HOW THE GOVERNMENT MANAGES THE ECONOMY

Economic Growth

The increase in the production and consumption of goods and services over time, crucial for improving living standards, reducing poverty, and providing employment.

Low Unemployment

Keeping unemployment at a low level, contributing to economic stability and reducing social and economic costs associated with unemployment.

Price Stability

Maintaining a low and stable rate of inflation to preserve the purchasing power of money, avoid uncertainty, and protect savings and investments.

Balance of Payments Stability

Ensuring the country can meet international financial obligations by balancing imports and exports.

Redistribution of Income

Using taxation and government spending to reduce income inequalities, support lower-income households, and provide public goods and services.

Fiscal Policy

Involves government spending, taxation, and the budget deficit to influence the overall level of economic activity.

Expansionary Fiscal Policy

Aimed at boosting economic activity by increasing government spending, reducing taxes, or both, typically used during a recession.

Contractionary Fiscal Policy

Designed to reduce economic activity by decreasing government spending, increasing taxes, or both, often used to curb inflation.

Monetary Policy

Actions taken by the central bank to manage the economy by controlling the money supply, interest rates, and exchange rates.

Supply-Side Policies

Aim to improve the efficiency and productivity of the economy by increasing the quality and quantity of factors of production.

Externalities

Side effects of economic activities affecting third parties, can be positive or negative.

Free Trade

International trade without tariffs, quotas, or restrictions, leading to increased efficiency, consumer benefits, and economic growth.

Free-Trade Agreements (FTAs)

Treaties between countries to establish a free-trade area, promoting economic integration and attracting investment.

Globalization

Increased interconnectedness among countries, facilitating the movement of goods, services, and capital, with benefits and drawbacks.

A strong currency makes __________ more expensive for foreign buyers and __________ cheaper for domestic consumers.

exports; imports

A strong currency typically results in a trade surplus due to cheaper exports

False

A weak currency can help a country achieve a trade surplus by making exports cheaper for foreign buyers.

True

Government policies often involve __________, where achieving one objective might come at the expense of another.

trade-offs

What is a time lag in the context of fiscal and monetary policies?

The delay between the implementation of a policy and its full effects on the economy.

When can time lags occur in economic policy?

After the introduction of policies like tax cuts or changes in interest rates, which may take months or years to affect consumer spending and economic growth.

Who needs to prioritize when economic objectives conflict?

Government policymakers

What is meant by global interconnectedness in the context of globalization?

In the late 20th century, particularly after the Cold War and the establishment of trade agreements.

Who benefits from access to larger markets due to globalization?

Producers and manufacturers seeking to expand their customer base.

What is the advantage of supply chain efficiency for companies?

It allows companies to reduce costs by sourcing materials and labor globally.

When do job opportunities typically arise in developing countries due to globalization?

When foreign direct investment occurs in those countries.

Who faces increased competition as a result of globalization?

Local producers and small businesses

Who may be concerned about the quality of goods produced in lower regulatory standard countries?

Consumers and advocacy groups focused on product safety

Why is sustainability a crucial consideration in globalization?

To ensure that the needs of the present are met without compromising the ability of future generations to meet their own needs

When did multinational corporations begin to significantly drive globalization?

In the late 20th century, especially after the rise of the internet and digital communication

Why are technological advancements crucial for conducting business across borders?

They enhance communication, logistics, and overall efficiency in global operations

Who are the major beneficiaries of increased global interconnectedness?

Both developed and developing countries, as they benefit from trade, investment, and technology transfer

What does the movement of goods, services, and capital across borders facilitate in globalization?

It encourages trade, investment, and economic cooperation between countries

Why do fewer restrictions on trade help global businesses

They lower costs and barriers, allowing businesses to operate more efficiently and expand internationally

Who often suffers from increased competition due to globalization?

Small and local businesses that cannot compete with large multinational corporations

What can increased competition lead to for local produce

Business closures and loss of market share.

Why does globalization lead to job displacement in certain industries?

Companies may outsource jobs to countries with cheaper labor, or automate processes, reducing the need for workers in certain sectors.

Who drives technological advancements that contribute to globalization?

Innovators, tech companies, and multinational corporations that rely on cross-border communication and operations.

What role do technological advancements play in globalization?

They make it easier for companies to operate internationally, enhance communication, and increase the speed of trade and transactions.

When did trade liberalization become a significant factor in globalization?

In the late 20th century, with the establishment of free-trade agreements and the reduction of trade barriers.

What is the main concern with cultural homogenization due to globalization?

The erosion of unique local cultures and traditions as global brands and media dominate