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Econ April assessment - Coggle Diagram

- - - - Marginal propensity to consume MPC: income may increase but MPC doesn't increase at the same rate, eg MPC will be less than one
      - change in consumption/ change in income
    - - Tastes and attitudes: in todays society there is a higher drive to be materialistic, therefore, consumption tends to increase
      - Interest rates; more expensive goods are bought through borrowing, if interest rates are high them people are less likely to borrow -> decrease in consumption
      - Distribution of income: those who have higher incomes are more likely to save more than those on lower incomes, if the distribution moves from rich to poor, then it is likely that we see an increase in consumption because lower income groups have a higher MPC
  - - - Increase in demand -> firms get close to full capacity -> firms invest to increase their capacity
      - Limitations: There are time lags in investment, firms do not respond to small changes in demand,
    - - Effects how likely businesses and consumers are to invest or consume
      - Affected by house prices: if house prices ^ then Cc ^
    - - Regulation: governments can influence investment through things like subsidising technological development for example, However they can discourage investment through strong regulation
      - Technological change: development in tech can help to decrease the costs of production, this will increase the profitability of the businesses
      - Interest rates; most investment is done through borrowing, therefore if interest rates are high a business will have to have confidence in their expectations before they invest
  - - - Can be linked to the Laffer curve, taxes can only be increased to a certain point until they stop making as much revenue. this can be because (e.g) people lose the incentive to work as they gain less from it and therefore choose not to work and claim benefits instead
- - - - Absolute poverty
      - Relative poverty
- - - - Free trade
      - Tariffs
      - Quota: Restricting the amount that can be imported
      - Embargo: complete ban on certain imports of goods and services or imports from a certain country
      - Export subsidies: Government subsidise exporting businesses to increase their incentive and exports
- - - - Agricultural products are usually the primary source of income for developing countries. These can easily affect the countries economy if there is a bad harvest
      - Natural disasters can wipe out products
      - They have a low income elasticity of a demand, as people get wealthier they don't increase the amount they purchase
      - Not all products have a low income elasticity of demand e.g diamonds
      - Countries such as Saudi Arabia grew their economy off of oil, a primary product
      - primary products tend to have inelastic demand and supply therefore a change in demand or supply can lead to massive price fluctuations and therefore is not sustainable for and economy to grow off of
        
        due to the country's fluctuating income it is hard to create an investment plan to be able to develop, also peoples income falling rapidly means that producers can easily fall into poverty
    - - Developing countries have lower incomes and thus they save less. This means there is less money for banks to lend, reducing borrowing and thus reducing investment/consumption
      - the savings rate in Africa is around 17% of GDP, compared to an average of 31% in middle income countries
    - - This is when exports from a developing country are too low compared to imports to finance the purchase of investment or other goods from overseas required for economic growth
      - Ethiopia in 2018, public debt was around 60% of GDP, most of it in foreign currency so it is possible that they will not have enough foreign currency to repay their debt.
    - - Developing countries have high population growth which limits economic development, as the population grows by 5% so should the economy