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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. external influences

    Richer Sounds also offer price beats in their store catalogue. If any customer phones and finds that the same product is sold in any competitor's store or on the web, then Richer Sounds will try and beat any lower price by up to �100 any time up to seven days after purchase. Richer Sound has at least 4 competitors: 1. Argos 2. Dixon's 3. Curry's 4. Comet Competition helps keep prices down The most competitive business will be the most efficient Businesses may be able to reduce costs by using new methods of production e.g.

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  2. 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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  3. GDP and Growth

    There are two types of GDP, 'money' GDP and 'real 'GDP'. 'Money' GDP, known as nominal GDP, measures the value of the output produced in a given year and valued at the price of that year. 'Real' GDP measures the value of the output produced in a given year but valued at the price from the base year. Here is an example, according to the data from the UK National Income Accounts, the 'money' GDP for UK was �953,227million in 2000 and �1,110,296 in 2003, as the 'money' GDP in 2003 was greater than in 2000, it indicates that either

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  4. Free essay

    What are the main characteristics of a free market economy and centrally planned economy?

    In a fixed price system there is minimal incentive because the prices and wages are fixed, which demoralizes the employees, and thus decreases incentives. Nevertheless, the fixed price system also suggest that a greater majority of the society will be able to afford the good or service, and thus, it will be more beneficial for society, and not only those who can afford the good or service such as education and health care. A planned economy can often cause problems with the fact that they can misallocate resources, which means that there will be over production of goods.

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  5. Main characteristics of free market economy

    Essentially, the law of "supply and demand" dominates in a free market which explains and predicts the change in price; quantity supplied and demanded of the good in a competitive market. When equilibrium of price is reached the owners will then distribute the products according to the consumer's utility and purchasing power. The essential component in a free market is that price affecting factors such as taxes, population, income, subsidies and any government interventions are avoided. The term "free market" is related with the laissez-faire economic policy, where businesses and firms are left to run on their own without government intervention.

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  6. Homelessness in Chicago

    Eventually, the city recovered from the fire and became the hub for the meat-packing industry in the United States. However, during the depression of 1893 the city once again encountered an extraordinary amount of people without anywhere to live. The weak economy played a major role in this, but it was the city's industrial growth and position as the hub for the country's railroad system which had the greatest impact. (Slayton) Word spread quickly of the opportunity to make a living in Chicago, and the immigrants were listening. It became a recipe for disaster; there weren't enough jobs for the overwhelming influx of people.

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  7. Explain how economic growth and the operation of a market economy impact on the global environment, and suggest ways in which action could be taken to limit this impact. √

    Indeed, OKv Adam Smith, an economist from the 18th century, introduced the idea of an 'invisible hand` as a metaphor to describe how markets work. He suggested that there are invisible forces (known as market forces) which bring together a buyer and a seller based on how much it costs to produce something and how much people are prepared to pay[S3]. If a business is not competitive in the pricing of goods consumers will go elsewhere to buy (the natural and the social: uncertainty, risk, change.

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  8. Significance of Cotton to the British Industry

    Productivity improvements also continued at an average of 2.1% per annum in the spinning sector and 2.7% in weaving. This incredible expansion can be partly due to the adoption of the factory system. Particularly in the case of the cotton industry, mechanical invention was rife. Machines of ever-increasing sophistication followed one another in an extraordinary succession. The factory system was set up particularly in Lancashire due to its easy access to the port in Liverpool. In addition, a population boom provided for factory owners a large new workforce. Furthermore, the permanently damp climate was ideal for the cotton fibre to remain easily manageable.

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  9. 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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  10. GCSE Applied Business Strand D Theory

    Most of the local competitors of Asda, which do not include competitors that are also national, do not pose a large threat to Asda, as generally these are smaller stores, which offer less competition to Asda. Asda must take into account all of its competitors and must constantly achieve their aims and objectives, whilst maintaining a competitive price and maintaining the quality of the products and services offered Economic conditions Economic conditions can have an effect on even the most well organised and managed of businesses.

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  11. India's Economy: "Goldilocks tests the Vindaloo"

    Demand has also been inflated by an excessively negligent monetary policy. The Indian government, initially was sluggish in reacting to higher prices, and have fractured this year with a series of administrative and fiscal measures, notably "banning wheat exports and lowering fuel taxes; and the Reserve Bank of India (RBI) has tightened monetary policy." Yet the proposal that Indian inflation is controlled can to be based on three universal economic characteristics, which ultimately can resolve the indecision on whether the Indian economy should or shouldn't tighten its monetary policy.

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  12. 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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  13. The Implications for Economy, State and Identity.

    What we have to clarify firstly, before attempting to delve into any form of interpretation, is the definitions of the two most pertinent terms used in Lim's article- Globalization and Place. Globalization is defined as the "major increases in worldwide trade and exchanges in an incrasingly open, integrated and borderless economy"1. This implies that due to the growing economic interdepence of countries worldwide through the increase of cross-border transactions in both goods and services, it is only vital that any country who wants to be a part of the globalized world must fit the part of being proficient enough to be able to contribute sufficiently, and resulting in the advancement of the world economy.

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  14. Paper 2 Practice HL

    Such can be shown on the diagram below: Diagram showing the incidence of an ad valorem tax. Price S2 F E S1 G K C H J D 0 A B Quantity The imposition of an ad valorem tax will shift the supply curve upwards; the higher the price, the greater will be the amount of the tax. As shown by the diagram, the total tax revenue of the government is shown by FHJE. Consumers will pay FG tax per unit whilst the incidence of tax on producers will be HG.

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  15. 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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  16. Compare economics systems(Aus, China and Brazil

    As Australia, Brazil and China are run by a different government and economic system, these problems are solved in various methods. Although China is greatly shifting towards the market economy, the government has a great power over the economy. They operate large State-Owned Enterprises that account for nearly 20 per cent of Chinese output. They carry out an economy by central planning, meaning government do control the entire economic system. But Australia and Brazil are mostly organised through a series of markets involving buyers and sellers of resources and final goods and services.

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  17. Problems with high NZ Dollar

    For example, in Noel Leeming Compaq Laptops have dropped from $1199 to $937, and Mitsubishi fridges form $899 to $629, all in the last week. These bargains, created by the high NZ dollar, can only exist whilst the dollar continues to rise. The high New Zealand dollar is also good for New Zealanders traveling overseas. At the moment they are enjoying the greater buying power of each dollar. DISADVANTAGES It may be argued that the high NZ dollar has greatly impacted our economy, for the worse. Apart from the dairy industry, primary product and manufacturing prices are flat or declining.

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  18. USA 1919 - 1941 Coursework, Question No. 2, Why was there an economic boom in the 1920s?

    They became the fuel America needed for its boom by working to improve America's economy. Without the immigrants there would not be enough people to push this boom of the 1920s forward. America's growing population was encouraged to work hard by the Republican presidents of the time. They introduced the policy of 'Laissez-Faire' which was basically the Republican presidents, specifically Coolidge, Harding and Hoover, leaving the economy to run without government interference. The state did not meddle with business, and in addition, there were low taxes on income and profit so that the American population could retain their money and invest it back into American goods, strengthening the economy.

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  19. In order to effectively analyse Luxury Boats Ltd. and the framework of macro-environmental factors affecting the business, two analytical tools will be used; the PEST Analysis and the SWOT Analysis.

    Under Threats, the external factors that may cause harm to Luxury Boats Ltd will be examined. The key questions which need answering are; how can the company use each Strength, stop each Weakness, exploit each Opportunity and defend against each Threat? MARC MENENDEZ 05260233 PEST Analysis 1. Political * A Socialist government will assist for the economic advancement of the poorer sections of society at the expense of the wealthier groups. 2. Economic * Elections of 2002 return socialist government intent on economic policies designed to assist the poorer citizens at the expense of the wealthy.

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  20. Economics in a European Context Coursework - Monetary Union

    For example, Whiskey is exported from the UK to the EU, the Whiskey is sold to an Italian hotel, who in order to pay for it have to convert their Euros to Sterling. The cost of conversion will be passed onto the consumers in the hotel who may opt for a cheaper drink as a result of the increased cost. To combat this the Whiskey producer may artificially lower their prices so they are able to compete with Eurozone beverage producers, however this would reduce their export revenue.

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  21. Consequences of the Government imposing a "rent ceiling" in the rental accommodation market

    But controls prevent rents from attaching market-clearing levels and shortages result. In May 1976, in a poll in the issue of American Economic review, ninety-eight percent of economists agreed that, "a ceiling on rents reduces the quantity and quality of housing available." Similarly, in June 1988 issue of Canadian Public Policy reported that over ninety-five percentage of the Canadian economists polled also agreed with the statement. Assar Lindbeck asserted, "in many cases rent control appears to be the most efficient technique presently known to destroy a city, except for bombing."(Hazlitt H, n.d.)

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  22. Examine the extent on which stability and Prosperity in Germany between 1925-1929 were dependent on foreign loans??

    These loans came straight from American investors and businesses and went into all aspect of German society - some went into public services, and private businesses like General Motors and General Electric. One such loan that came from the USA was the Dawes Plans. This was headed by Charles Dawes, who established a committee who assessed Germany's financial needs, and composed a structure of loans whose purpose and function would be to ease Germany's financial burden but also provide them with a steady stream of interest and dividends.

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  23. world oil market

    As living standards increase more people are driving which results in greater fuel demands. Furthermore the world economy has grown as economic output has increased which means again more fuel is required, countries like china and India are industrialising at a very fast rate causing the demand for oil to increase sharply. The USA is the worlds biggest oil consumer using up 25% of the world's oil; this is a staggering figure given that the USA only account for 5% of world population, this culture of high fuel consumption is partly due to the cheap price of fuel in America and low taxation as well as relatively high average income.

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  24. mergers and acquisition

    Both mergers and acquisitions can be financed either through the use of stock, cash, or debt, or a mixture of all three, or a combination of two of the three sources of finance. There are three types of mergers and acquisitions between companies: 1. Horizontal integration - occurs as a result of a merger or acquisition involving two companies who operate in the same stage of production in the same line of business. Recent examples include the merger of Granada and Carlton to form ITV plc, and Wm.

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  25. 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.

    • Word count: 3039

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