante para que se generara esta crisis, fue uno de los mayores g�rmenes para su creaci�n. Debido a la poca vigilancia y control que ejerc�an las autoridades financieras Estadounidenses sobre los actores econ�micos del momento se dio inicio a esta burbuja, a trav�s de la compra y venta de las hipotecas inmobiliarias de los millones de Norteamericanos la cuesti�n era una red transacciones donde los inversionistas sedientos por comprar estos t�tulos, as� como intermediarios

    • Word count: 940
  12. Is the Welfare State Desirable?

    These desires fundamentally led to both his and Duncan's downfall. It is also very evident that his ambitions would lead him to do awful crimes and acts of terror which he would never contemplate before. "The Prince of Cumberland a step on which I must fall down or else o'erleap" clearly shows how his ambition had taken control of him and how far he was willing to kill and murder The Prince of Cumberland as before he says "whose murder is yet fantastical", indicating no intentions of murder.

    • Word count: 2437
  13. Goverment spending. How and why the Government spends and how this might affect Tescos.

    Short term money can be raised by buying Treasury bills from the banks which are short term government securities which pay little interest and discounted. If the government wants to pay for long term finances, government bonds will be formed which Is a promise to repay money borrowed after a particular period of time with certain rate of interest. To repay the money back they government will then have to cut back on the money spent, raise taxes or save more money.

    • Word count: 1694
  14. Report on Business Growth

    In 2004, General Motors redirected funds from the development of sedans to development of light trucks and sport-utility vehicles. Soon after this decision, fuel prices increased by 50%, causing GM to start developing hybrid vehicles and introducing the best fuel economy in their vehicles. In 2005, GM promoted sales through a discount to all buyers, to get rid of all 2005 buildup models, before introducing the 2006 models. However, the promotion did not help the company make more profit. General Motors had completely changed its marketing strategy since then. Nowadays all vehicle prices are lowered, but there are very little or none incentives.

    • Word count: 1094
  15. Slatterys is one of many businesses that are affected by the exchange rate, in various different ways. Exchange rates can influence the amount of money, Slatterys has to spend on overseas imports.

    Due to this factor, Slatterys have to import cocoa beans from abroad. However, the exchange rate can determine if Slatterys gains or losses money, e.g. if the pound (�) was strong against the South African Rand (R) this would make it cheaper for Slatterys to buy cocoa beans, however, if the pound was weak against the South African Rand (R), this would make the cocoa beans more expensive.

    • Word count: 384
  16. 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??

    • Word count: 5680
  17. Free essay

    Will The 2012 London Olympics Benefit The UK Economy?

    For this coursework I must understand how the economy would work in this situation with the Olympics. I must understand government cost for this and what type of tourism the Olympics will bring and how tourism of this kind can affect economies on a national and local scale. I must also understand the how the government can create jobs for the economy. The Olympics in theory should be a positive thing for a company because temporary increase in population means that there are more people for the company to offer their services to. "Up to 30,000 construction jobs will have been created on the Olympic site in east London by 2012, according to the Olympic Delivery Authority (ODA)''-http://www.building.co.uk/.

    • Word count: 675
  18. Defining GDP

    = GDP. Each letter represents consumption, investment, spending by government and exports minus imports. Therefore, in order to calculate GDP, it is necessary to know consumption, investment, spending by government, exports, and imports. 4. Recession My definition: When GDP, Gross Domestic Product, decreases, it calls as recession. When recessions exist for a long time, it calls as depression. Economic definition: A period of general economic decline; specifically, a decline in GDP for two or more consecutive quarters.This content can be found on the following page: 5. The income approach to calculate GDP [You tell me which specific things are used for this approach] The formula for Income Approach is compensation of employees +rents + profits + net interest+ non-income adjustments = GDP.

    • Word count: 636
  19. Naked Economics: It Depends

    (Wheelan, pg 77). A simple question but with a complex answer. Consider the banking bailouts issue, should the government bailout banks and financial institutions? Firstly, the US government distorted the market to encourage poorer individuals to take out large mortgages and buy houses. When a few of these people failed to pay off the mortgage, this began the chain of events that led to the foreclosure crisis we see today, this is a perfect example of how a big government took an active role in society and thus failed. However, what would be different if the government had not intervened?

    • Word count: 848
  20. 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.

    • Word count: 4005
  21. Economic Solutions to the Problems Facing Sudan

    Despite the massive scale of Sudan, only 6.8% of its land is arable, making it just about useless for farming, although this is a tactic many other African nations use to make their share of money. They also have a debt of about $29.7 billion, and although the G8 managed to abolish the debts of the 18 poorest countries (of almost 40 billion dollars) to the World Bank and others they have not yet got round to the almost 30 billion dollars owed by Sudan to the variety of banks. This would be the first step to development in Sudan.

    • Word count: 1415
  22. 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.

    • Word count: 6075
  23. Should the government increase spending to get out of a recession?

    People on low incomes general have a high marginal propensity to consume, because more of their income is spent on goods and services need to survive5. Whereas the rich can safely have idle money in bank accounts, gathering interest, and still enjoy luxury goods like that new Mercedes Benz. Therefore, the accumulated revenue from taxation can be used to fund the lives of people on low incomes, in true Robin Hood style. However, I sense a problem. The government does not have an infinite supply of money or materials, because as the basic economic problem states "there are finite scarce resources to satisfy infinite wants" 6.

    • Word count: 1747
  24. World Economic Crisis

    and an excess of houses on the market led to a decline in value of houses across the whole country, and an enormous deficit for banks who then were in ownership of millions of devalued properties. The tightening of banks lending across the globe then followed for fear of instability and protectionist policies were then adapted, freezing the global economy. Due to this lack of confidence on the part of the banks, investors and the consumers a rapid decrease in spending across the whole economy [Jarvis, 2009].

    • Word count: 1210
  25. How has the process of globalisation has affected the Chinese economy?

    However this improvement is not shared evenly across the population, which will be discussed later. As mentioned above, globalisation encourages international trading and economic growth, and China has benefited particularly from this. During the past 30 years the average export levels have increased by 17% annually. This shows that China's international trade levels have increased dramatically due to globalisation. In 2005 China joined the World Trade Organization in response to the globalisation trend and reduced its trade barriers, opening up to foreign investments and international trade. This was beneficial to the economy as it increased opportunities for economic growth through international trade and foreign investments.

    • Word count: 947

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