LS1-LS3 Booklet

• Key players in the economy:

  • government
  • industry
  • central bank
  • consumers
  • civil society
• Governments make public goods and services such as schools, railways and hospitals
• The government sets rules that economic agents must follow
• The government makes rules that protect the public and promotes positive economic growth
• The government can provide support to businesses through state funding, however private sector funding is much more riskier
• the civil society are groups outside the government and business
• The civil society include trade unions and charities who protest for improved working conditions
• Consumers are buyers of goods and services
• Most economies rely on consumer income
• consumers have a large income on economies
• Industries are businesses that produce goods or services
• Industries tend to focus on domestic markets
• A central bank is responsible for setting interest rates for countries
• A central bank acts as a banker to other banks
• the first modern central bank is the Bank of England
• Key issues for government and economy:

  • economic growth
  • trade
  • inflation
  • employment
• National economies can only produce limited goods and services because are raw materials are scarce due to limited resources and climate
• Some National economies can only produce limited goods and services due to lack of modern technology, especially in underdeveloped countries
• Underdeveloped countries partake in international trade so they can get the goods and services they require
• Employment is important as it is a source of income
• Unemployment leads to social unrest and less people contributing to the economy
• The size of an economy is determined by the amount of goods and services available to citizens
• The size of the economy determines the countries infrastructure like roads and buildings
• the size of the economy determines the quality of a countries public services
• GDP is a measure of the size of an economy
• GDP stands for Gross Domestic Product
• Inflation is the rise in the general prices of goods and services
• Higher inflation means poorer living conditions
• The balance of payments on current account shows the money coming in and out of the country (imports and exports)
• A surplus in the current account shows a strong economy
• Increased economic activity will damage the planet
• Some argue that increases in output and improvements in technology can allow economies to clean up their environments and reduce pollution
• If there are more citizens in poverty, there is less contribution to the economy
• if your yearly income is more than £12750, you pay 20% income tax
• Some argue that inequality in income distribution will motivate workers to gain more income
• Free market = led by private sector. no government
• Governments can set minimum wages and maximum prices on goods to reduce inequality
• Consumer Price Index is a measure of inflation
• Aggregates - total of something e.g total unemployment
• unemployment shows that the factors of production are not being fully utilised in an economy