Economics Past Paper Stuff

What is meant by the term tariff?

A tax placed/levied on imports.

What is a quota?

A limit placed on the number/volume of imports.

What is an embargo?

A complete ban on certain goods or goods from a particular country being imported.

What is a subsidy?

A payment by the government to domestic firms to help them compete.

What are high safety/quality standards?

A set of criteria which imported goods must meet.

What are soft loans?

Loans from the government to domestic firms at very low interest rates.

What are administrative barriers?

Bureaucracy/paperwork which must be completed by importers.

What is discrimination in trade?

Governments deliberately favouring domestic producers for domestic contracts despite foreign firms being cheaper.

Why might countries place a tariff on Spanish vegetables?

To reduce imports, make imports more expensive, increase government revenue, retaliate against Spain, prevent dependence, protect an infant industry, protect domestic jobs, improve competitiveness, or protect a strategic industry.

What is a possible impact on Spanish exporters of high volumes of customs paperwork?

Increased administrative costs, reduced volume of exports, increased delivery time, and decreased demand due to perishability.

What is meant by the market for vegetables?

A situation where buyers and sellers of vegetables come together to agree on a price and make an exchange.

What happens to the market for Spanish vegetables during bad weather?

Supply decreases, leading to a higher price and lower quantity available.

What are two of Scotland's main industries?

Oil and whisky.

How do entrepreneurs contribute to the Scottish economy?

By creating jobs, increasing tax revenue, raising GDP, increasing exports, improving productivity, fostering innovation, and providing new products.

What are three economic aims of the UK Government?

Low/steady inflation, low unemployment, and economic growth.

What is the term interest rate?

The cost/price of borrowing; the return for saving; the percentage charged by a bank on a loan.

What are the effects of a decrease in interest rates on borrowers?

Decreases the cost of borrowing, incentivizes borrowing, decreases mortgage repayments, and makes housing more affordable.

How is unemployment measured in the UK?

Through the Claimant Count and the Labour Force Survey (LFS).

What are the effects of unemployment on individuals?

Reduced income leads to a lower standard of living, inability to meet spending commitments leads to poverty, loss of skills makes it harder to find work, and social consequences include increased crime and worsening health.

What are the effects of unemployment on firms?

Lack of demand leads to loss of sales revenue and potential business failure, may force reduction in staffing levels and pay redundancy costs, labour becomes de-skilled and less efficient, and increased pool of labour allows firms to choose high-quality staff.

What is one way the government could increase economic growth?

Improve quality/quantity of resources.

What is another way the government could increase economic growth?

Invest in technology infrastructure.

What is a third way the government could increase economic growth?

Allow working age immigration.

What distinguishes direct taxes from indirect taxes?

Direct taxes are levied on income and wealth, while indirect taxes are on expenditure and collected by intermediaries.

Give an example of a direct tax.

Income Tax.

Give an example of an indirect tax.

Excise duties.

What was one reason for the fall in government income from VAT in 2020/21?

Businesses were closed, so no sales were made.

What is capital spending?

Long-term spending on non-current assets or infrastructure.

What is current spending?

Day-to-day spending on wages or consumables.

Give an example of government capital spending on health.

Building a hospital.

Give an example of government current spending on health.

Paying healthcare staff wages.

What are two ways to save which would gain interest?

Instant access savings accounts and regular savings accounts.

Why should an individual prepare a budget for their personal finances?

To identify cash left over for future purchases.

What is occupational mobility?

The ability of workers to change work skills.

What is geographical mobility?

The ability of labour or resources to move location.

What is the return for land in factors of production?

Rent.

What is the return for labour in factors of production?

Wages.

What is the return for capital in factors of production?

Interest.

What is the return for enterprise in factors of production?

Profit.

What change occurs in the supply of strawberries when there is an extension of supply?

The quantity supplied has increased.

What are three factors that can decrease the supply of strawberries?

Poor weather, rise in costs of production, and removal of subsidies.

How does an increase in the price of motorbikes affect the quantity demanded?

It causes a contraction of demand and a fall in quantity demanded.

What are factors, other than price, that might affect the demand for motorbikes?

Consumer preferences, income levels, and availability of substitutes.

What are the benefits of international trade for individuals?

Greater choice/variety and cheaper prices.

What are the benefits of international trade for firms?

Bigger markets for economies of scale and lower raw material prices.

What are the benefits of international trade for governments?

Imports can meet shortages and create jobs in export firms.

What is the exchange rate?

The price or value of one currency in terms of another.

How does a fall in the exchange rate affect a UK importer?

The importer pays more Sterling for foreign currency, making imports dearer.

What is nominal income?

Income excluding the effect of inflation; the actual amount of cash available to spend.

What is real income?

Income including the effect of inflation; the purchasing power of income.

What happens to nominal income when wages increase by 5%?

Nominal income increases from £100 to £105.

What happens to real income when inflation is 7% and wages increase by 5%?

Real income decreases due to reduced purchasing power.

What are the steps to measure inflation in the UK?

1. Complete Living Costs and Food Survey. 2. Assign weights to items. 3. Gather prices from retailers. 4. Compare prices against a base year. 5. Calculate average percentage change.

Why does the government spend on health?

To provide free access for those who cannot afford private care.

Why does the government spend on education?

To create an employable/productive workforce.

Why does the government spend on defence?

To maintain secure borders and deter invasion.

What are reasons a UK business may locate in a foreign country?

Cheap land, lower wage costs, access to new markets, and government incentives.

What is a characteristic of a developing economy?

Low GDP per capita.

What is a characteristic of an emerging economy?

Rapidly increasing GDP.

What is capital aid?

Providing machinery or equipment.

What is emergency aid?

Providing food/shelter in response to a disaster.

What is bilateral aid?

Aid given by one government directly to a recipient country.

What trend in inflation was observed from January to July 2022?

Inflation rose from 5.5% to 10.1%.

What happened to inflation from July to August 2022?

Inflation fell from 10.1% to 9.9%.

What is the implication of a positive inflation rate?

Prices are rising, even if the rate itself is falling.

What effect does an increase in the UK rate of inflation have on raw materials?

The cost of raw materials increases, raising production costs.

How might firms respond to increased production costs due to inflation?

Firms may increase prices to maintain profit margins.

What happens to consumer spending during inflation?

Consumers spend less on non-essentials, leading to lower demand.

How does inflation affect UK exports?

UK exports become more expensive and less competitive abroad.

What are three determinants of demand for home furnishings?

Change in taste/fashion; change in income levels; successful advertising campaigns.

What is the effect of a weak Sterling on UK exports?

Overseas buyers get more Sterling for their currency, making UK exports cheaper and more attractive abroad, increasing demand for exports.

What are advantages of international trade for UK households?

Greater choice/variety of goods; ability to buy products not produced in the UK; lower prices due to global competition; increased quality; creates employment in exporting firms.

What is economic growth?

An increase in total output over a period of time; an increase in real national income/GDP.

What are two economic aims of a government?

Low level of unemployment; equal distribution of income.

What are the reasons for scarcity in economies?

Resources are limited while human wants are unlimited; scarcity is a universal problem.

What is an example of opportunity cost for a government in a developing country?

Choosing to build a school instead of a road; the road is the opportunity cost.

What is a multinational company?

A firm that has its headquarters in one country and operates in at least one other country.

What is effective demand?

The quantity of a good which consumers are willing and able to buy at a particular price.

How does a successful advertising campaign affect the price of a new product?

Increased awareness leads to higher demand, which puts upward pressure on the price.

Why does a supply curve slope upwards from left to right?

At higher prices, producers make more profit per unit and are therefore willing to supply more.

What is the impact of taking out a mortgage on an individual?

Monthly repayments reduce discretionary income; failure to pay can result in loss of home; individuals become property owners.

What is a transfer payment?

When the government provides income to people without receiving an economic activity in return.

What are public goods?

Non-excludable and non-rivalrous goods, such as street lighting and defense.

What are merit goods?

Goods that provide external benefits and are under-consumed if people have to pay full price, such as education and healthcare.

What is the level of unemployment?

The total number of people who are unemployed and actively seeking work.

What is the rate of unemployment?

The number of people unemployed expressed as a percentage of the working population.

What does a fall in the standard of living mean?

A decrease in the quantity/quality of goods and services available to an individual.

What is a recession?

Two consecutive quarters of negative economic growth.

What are causes of unemployment?

Cyclical: downturn in the trade cycle; Structural: changes in the economy mean certain industries are no longer required.

What are the four types of unemployment?

Structural, Seasonal, Frictional, Technological.

What is one effect of unemployment on the UK government?

Loss of tax revenue.

Why do firms have to make choices?

Firms have limited resources and must choose to produce the products that generate the highest profit.

How does a fall in the value of sterling against the Euro affect a UK holidaymaker?

The holidaymaker gets fewer Euros for their Pounds, decreasing their spending power.

What is one example of a direct tax?

Income tax.

What is one example of an indirect tax?

VAT.

What are features of an indirect tax?

Levied on goods and services; collected by a third party; included in the final price.

Name one tax that could be classified under 'other taxes'.

Council tax.

What factors could increase the demand for electric/hybrid cars?

Successful advertising, fall in price of electricity, rise in price of petrol/diesel.

What are possible ways a government could raise revenue from motorists?

Congestion charges, toll roads, pay-per-mile road pricing.

What happens to the price of a good following a shortage?

Demand is greater than supply, causing consumers to bid up the price.