Term Definition
Free enterprise Producers will supply the goods that consumers want. Most choices are made by individuals and entrepreneurs with little goverment interference
Centrally planned economy Goverment decides what good are to be produced and individuals have little say ( North Korea )
Mixed economy Have goverment intervention through law but also have numbers of private busnisses. The goverment makes decisions that affect business but individuals are free to choose the goods and services the produce/sell ( Ireland )
Factors of production Land, Labour, Capitol, Enterprise
Land All things supplied by nature for producing goods and services/ eg Oil
Labour People employed to produce the goods and services. eg Engineers
Capital Man made items used in the production process. eg Tools and Machinery
Enterprise Someone is willing to take a risk, pulling the other three factors together, by setting up a business. eg Bill Gates
Economic growth When the total amount of goods and services produced in a country increases from one period to the next
Inflation General increase in the price of goods and services over a certain period of time
Cost push inflation Increase in taxes, oil, wages, interest rates causes an increase in the cost of producing goods and therefore an increase in price
Demand pull inflation Excessive demand in the market. Demand is greater than supply therefore prices rise
Advantages of low inflation Economic growth is aided, Goods can be produced more cheaply and are easier to sell abroad,
Benefits of low inflation Prices in shops are more testable, easier to plan and budget, value of savings is protected
Benefits of low interest rates in our economy Mortgages and loans will be cheaper, Encourages business investment , Increases consumer spending, Reduces business costs, Reduces the cost of servicing the national debt
Privatisation Sale of a state owned company to private buyers/investors
Nationalisation The purchase of private business by the state. The state now owns the business.
Gross National Product Measures the total amount of goods and services produced in a country in a year
Consumer Price Index Official measure of inflation. Calculated by the CSO.
CPI Consumer Price Index
GNP Gross National Product
The payment for land is Rent
The payment for labour is Wages
The payment for capital is Interest
The payment for enterprise is Profit