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. Inflation persistent increase of consumer prices or persistent decline in purchasing power of money ( caused by increase in available currency and credit beyond the proportion of available goods and services) Employment / Unemployment amount of people at work. Balance of payment difference between all imports and exports of a country.
Surplus total value of exports exceeds the amount of imports Deficit total value of imports exceeds the total value of imports
Economic objectives
Stable prices Steady and sustained economic growth Low unemployment Balanced balance of payments
The economy tends to experience different trends. These trends can be categorised as the trade cycle (business cycle), and may feature boom, slump, recession, recovery.
Boom - period of fast economic growth.
Due to increased demand output is high. Unemployment is low. Business confidence is high due to increased investment Consumer confidence may lead to extra spending
Recession a period where economic growth slows down and the level of output may actually decrease.
Unemployment is likely to increase Firms may loose confidence and reduce investment Individuals may save rather than spend
Business produce more goods Businesses invest in more machinery Consumers spend more money. There is a feel good factor Less money is spent by the government in unemployment benefits More money is collected by the government in income tax and VAT Price tend to increase due to extra demand
Businesses cut back on production Some business may go bankrupt Consumers spend less money. Fall in feel good factor Individuals may lose their jobs More money is spent by the Government on unemployment benefits Less money is collected by the Government in income tax and VAT Prices start to fall
Every market suffers from business cycles. A business cycle consists of fluctuations of total production, or GDP, accompanied by fluctuations in the level of unemployment and the rate of inflation Governments attempt to modify fluctuations in the business cycle through,
Control of taxes and government spending Ability to control quantity of money in the economy
The national government may reduce taxes in a recession - in the hope that people will increase spending and thus raise GDP.
In a recession, the central bank may increase the quantity of money more rapidly, to help to bring the economy out of it. When inflation is high the central bank will reduce the rate of money growth with the aim of reducing inflation Government cannot control the economy perfectly. Some time it can worsen the business cycle.
Government Intervention
Objective of the government is,
To achieve satisfactory and stable growth Controlling inflation Controlling value of the currencies
Growth is important as it enhances general economic well being and provides for high levels of employment and changes in household wealth. Wealth value of assets owned by consumers. Eg. Houses and shares.
Monetary Policy
Regeneration is the term used to describe the process of redevelopment in an area that has suffered decline perhaps due to structural changes in the economy. It can be applied to urban or rural areas Market economies are dynamic and constantly changing. Where the rate of existing jobs exceeds the rate of creation of new ones, a local area will suffer economic decline. Figure 9.1- pg 187
If this pattern continues local area will become depressed or deprived Like at the national level, localised recession can turn in to a long depression. Regeneration is therefore about replacing the gap left by declining industries by implanting new centres of economic activity. Leisure, recreation and tourism projects can provide a popular focus the regeneration
Local jobs - at the construction stage of a new project Local jobs when the new project are commissioned Leisure projects attract spending from outside local area
Local economic benefits from an investment in tourism can be both short term and long term 2012 London Olympics an example Pg 188
What are the short term and long term economic benefits from the 2012 London Olympics?
Pro-Poor Tourism (PPT) is tourism that result in increased net benefits for poor people. PPT is an approach to tourism development and management. ( it is not a specific product or a niche sector) It enhances the tourisms contribution to poverty reduction. It enhances the linkage between tourism business and poor people So that poor people can participate more effectively in product development (in tourism)
Pro-poor tourism is regular tourism except it consciously benefits the poor and helps reduce their poverty
Pro-poor tourism can include, Hotels that train local people for future jobs Local handicraft sales Wages and health services for local staff Health services for local staff Respect for local land ownership and boundaries Consultation with local groups before development
More money re-circulates in a community when people buy from locally owned and operated independent businesses, rather than nationally owned businesses. A market place of many small businesses helps to ensure more innovation and competition , and lower prices over the long term. Independent businesses, choosing products based on what their local customers need and desire, guarantee a more diverse range of products and service choices . Pg 190.