6.1

Government economic objectives and policies

Cambridge IGCSE Business Studies (0450)  · Unit 6: External influences on business activity  · 10 flashcards

Government economic objectives and policies is topic 6.1 in the Cambridge IGCSE Business Studies (0450) syllabus , positioned in Unit 6 — External influences on business activity , alongside Environmental and ethical issues and Business and the international economy.  In one line: Economic growth is an increase in the level of goods and services that an economy produces. It's often measured by the percentage increase in a country's Gross Domestic Product (GDP) over a period of time, typically a year.

This topic is examined in Paper 1 (short-answer questions, built around a pre-released case study) and Paper 2 (extended case-study analysis).

The deck below contains 10 flashcards — 6 definitions and 4 key concepts — covering the precise wording mark schemes reward.  Use the 6 definition cards to lock down command-word answers (define, state), then move on to the concept and application cards to handle explain, describe and compare questions.

Key definition

'economic growth' and explain one way a government might measure it

Economic growth is an increase in the level of goods and services that an economy produces. It's often measured by the percentage increase in a country's Gross Domestic Product (GDP) over a period of time, typically a year.

Questions this Government economic objectives and policies deck will help you answer

Definition Flip

Define 'economic growth' and explain one way a government might measure it.

Answer Flip

Economic growth is an increase in the level of goods and services that an economy produces. It's often measured by the percentage increase in a country's Gross Domestic Product (GDP) over a period of time, typically a year.

Key Concept Flip

Explain the term 'low unemployment' and why it is an important government objective.

Answer Flip

Low unemployment means a high percentage of the workforce has jobs, indicating a healthy economy. It's important because it reduces poverty, increases tax revenue for the government, and boosts consumer spending.

Definition Flip

What is 'inflation' and how does it affect businesses?

Answer Flip

Inflation is a sustained increase in the general price level of goods and services in an economy. It can increase business costs, reduce consumer spending if wages don't keep pace, and create uncertainty for investment decisions.

Definition Flip

Define 'balance of payments' and explain what a deficit indicates.

Answer Flip

The balance of payments is a record of all financial transactions between one country and the rest of the world. A deficit means a country is importing more goods, services, and capital than it is exporting.

Definition Flip

What is 'fiscal policy'? Give an example of its use.

Answer Flip

Fiscal policy involves the government using taxation and government spending to influence the economy.

Example: increasing government spending on infrastructure projects during a recession to stimulate demand.
Key Concept Flip

Explain how changes in 'taxation' can impact consumer spending.

Answer Flip

Increasing income taxes reduces consumers' disposable income, leading to decreased spending. Conversely, decreasing taxes can increase disposable income and boost spending.

Example: a VAT cut might reduce prices.
Definition Flip

Define 'monetary policy' and give one example of how it's implemented.

Answer Flip

Monetary policy is the manipulation of interest rates and the money supply to influence economic activity. It's implemented through actions such as raising or lowering interest rates by the central bank.

Key Concept Flip

Explain how changes in 'interest rates' affect business investment.

Answer Flip

Higher interest rates make borrowing more expensive, discouraging businesses from taking out loans for investment. Lower rates encourage borrowing, making investment more attractive.

Example: expansion of a factory.
Definition Flip

What are 'supply-side policies'? Give one example.

Answer Flip

Supply-side policies aim to increase the productive capacity of the economy. An example is government investment in education and training programs to improve the skills of the workforce.

Key Concept Flip

Explain how a weaker 'exchange rate' might affect a country's exports.

Answer Flip

A weaker exchange rate makes a country's exports cheaper for foreign buyers, potentially increasing demand and boosting export sales.

Example: UK goods becoming cheaper for US consumers.

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5.5 Analysis of accounts 6.2 Environmental and ethical issues

Key Questions: Government economic objectives and policies

Define 'economic growth' and explain one way a government might measure it.

Economic growth is an increase in the level of goods and services that an economy produces. It's often measured by the percentage increase in a country's Gross Domestic Product (GDP) over a period of time, typically a year.

What is 'inflation' and how does it affect businesses?

Inflation is a sustained increase in the general price level of goods and services in an economy. It can increase business costs, reduce consumer spending if wages don't keep pace, and create uncertainty for investment decisions.

Define 'balance of payments' and explain what a deficit indicates.

The balance of payments is a record of all financial transactions between one country and the rest of the world. A deficit means a country is importing more goods, services, and capital than it is exporting.

What is 'fiscal policy'? Give an example of its use.

Fiscal policy involves the government using taxation and government spending to influence the economy.

Example: increasing government spending on infrastructure projects during a recession to stimulate demand.
Define 'monetary policy' and give one example of how it's implemented.

Monetary policy is the manipulation of interest rates and the money supply to influence economic activity. It's implemented through actions such as raising or lowering interest rates by the central bank.

More topics in Unit 6 — External influences on business activity

Government economic objectives and policies sits alongside these Business Studies decks in the same syllabus unit. Each uses the same spaced-repetition system, so progress in one informs the next.

6.2 Environmental and ethical issues

10 flashcards
6.3 Business and the international economy

10 flashcards

Cambridge syllabus keywords to use in your answers

These are the official Cambridge 0450 terms tagged to this section. Mark schemes credit responses that use the exact term — weave them into your answers verbatim rather than paraphrasing.

government economic growth low unemployment low inflation balance of payments fiscal policy taxation government spending monetary policy interest rates supply-side policies exchange rate

Key terms covered in this Government economic objectives and policies deck

Every term below is defined in the flashcards above. Use the list as a quick recall test before your exam — if you can't define one of these in your own words, flip back to that card.

'economic growth' and explain one way a government might measure it
'inflation' and how does it affect businesses
'balance of payments' and explain what a deficit indicates
'fiscal policy'? Give an example of its use
'monetary policy' and give one example of how it's implemented
'supply-side policies'? Give one example

How to study this Government economic objectives and policies deck

Start in Study Mode, attempt each card before flipping, then rate Hard, Okay or Easy. Cards you rate Hard come back within a day; cards you rate Easy push out to weeks. Your progress is saved in your browser, so come back daily for 5–10 minute reviews until every card reads Mastered.