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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. Economics Commentary 1

    This shift occurs because the determinants of tastes and preferences of the consumer (color and brand label of wine) influence the sales of fine wines. Despite the price of Bordeaux fine wines remaining more or less constant, "the Decanter Bordeaux Index of 1300 wines went up by a staggering 8.5%". Price elasticity of demand is the measure of the responsiveness of a demand change resulting from a price change of the good. The article states that "the Liv-ex 100 wines index, which tracks the prices of 100 fine wines, has risen by 55% in the last year". Diagram 2 As the diagram shows, fine wines are price inelastic in demand.

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  2. GCSE Economics Coursework

    This will mean that there should be an adverse affect on the cash flow of any business. Also another reason of the recent rises in interest rates could be due to the trade cycle. The trade cycle is made up of 4 parts recovery, boom, recession, and slump. At this point, we are currently in a recovery, this means that inflation is rising due to increased demand, to try and curb the increasing supply the Monetary Policy Committee are increasing Interest rates, this will increase savings as there are more rewards, and decrease things such as house loans as they become too expensive.

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  3. What is the effect of an interest rate cut upon multinational corporations?

    There was no real way that they could actually reclaim this money, as the people would be unable to keep up with their mortgage repayments. This sparked huge losses within this industry, with banks that had lots of money lent to the banks who had issued these mortgages, Northern Rock being a bank with money stored up in this market, lost out when the market collapsed and many banks lost billions of dollars. Share indexes fell, with stock prices tumbling due to the huge losses made by banks, drying up investment from these banks, sparking fears of market recession coming from the downturn caused by the collapse of the sub-prime mortgage market.

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  4. Free essay

    different sectors of economy

    For example car industry is all those businesses and people involved in making cars. (Source: www.bbc.co.uk/bitesize) Industry is part of the economy and industries classified into primary sector, secondary sector and tertiary sector which cover all the businesses in UK. All three sectors show that they are linked together and often referred to as the supply chain. The supply chain involves a flow of production and processes through each of the three industrial sectors. (Source: www.thetimes100.co.uk) * Primary Sector Primary industries are those which use the earth's natural resources and produce raw materials for primary products.

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  5. Examining the world through Economic

    Scarcity means that people can not always fulfil their desires. Hence choices have to be made. For example, people have a limited amount of time every day, week or weekend and have to choose how they want to spend their time. Thus having to make choices arises from scarcity. In economics, the issue of choice is subdivided into three questions: * What - to produce? * How - to produce? * For whom - to produce? These basic questions are faced by everyone individual, group, community, business and government.

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  6. Is the UK heading for a recession in the next two or three years?

    This can be illustrated by the supply and demand diagram below. The graph below show how inflation has risen over the last two years, with CPI inflation "2.5 per cent up in February 2008 from 2.2 per cent in January 2008"2. 3 Exchange rates can also show if the UK is heading towards a recession. For example, if the Pound Sterling is stronger than the US dollar (as it as throughout 2007) then the US is less likely to import goods from the UK, yet the UK will still import goods from the US, but at a cheaper price.

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  7. what are the problems of trying to compare living standards

    National income statics are used to compare the living standards of different countries. Apart from the problem of excahnge rate fluctuations overtime between countries being compared, there are a number of other difficulties when making international comparisons. There may be differences not only in the way national income is calculated but also in the reliabilty of the collected data. When comparing living stnadards between or within countries it may be essential to be aware of the population or income earners the main problem that occurs is the lack of people who are willing to take part in the survey or any data that is needed.

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  8. Globalisation in Malaysia

    Today, Malaysia is one of the biggest exporters of hard drives and memory chips across the world (gov.my). Growth, however, contracted during 1997 when Malaysia suffered from the Asian financial crisis, causing rise to unemployment and interest rates. In 1999, the economy began recovering and growth has continued since. At the end of 2008, sales increased in the manufacturing sector (the largest sector in the Malaysian economy) by 13.5% than in 2007. However, the number of people unemployed also rose by 3.1% or 33,826 persons, making the total to 1,065,278 people unemployed at the end of 2008. Malaysia's GDP has been steadily increasing since experiencing a decline in 1997 but experienced a sharp fall from 7.4% in 2006 to 2.1% in 2007, due to a drop in the rate of growth of exports.

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  9. How will Games Workshop fair in the upcoming recession.

    St Albans �36,598 This means that although people will have less money to spend in the recession, they may have enough to spend on warhammer in this area. However I came to the conclusion that the age of people going into the store will have a deep affect on whether the company will survive. Therefore I took a survey of the amount of people who I saw in the shop over a period of an hour on a Saturday, here were the results: This shows that the manager was true when he said the average age was 15-20, I believe

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  10. Free essay

    Economic Commentary

    due to the fall of the oil and commodity prices. This also reduces the consumer's price expectations, therefore decreasing aggregate demand (AD). [See graphs] The effects of this situation are double-sided. The fall in the European inflation rate will hurt people with variable incomes, and benefit people with fixed incomes. Due to the increase in the purchasing power of money, it will hurt borrowers and benefit lenders. As the value of money rises, savings will become more productive; however, it will cause a fall in expectations that reduces investment in the stock market.

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  11. Congestion Charging

    Because people are in congestion for longer, they will use up more petrol due to the congestion and with current petrol prices being very high, people can lose a lot of money. The external cost involved here is the cost of extra petrol used up because of congestion that would not have been used if there wasn't any congestion. This can also add up over a while. There is also an external cost in terms of lost wages because of the amount of time lost and so this can lead to people being less well off and so spending less in the economy.

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  12. business studies nat dip level 3 unit 4

    Job specification 3. Advertisement 4. Application / CV 5. Applicants are short listed 6. Reference are requested 7. Interview 8. Job to be offered 1. A job description is on an advert stating which tasks and responsibilities the job involves. Businesses such as JD Sports do this to inform the employee and so JD Sports is recruiting the right person. This is the first stage of designing and advert; there are two stages before it's actually advertised. Below is a job description, directly copied of their website. Retail Assistant The John David Group Plc has long been established as the leading UK specialised multiple retailer of fashionable branded and own brand sports and casual wear, principally through the growth of its main retail fascia, JD Sports.

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  13. Free essay

    Did the Competition Commission Tame the supermarket giants?

    The heaviest concentrations of its stores were in south-east England and Scotland. Safeway also operated 184petrol filling stations and has a 50 per cent interest in a joint venture with BP, which operates forecourt food stores in some of BP's petrol stations. It was making a huge loss and was fast losing not only its popularity but also its profit and it needed to merge with a large company to improve its image. The following are the supermarkets that were involved in the bid to take over Safeway: Asda Asda was acquired by the US corporation Wal-Mart in June 1999.

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  14. Differences between the standards of living in Slovakia and The Hague

    There are many ways we can measure the standard of living of a nation. One of the important but imperfect ways to measure the standard of living is the level of national income. It is mostly measured in real national income per capita. This is done by dividing the total real national income (GDP or GNP) by the total population of the nation. (http://tutor2u.net/economics/content/topics/livingstandards/measuring_sol.htm) It can be measured also in other ways, such as: - The number of patients per doctor - a measure of health provision in a country - Hospital waiting lists for important operations - The number of children per thousand of the population who die each year (infant mortality rates)

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  15. Taxation Reform in Australia

    $80,001 - $180,000 $18,000 plus 40c for each $1 over $80,000 $180,001 and over $58,000 plus 45c for each $1 over $180,000 From the tables above, a progressive tax system is evident, whereby the higher income earners pay a higher proportionate tax than lower income earners thus achieving vertical equity. An advantage of this is the achievement of a fair system with progressive taxes. This is to allow lower income earners with enough income to purchase necessities such as food and clothing.

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  16. 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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  17. Assess whether a tuck shop is likely to be a successful business if it were to set up in the school.

    Like before, using the profit margin can also be misleading as by giving a percentage of the revenue as the profit does not directly give you an amount. For this I will then use the amount of profit made to be my success criteria. It will be easy, as you simply need to look at the profit margin. However other success criteria can apply to the business being profitable. Method I began my research in order to start my business and I carried out a questionnaire, which was primary market research from which I got the data directly and allowed me to see which questions needed changing or adding.

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  18. It is often argued that buffer stock schemes should be used to control the prices of industrial raw materials such as nickel and tin.

    The diagram below is an illustration of the operation of a buffer stock scheme. The supply curves, S1 and S2 represent the supply of, for example, tin, at the end of two different periods of time. Supply is inelastic since the producers cannot change the quantity that they can supply to the market after a period of time. The organisation wishes to keep price fluctuations within a certain band: it will not allow the price of the product to rise above P max or to fall below P min. if we assume that in one particular year there is a bumper production surge so that S1 is supplied onto the market.

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  19. Tax Policy in Europe

    would not have anything deductable. VAT received from customers is paid to Inland Revenue. The VAT rates for products and services are either 6% (food and medicines), 19% (general rate), or 0% (goods exported from the European Union). In the last case, the VAT would be collected by the country collecting the goods, not the country exporting. Examples of other types of products and services that gets an exemption on VAT are medical services, insurance transactions, and homecare services. However, VATs previously paid on them won't be deducted.

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  20. Argentina Economic Analysis

    Salary Divide in Argentina is a woman's wage is 98% of man's. Government's Role in Society In Argentina, free education is provided to students between 6-14. Similarly, the Australian education system is funded by the Federal Government, by monitored by the State. In 2006 the national education budget was $40.44 billion, comprising 5.8% of the GDP. An extensive system of hospitals and clinics in Argentina is run by national and provincial authorities as well as by private organizations. Medical costs are covered by comprehensive array of insurance plans.

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  21. free enterprise

    We also have the freedom to elect the people who represent our government. Our nation's founders believed that individuals should have freedom of choice and created the philosophy of thee free enterprise system. Free enterprise system encourages individual to start and operate their own business without government involment.The free enterprise system we have today is modified because the government does intervene on a limited basis. There are however restrictions on how and where those businesses may operate. COMPETITION: Businesses that operate in a free enterprise system try to attract new customers and keep old ones.

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  22. economics oil prices

    This will mean that the non-oil markets will grow and expand. This is a form of economic growth. By putting more resources (land, labour and capital) into the non-oil industries, this will takes some of the resources out of the oil companies, so will lose some jobs in the short run. However, in the long run, a lot more jobs will be created in the new industry. Oil is a necessity. This means that the demand curve is very steep. � � P1 P QD Q1 Q This diagram shows that if an oil supplier raised the price from P to P1 the quantity demanded only fall a small bit compared to that of the price rise.

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  23. What are the important elements of International Trade

    If it doesn't and you have purchased more imports than exports this is called a deficit. When you export more than you import this is called a surplus but even if you export more you still have to have more income. E.g. you could export more but the price of imports could come to more than the income of exports meaning that you would be in deficit. So you must make sure that the income of exports is more than the price of imports. The next point that I will cover is, Visible Trade. Visible trade is trade between countries that can be seen, such as raw materials, basic materials including iron and mineral fuels and

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  24. Stick with Steel Tariffs

    to trade if one has a lower relative cost of producing some good. What matters is not the absolute cost of production but the opportunity cost which measures how much production of one good is reduced to produce one more unit of the other good. Comparative advantage is a key economic concept in the study of free trade. 2. Use a supply and demand diagram to show the effects of the US tariff on imported steel. The tariff has the effect of shifting the world supply curve vertically. This will create a redistribution of surplus within the graph.

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  25. brief history on political economy in egypt

    To start off, during the Egyptian revolution of 1953, Egypt's relationship with the United States and Britain deteriorated, because Nasser saw that his success in reaching the economic goals he set for Egypt would clash with their interests in the Middle East region. Therefore, Nasser chose to take the Soviet Union as his super power ally. Such economic targets, hoped for by Nasser, and which are to be accomplished through a social economic system, would in turn need the nationalization of the Suez Canal (to secure a high source of income for Egypt), moreover, would require building the High Dam to help with the prospering plans for Egypt's agriculture.

    • Word count: 1625

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