economic issues

Question 1

growth analysis

Answer 1

• increase in national output
• lower unemployment
• better living standards

Question 2

boom analysis

Answer 2

• economy has reached peak output
• excessive spending
• businesses unsure about future
• rapid inflation
• low supply of labour

Question 3

recession analysis

Answer 3

• decrease in national output
• fall in demand
• increased unemployment

Question 4

slump analysis

Answer 4

• long period of recession
• high unemployment
• difficult period for firms

Question 5

changes in employment impact

Answer 5

• increased unemployment means easier to employ staff as wider pool candidates
• no need to pay high wages
• workers have increased incomes so can pay for businesses products

Question 6

rapid inflation impact

Answer 6

• increased costs of production
• passed on as increased prices
• could see loss of demand

Question 7

increased national output impact

Answer 7

• increased incomes as higher production
• people can afford to spend
• reflects increasing demand

Question 8

low inflation impact

Answer 8

• rapid inflation will reduce people’s purchasing power
• rising domestic prices means people buy imported products which are cheaper
• fall in demand for local products leads to lower wages, less expansion, less employment and lower living standards

Question 9

low employment impact

Answer 9

• unemployed people do not contribute to the output of an economy
• the government must pay unemployment benefits as these people have no incomes
• this leads to lower outputs and decreased living standards

Question 10

economic growth impact

Answer 10

• falling output means less employees required so increased unemployment
• this means lower incomes and decreased standards of living
• this means businesses cannot expand

Question 11

balance of payments impact

Answer 11

• nation would have to borrow as they have exceeded their limit of spending
• the value of currency will decline meaning less goods and services can be purchased from abroad

Question 12

impact of increased government spending

Answer 12

• increased economic growth
• increased output
• increased employment
• increased tax & revenue generated
• increased standard of living

Question 13

increased income taxes impact

Answer 13

• increased taxes means lower disposable income so less spending
• lower sales due to lower demand means decreased production
• this leads to unemployment and its consequent effects

Question 14

increased corporate taxes impact

Answer 14

• less money available to fund expansion plans
• less money to pay to shareholders as dividends
• employees unable to get a pay rise which affects the motivation of the workforce

Question 15

indirect taxes impact

Answer 15

• prices of products increase
• lower demand and sales
• lower production
• employees start demanding more money to afford higher prices

Question 16

import tariffs impact

Answer 16

• prices of imports more expensive
• demand for locally produced goods increases
• if businesses import raw materials they will face increased costs of production
• this will lead to increased prices
• other countries may also start to introduce these tariffs

Question 17

import quota impact

Answer 17

• protect competition from foreign countries
• protect employment

Question 18

interest rates impact

Answer 18

• reduced profits for businesses that have taken out bank loans
• owners delay expansion plans because cost of borrowing capital for expansion has increased
• fewer entrepreneurs would start new businesses as the capital for this is now more expensive to acquire
• fall in demand as fewer customers borrow money to spend on goods and services
• increase in demand for currency as foreigners can earn money from depositing

Question 19

currency appreciation/depreciation impact

Answer 19

• prices of domestic products higher/lower than foreign products
• demand falls/rises from both local and foreign customers
• businesses that import raw material will see decreased/increased costs of production