Econ paper 2

• Why are positive externalities less consumed?

  People think more so about the personal gain rather than external.
• What does fiscal policy control?

  Government expenditure and taxation.
• Why does smoking have inelastic demand?

  It is habitually consumed- nicotine is addictive
• How is market failure often corrected?

  Through the decreasing of negative externalities OR increasing of positive externalities.
• Inflation


  Influences interest rate
• Increased inflation


  May lead to an increase in the interest rate
• Interest rate


  The reward for saving, and the cost of borrowing
• Investing


  • Spending on capital goods/ factors of production
• Spending


  • The simple purchase of goods and services
• Benefits of increased spending on healthcare


  • Positive externalities of skill
  • Influences rise in AD
• Costs of increased spending on healthcare


  • Time lag as it is a SS policy
  • Opportunity cost of money being spent elsewhere- eg. healthcare
• Financial sector


  • Provides loans for investment
  • Firm may have retained profits
• Retained profits


  Left over profits after all costs
• Definitions


  • Disinflation- inflation occurring at a slower rate
  • Inflation- sustained rise in the average price level
  • Economic growth- a period of increased real GDP
  • Real income- income when adjusted for inflation
  • Nominal GDP- GDP unadjusted for inflation
  • Occupational immobility- barriers to FOP mobility (changing jobs)
  • Balance of payments- record of all financial transactions over a period of time between one country and the rest of the world