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Title: IGCSE Economics Unit 3
Description: Key terms on money and finance, definitions of different banks, ways of borrowing. Completed and good quality summary
Description: Key terms on money and finance, definitions of different banks, ways of borrowing. Completed and good quality summary
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Money and finance:
Specialization! first step towards a wealthier society ! division of labour
Barter= exchanging one good or service for another! it has three main problems: fixing
a rate of exchange, finding someone to swap with, trying to save up (save some cheese
for a long period of time)
What is money:
• A medium of exchange: a good that is acceptable in exchange of any other good
(don’t have to wait for someone to swap with)
• A measure of value: all products have a price expressed in term of one single
product=money which is a unit of account used to measure and compare the
value of different goods and services
• A store of value: it doesn’t loose its value with time and this makes you have the
possibility to save up money so that you can spend it later on
• A means of deffered (postponed) payment: with money you can leave debts
that you can then pay further on
...
A bank is a financial intermediary, which brings together customers who want to save
money and customers who want to borrow it
...
A bank
then lends money to other customers
...
The services include: deposits of money and savings, helping
customers making and receiving payments, making personal and commercial
loans, buying and selling shares, providing insurance, pension funds, providing
financial and tax planning advice, exchanging foreign currencies
• Credit unions: also known as saving and loans associations ! specialized in
providing mortgages to buy properties
...
• Islamic bank: it is based on the principles of islamic sharia law which forbids
interest charges and payments
...
People who deposit their money here wont be
paid in interest but will instead earn a share of the bank’s profits
...
Its owned by
the government
...
It is the “lender of the last resort” to the banking system (it lends money to banks when
they are in difficulty)
It manages the nation’s gold and foreign currency reserves
It operates the government’s monetary policy (influence price inflation, employment
and economic growth)
The stock market: (=the global market for the buying and selling of government stocks
and company shares)
Stock= money raised by a joint stock company, corporation or government
Companies issue and sell stocks in the form of shares
Shareholder= person or organization that buys and holds shares in a joint share
company
...
! shareholders can sell their shares on a stock market to other investors
Flotation= involves a new company issuing shares for the first time through a stock
market
...
It has preference in the payment of dividends from
profits! they aren’t allowed to vote on company policy
• Common stock (ordinary shares)!they receive a dividend from any profits
remaining after the preference shareholders have been paid
...
! they are repaid
with a fixed rate of interest at the end of term (maturity)! in the mean while
they get sold and when they mature the final holder gets repaid its face value +
interest
...
Occupations and earnings:
People work to earn an income (wages) to be then able to buy goods and services
...
Performance related payments! it may be offered to an individual who is highly
productive (bonus)
...
Benefits of specialization:
Best use of skills and abilities+ improvement on skills by repeatedly carrying out similar
tasks+ skilled employees earn more than unskilled employees because they are more
productive + there is a greater demand for their labour from other firms
...
Labour market is different for every type of occupation
...
Demand for labour= derived demand ! the more goods and services demanded the
bigger the demand for labour
...
As the wage rate raises the demand for labour contracts
...
!
the higher the wage rate the more labour will be supplied
...
However not all individuals will want to work more as the wage rate
increases they might decide to work less hours and to have more free time
...
The following factors can make firms change their demand for labour:
• Changes in consumer demand for goods and services
• Changes in the productivity of labour
• Changes in the price and productivity of labour
• Changes in non wage emplyment costs
The following factors can make labour supply change:
• Changes in the net advantages of an occupation
• Changes in the provision and quality of education and
training
• Demographic changes (changes in the size and age
distribution)
• Wage differentials= differences in wages between
different occupations and emplyees in the same
occupation
...
• Labour immobility (they don’t want to travel) people who travel will earn more
•
•
•
•
•
•
•
Fringe benefits (wages are lower but they have more benefits that compensate)
Why do earnings differ between people doing the same jobs:
Regional differences in labour demand and supply conditions
Length of service
Local pay agreements
Non-‐monetary rewards differ (fring benefits)
Discrimination
The role of trade unions:
Trade unions promote and protect the interests of their members with the purpose of
improving their wages and working conditions
...
Trade unions aims:
Negotiating improvements in and other non-‐wage benefits with employers
Defending employees rights and jobs
Improving working conditions
Improving pay and other benfits (holidays)
Making workers have more participation in business decision making
Supporting members who have been dismissed or are taking industrial action
Developing the skills of union members with training & education courses
There has been a decline in union membership in many developed economies
...
Trade unions argue for improved wages and working conditions if:
Price inflation is high & rising
Other workers have received pay rises
New machinery’s have been introduced in the workplace
The labour productivity of the members has increased
The profits of the employing organisation has increased
Three different types of union representation:
Closed shop! gives the trade union to much power! it can dictate who a firm should
employ + can call all employers of firm on strike
Open shop! a firm can employ both unionized and non-‐unionized labour
Single union agreement! an employer agrees to a single union representing all its
employees
! single union is a problem because it gives the trade union significant barganing
power
...
Industrial disputes can occur when collective barganing fail and in this case employer
and trade union can’t reach an agreement
...
Types of industrial action:
Overtime ban: workers refuse to work more than their normal hours
Work to rule: workers deliberatly slow down production by complying to rules and
regulations
Go-‐slow: workers carry tasks slowly to slow down production
Strike: workers refuse to work + protest + stop deliveries going to the business
...
Disposable income= the income a person has left after income related taxes & charges
have been deducted
...
Consumer confidence: confidence about jobs and future incomes
...
Why do people save?
Saving for consumption: save their money for bigger purchases in the future
...
High= more people save
Consumer confidence: confidence about financial situation
...
Borrowing: consumers may borrow money to increase their expenditure on goods and
services usually for a particular good or service they want
...
! the total stock of
accumulates borrowing by a person is called the personal debt
...
Consumer confidence: confidence about their financial situation
...
Borrowing is not a problem unless you are not able to repay the loan with interest
...
Title: IGCSE Economics Unit 3
Description: Key terms on money and finance, definitions of different banks, ways of borrowing. Completed and good quality summary
Description: Key terms on money and finance, definitions of different banks, ways of borrowing. Completed and good quality summary