# Relationship Between Balance Sheet and Income Statement

The relationship between balance sheet and income statement is that the profit of the business shown in the income statement, belongs to the owners and this is shown by a movement in equity between the opening and closing balance sheets of the business.

Suppose the business starts off with the owner injecting cash of £600 into the business bank account. The opening balance sheet is shown below, the business has an asset of cash of £600, and the owners equity in the business is £600.

The business now trades for an accounting period. It buys goods costing £500 for cash and sells them on credit to customers for £800.

In balance sheet terms, the asset of cash has fallen by the amount we paid to the supplier £500, and the closing cash balance is £600 &#8211; 500 = £100.

The accounts receivable have increased by £800 which is the amount due from the customers, and the closing accounts receivable is £0 + 800 = £800.

Using this information the business can now produce a closing balance sheet, shown below.

Because the net assets are now £900, to maintain the accounting equation, and make the balance sheet balance, the equity must also be £900.

If we now add another column to show the movement on the balance sheets we get the following.

Two of the movements can be explained. The movement on cash is -£500, the amount paid to the supplier. The movement on accounts receivable is £800, the amount invoiced and outstanding from customers. However, to make the balance sheet balance there has to be a movement on equity of £300, which needs to be explained.

The explanation for the movement in equity lies in the relationship between balance sheet and income statement. If we now look at the income statement for the period we see the following.

The income statement reflects the fact that the business sold goods costing £500 for £800 and made a profit of £300. The profit belongs to the owners and increases the owners equity by £300. This increase is the same as the movement in equity between the opening and closing balance sheets.

So the relationship between balance sheet and income statement is that the profit for the period which comes from the income statement, represents the movement on equity which is the difference between the opening and closing equity in the balance sheets of the business.

# Английский язык: Учебные задания по профессионально-ориентированному чтению

Учебные задания содержат материал для профессионально-ориентированного чтения и предназначены для студентов первого и второго курсов вечерней формы обучения по специальностям "Экономика9quot; и "Менеджмент9quot;. Учебные задания подготовлены кафедрой иностранных языков и рекомендованы к изданию редакционно-издательским советом Санкт-Петербургского государственного университета аэрокосмического приборостроения.

Изображения (картинки, формулы, графики) отсутствуют.

# Chapter 8. The Propensity to Consume: I. The Objective Factors

WE are now in a position to return to our main theme, from which we broke off at the end of Book I in order to deal with certain general problems of method and definition. The ultimate object of our analysis is to discover what determines the volume of employment. So far we have established the preliminary conclusion that the volume of employment is determined by the point of intersection of the aggregate supply function with the aggregate demand function. The aggregate supply function, however, which depends in the main on the physical conditions of supply, involves few considerations which are not already familiar. The form may be unfamiliar but the underlying factors are not new. We shall return to the aggregate supply function in Chapter 20, where we discuss its inverse under the name of the employment function. But, in the main, it is the part played by the aggregate demand function which has been overlooked; and it is to the aggregate demand function that we shall devote Books III and IV.

The aggregate demand function relates any given level of employment to the &#8220;proceeds&#8221; which that level of employment is expected to realise. The &#8220;proceeds&#8221; are made up of the sum of two quantities &#8212; the sum which will be spent on consumption when employment is at the given level, and the sum which will be devoted to investment. The factors which govern these two quantities are largely distinct. In this book we shall consider the former, namely what factors determine the sum which will be spent on consumption when employment is at a given level; and in Book IV we shall proceed to the factors which determine the sum which will be devoted to investment.

Since we are here concerned in determining what sum will be spent on consumption when employment is at a given level, we should, strictly speaking, consider the function which relates the former quantity (C) to the latter (N). It is more convenient, however, to work in terms of a slightly different function, namely, the function which relates the consumption in terms of wage-units (Cw) to the income in terms of wage-units (Yw) corresponding to a level of employment N. This suffers from the objection that Yw is not a unique function of N, which is the same in all circumstances. For the relationship between Yw and N may depend (though probably in a very minor degree) on the precise nature of the employment. That is to say, two different distributions of a given aggregate employment N between different employments might (owing to the different shapes of the individual employment functions &#8212; a matter to be discussed in Chapter 20 below) lead to different values of Yw. In conceivable circumstances a special allowance might have to be made for this factor. But in general it is a good approximation to regard Yw as uniquely determined by N. We will therefore define what we shall call the propensity to consume as the functional relationship &#&67; between Yw a given level of income in terms of wage-units, and Cw the expenditure on consumption out of that level of income, so that

The amount that the community spends on consumption obviously depends (i) partly on the amount of its income, (ii) partly on the other objective attendant circumstances, and (iii) partly on the subjective needs and the psychological propensities and habits of the individuals composing it and the principles on which the income is divided between them (which may suffer modification as output is increased). The motives to spending interact and the attempt to classify them runs the danger of false division. Nevertheless it will clear our minds to consider them separately under two broad heads which we shall call the subjective factors and the objective factors. The subjective factors, which we shall consider in more detail in the next Chapter, include those psychological characteristics of human nature and those social practices and institutions which, though not unalterable, are unlikely to undergo a material change over a short period of time except in abnormal or revolutionary circumstances. In an historical enquiry or in comparing one social system with another of a different type, it is necessary to take account of the manner in which changes in the subjective factors may affect the propensity to consume. But, in general, we shall in what follows take the subjective factors as given; and we shall assume that the propensity to consume depends only on changes in the objective factors.

The principal objective factors which influence the propensity to consume appear to be the following:

(1) A change in the wage-unit. &#8212; Consumption (C) is obviously much more a function of (in some sense) real income than of money-income. In a given state of technique and tastes and of social conditions determining the distribution of income, a man&#8217;s real income will rise and fall with the amount of his command over labour-units, i.e. with the amount of his income measured in wage-units; though when the aggregate volume of output changes, his real income will (owing to the operation of decreasing returns) rise less than in proportion to his income measured in wage-units. As a first approximation, therefore, we can reasonably assume that, if the wage-unit changes, the expenditure on consumption corresponding to a given level of employment will, like prices, change in the same proportion; though in some circumstances we may have to make an allowance for the possible reactions on aggregate consumption of the change in the distribution of a given real income between entrepreneurs and rentiers resulting from a change in the wage-unit. Apart from this, we have already allowed for changes in the wage-unit by defining the propensity to consume in terms of income measured in terms of wage-units.

(2) A change in the difference between income and net income. We have shown above that the amount of consumption depends on net income rather than on income, since it is, by definition, his net income that a man has primarily in mind when he is deciding his scale of consumption. In a given situation there may be a somewhat stable relationship between the two, in the sense that there will be a function uniquely relating different levels of income to the corresponding levels of net income. If, however, this should not be the case, such part of any change in income as is not reflected in net income must be neglected since it will have no effect on consumption; and, similarly, a change in net income, not reflected in income, must be allowed for. Save in exceptional circumstances, however, I doubt the practical importance of this factor. We will return to a fuller discussion of the effect on consumption of the difference between income and net income in the fourth section of this chapter.

(3) Windfall changes in capital-values not allowed for in calculating net income. &#8212; These are of much more importance in modifying the propensity to consume, since they will bear no stable or regular relationship to the amount of income. The consumption of the wealth-owning class may be extremely susceptible to unforeseen changes in the money-value of its wealth. This should be classified amongst the major factors capable of causing short-period changes in the propensity to consume.

(4) Changes in the rate of time-discounting, i.e. in the ratio of exchange between present goods and future goods. &#8212; This is not quite the same thing as the rate of interest, since it allows for future changes in the purchasing power of money in so far as these are foreseen. Account has also to be taken of all kinds of risks, such as the prospect of not living to enjoy the future goods or of confiscatory taxation. As an approximation, however, we can identify this with the rate of interest.

The influence of this factor on the rate of spending out of a given income is open to a good deal of doubt. For the classical theory of the rate of interest, [1] which was based on the idea that the rate of interest was the factor which brought the supply and demand for savings into equilibrium, it was convenient to suppose that expenditure on consumption is cet. par. negatively sensitive to changes in the rate of interest, so that any rise in the rate of interest would appreciably diminish consumption. It has long been recognised, however, that the total effect of changes in the rate of interest on the readiness to spend on present consumption is complex and uncertain, being dependent on conflicting tendencies, since some of the subjective motives towards saving will be more easily satisfied if the rate of interest rises, whilst others will be weakened. Over a long period substantial changes in the rate of interest probably tend to modify social habits considerably, thus affecting the subjective propensity to spend &#8212; though in which direction it would be hard to say, except in the light of actual experience. The usual type of short-period fluctuation in the rate of interest is not likely, however, to have much direct influence on spending either way. There are not many people who will alter their way of living because the rate of interest has fallen from 5 to 4 per cent, if their aggregate income is the same as before. Indirectly there may be more effects, though not all in the same direction. Perhaps the most important influence, operating through changes in the rate of interest, on the readiness to spend out of a given income, depends on the effect of these changes on the appreciation or depreciation in the price of securities and other assets. For if a man is enjoying a windfall increment in the value of his capital, it is natural that his motives towards current spending should be strengthened, even though in terms of income his capital is worth no more than before; and weakened if he is suffering capital losses. But this indirect influence we have allowed for already under (3) above. Apart from this, the main conclusion suggested by experience is, I think, that the short-period influence of the rate of interest on individual spending out of a given income is secondary and relatively unimportant, except, perhaps, where unusually large changes are in question. When the rate of interest falls very low indeed, the increase in the ratio between an annuity purchasable for a given sum and the annual interest on that sum may, however, provide an important source of negative saving by encouraging the practice of providing for old age by the purchase of an annuity.

The abnormal situation, where the propensity to consume may be sharply affected by the development of extreme uncertainty concerning the future and what it may bring forth, should also, perhaps, be classified under this heading.

(5) Changes in fiscal policy. &#8212; In so far as the inducement to the individual to save depends on the future return which he expects, it clearly depends not only on the rate of interest but on the fiscal policy of the Government. Income taxes, especially when they discriminate against &#8220;unearned&#8221; income, taxes on capital-profits, death-duties and the like are as relevant as the rate of interest; whilst the range of possible changes in fiscal policy may be greater, in expectation at least, than for the rate of interest itself. If fiscal policy is used as a deliberate instrument for the more equal distribution of incomes, its effect in increasing the propensity to consume is, of course, all the greater. [2]

We must also take account of the effect on the aggregate propensity to consume of Government sinking funds for the discharge of debt paid for out of ordinary taxation. For these represent a species of corporate saving, so that a policy of substantial sinking funds must be regarded in given circumstances as reducing the propensity to consume. It is for this reason that a change-over from a policy of Government borrowing to the opposite policy of providing sinking funds (or vice versa) is capable of causing a severe contraction (or marked expansion) of effective demand.

(6) Changes in expectations of the relation between the present and the future level of income. &#8212; We must catalogue this factor for the sake of formal completeness. But, whilst it may affect considerably a particular individual&#8217;s propensity to consume, it is likely to average out for the community as a whole. Moreover, it is a matter about which there is, as a rule, too much uncertainty for it to exert much influence.

We are left therefore, with the conclusion that in a given situation the propensity to consume may be considered a fairly stable function, provided that we have eliminated changes in the wage-unit in terms of money. Windfall changes in capital-values will be capable of changing the propensity to consume, and substantial changes in the rate of interest and in fiscal policy may make some difference; but the other objective factors which might affect it, whilst they must not be overlooked, are not likely to be important in ordinary circumstances.

The fact that, given the general economic situation, the expenditure on consumption in terms of the wage-unit depends in the main, on the volume of output and employment is the justification for summing up the other factors in the portmanteau function &#8220;propensity to consume&#8221;. For whilst the other factors are capable of varying (and this must not be forgotten), the aggregate income measured in terms of the wage-unit is, as a rule, the principal variable upon which the consumption-constituent of the aggregate demand function will depend.

Granted, then, that the propensity to consume is a fairly stable function so that, as a rule, the amount of aggregate consumption mainly depends on the amount of aggregate income (both measured in terms of wage-units), changes in the propensity itself being treated as a secondary influence, what is the normal shape of this function?

The fundamental psychological law, upon which we are entitled to depend with great confidence both a priori from our knowledge of human nature and from the detailed facts of experience, is that men are disposed, as a rule and on the average, to increase their consumption as their income increases, but not by as much as the increase in their income. That is to say, if Cw is the amount of consumption and Yw is income (both measured in wage-units) &#&16;Cw has the same sign as &#&16;Yw but is smaller in amount, i.e. dCw/dYw is positive and less than unity.

This is especially the case where we have short periods in view, as in the case of the so-called cyclical fluctuations of employment during which habits, as distinct from more permanent psychological propensities, are not given time enough to adapt themselves to changed objective circumstances. For a man&#8217;s habitual standard of life usually has the first claim on his income, and he is apt to save the difference which discovers itself between his actual income and the expense of his habitual standard; or, if he does adjust his expenditure to changes in his income, he will over short periods do so imperfectly. Thus a rising income will often be accompanied by increased saving, and a falling income by decreased saving, on a greater scale at first than subsequently.

But, apart from short-period changes in the level of income, it is also obvious that a higher absolute level of income will tend, as a rule, to widen the gap between income and consumption. For the satisfaction of the immediate primary needs of a man and his family is usually a stronger motive than the motives towards accumulation, which only acquire effective sway when a margin of comfort has been attained. These reasons will lead, as a rule, to a greater proportion of income being saved as real income increases. But whether or not a greater proportion is saved, we take it as a fundamental psychological rule of any modern community that, when its real income is increased, it will not increase its consumption by an equal absolute amount, so that a greater absolute amount must be saved, unless a large and unusual change is occurring at the same time in other factors. As we shall show subsequently, [3] the stability of the economic system essentially depends on this rule prevailing in practice. This means that, if employment and hence aggregate income increase, not all the additional employment will be required to satisfy the needs of additional consumption.

On the other hand, a decline in income due to a decline in the level of employment, if it goes far, may even cause consumption to exceed income not only by some individuals and institutions using up the financial reserves which they have accumulated in better times, but also by the Government, which will be liable, willingly or unwillingly, to run into a budgetary deficit or will provide unemployment relief, for example, out of borrowed money. Thus, when employment falls to a low level, aggregate consumption will decline by a smaller amount than that by which real income has declined, by reason both of the habitual behaviour of individuals and also of the probable policy of governments; which is the explanation why a new position of equilibrium can usually be reached within a modest range of fluctuation. Otherwise a fall in employment and income, once started, might proceed to extreme lengths.

This simple principle leads, it will be seen, to the same conclusion as before, namely, that employment can only increase pari passu with an increase in investment; unless, indeed, there is a change in the propensity to consume. For since consumers will spend less than the increase in aggregate supply price when employment is increased, the increased employment will prove unprofitable unless there is an increase in investment to fill the gap.

We must not underestimate the importance of the fact already mentioned above that, whereas employment is a function of the expected consumption and the expected investment, consumption is, cet. par., a function of net income, i.e. of net investment (net income being equal to consumption plus net investment). In other words, the larger the financial provision which it is thought necessary to make before reckoning net income, the less favourable to consumption, and therefore to employment, will a given level of investment prove to be.

When the whole of this financial provision (or supplementary cost) is in fact currently expended in the upkeep of the already existing capital equipment, this point is not likely to be overlooked. But when the financial provision exceeds the actual expenditure on current upkeep, the practical results of this in its effect on employment are not always appreciated. For the amount of this excess neither directly gives rise to current investment nor is available to pay for consumption. It has, therefore, to be balanced by new investment, the demand for which has arisen quite independently of the current wastage of old equipment against which the financial provision is being made; with the result that the new investment available to provide current income is correspondingly diminished and a more intense demand for new investment is necessary to make possible a given level of employment. Moreover, much the same considerations apply to the allowance for wastage included in user cost, in so far as the wastage is not actually made good.

Take a house which continues to be habitable until it is demolished or abandoned. If a certain sum is written off its value out of the annual rent paid by the tenants, which the landlord neither spends on upkeep nor regards as net income available for consumption, this provision, whether it is a part of U or of V, constitutes a drag on employment all through the life of the house, suddenly made good in a lump when the house has to be rebuilt.

In a stationary economy all this might not be worth mentioning, since in each year the depreciation allowances in respect of old houses would be exactly offset by the new houses built in replacement of those reaching the end of their lives in that year. But such factors may be serious in a non-static economy, especially during a period which immediately succeeds a lively burst of investment in long-lived capital. For in such circumstances a very large proportion of the new items of investment may be absorbed by the larger financial provisions made by entrepreneurs in respect of existing capital equipment, upon the repairs and renewal of which, though it is wearing out with time, the date has not yet arrived for spending anything approaching the full financial provision which is being set aside; with the result that incomes cannot rise above a level which is low enough to correspond with a low aggregate of net investment. Thus sinking funds, etc., are apt to withdraw spending power from the consumer long before the demand for expenditure on replacements (which such provisions are anticipating) comes into play; i.e. they diminish the current effective demand and only increase it in the year in which the replacement is actually made. If the effect of this is aggravated by &#8220;financial prudence&#8221;, i.e. by its being thought advisable to &#8220;write off&#8221; the initial cost more rapidly than the equipment actually wears out, the cumulative result may be very serious indeed.

In the United States, for example, by 1929 the rapid capital expansion of the previous five years had led cumulatively to the setting up of sinking funds and depreciation allowances, in respect of plant which did not need replacement, on so huge a scale that an enormous volume of entirely new investment was required merely to absorb these financial provisions; and it became almost hopeless to find still more new investment on a sufficient scale to provide for such new saving as a wealthy community in full employment would be disposed to set aside. This factor alone was probably sufficient to cause a slump. And, furthermore, since &#8220;financial prudence&#8221; of this kind continued to be exercised through the slump by those great corporations which were still in a position to afford it, it offered a serious obstacle to early recovery.

Or again, in Great Britain at the present time (1935) the substantial amount of house-building and of other new investments since the war has led to an amount of sinking funds being set up much in excess of any present requirements for expenditure on repairs and renewals, a tendency which has been accentuated, where the investment has been made by local authorities and public boards, by the principles of &#8220;sound&#8221; finance which often require sinking funds sufficient to write off the initial cost some time before replacement will actually fall due; with the result that even if private individuals were ready to spend the whole of their net incomes it would be a severe task to restore full employment in the face of this heavy volume of statutory provision by public and semi-public authorities, entirely associated from any corresponding new investment. The sinking funds of local authorities now stand, I think, [4] at an annual figure of more than half the amount which these authorities are spending on the whole of their new developments. [5] Yet it is not certain that the Ministry of Health are aware, when they insist on stiff sinking funds by local authorities, how much they may be aggravating the problem of unemployment. In the case of advances by Building Societies to help an individual to build his own house, the desire to be clear of debt more rapidly than the house actually deteriorates may stimulate the house-owner to save more than he otherwise would; &#8212; though this factor should be classified, perhaps, as diminishing the propensity to consume directly rather than through its effect on net income. In actual figures, repayments of mortgages advanced by Building Societies, which amounted to Ј24,000,000 in 1925, had risen to Ј68,000,000 by 1933, as compared with new advances of Ј103,000,000; and to-day the repayments are probably still higher.

That it is investment, rather than net investment, which emerges from the statistics of output, is brought out forcibly and naturally in Mr. Colin Clark&#8217;s National Income, 1924-1931. He also shows what a large proportion depreciation, etc., normally bears to the value of investment. For example, he estimates that in Great Britain, over the years 1928-1931, [6] the investment and the net investment were as follows, though his gross investment is probably somewhat greater than my investment, inasmuch as it may include a part of user cost, and it is not clear how closely his &#8220;net investment&#8221; corresponds to my definition of this term:

# Discuss the Economic Relationship Between Consumption, National Income and Investment

. to be Rs. 73,28,878 crore during 2011- 12, as compared to Rs. 63,25,039 crore during 2010-11, showing a rise of 15.9 per cent. Per Capita Income 12. The per capita income at current prices during 2011-12 is estimated to be Rs. 60,972 as compared to Rs. 53,331 during 2010-11, showing a rise of 14.3 per cent. 4 II ESTIMATES OF EXPENDITURES ON GDP, 2011-12 1 3 Alongwith the Advance Estimates of GDP by economic activity, the CSO is also releasing the Advance Estimates of expenditures of the GDP at current and constant (2004-05) prices. These estimates have been compiled using the data on indicators available from the same sources as those used for compiling GDP estimates by economic activity, detailed data available on merchandise trade in respect of imports and exports, balance of payments, and monthly accounts of central government. As various components of expenditure on gross domestic product, namely, consumption expenditure and capital formation, are normally measured at market prices, the discussion in the following paragraphs is in terms of market prices only. Private Final Consumption Expenditure 1 4 . Private Final Consumption Expenditure (PFCE) at current prices is estimated at Rs. 5 0 ,25,486 crore in 2011-12 as against Rs. 43,38,392 crore in 2010-11. At constant (2004-05) prices, the PFCE is estimated at Rs. 32,70,368 crore in 2011-12 as against Rs. 30,72,115 crore in 2 0 1 0 - 1 1 . In terms of GDP at market prices, the.

Words: 3086 - Pages: 13

#### Relationship Between the Savings Rate and Economic Growth of China

. the annual national saving, So, national saving, S = (Y- T- C) - (T- G) = Y- C- G National saving is also termed as Investment of Government Savings Rate: The saving rate s determines the allocation of output between consumption and investment. Saving rate is calculated as, Saving rate, s = i/y Where, i = Government investment equal as national saving S y = Total Output or Total Income 4 China’s Comparative Savings Rate: China’s saving rate is higher than the average of other high-saving countries, such as its East Asian neighbors and OPEC countries (Figure 1). Its national saving rate was 54.4 percent of gross national income in 2007, more than twice of the average saving rate of OECD countries (Table 1). Moreover, high saving, not weak investment is responsible for China’s large excess saving. China’s investment/GDP ratio averaged 41 percent from 2000 through 2008, more than double that in the United States (20 percent) over the same period. However, China’s national saving rate was even higher: It averaged 48 percent from 2000 to 2008, compared to 15 percent in the United States. Figure 1: National Saving Rate by Region 5 Relationship between the saving rate and economic growth: What does the Solow model say about the relationship between saving and economic growth? Higher saving leads to faster growth in the Solow model, but only temporarily. An increase in the rate of saving raises growth only until the economy reaches the new steady state. If the.

Words: 1982 - Pages: 8

#### Relationship Between Entrepreneruship Innovation and Economic Developement

. Discuss the relationship between entrepreneurship, innovation and economic development. What role do creativity and problem solving play in this relationship? Refer to both theories and examples from the business world to support your discussion. Since last century, entrepreneurship and innovation have been heavily discussed. Entrepreneurs create new business and provide the job opportunities to society as well as promote the economic development. However, with the increasing global economic competition, normal entrepreneurship becomes less competitiveness, government committed to develop innovative entrepreneurship in recent years (Cukier, 2006). Therefore, the relationship between innovation and entrepreneurship becomes one of the most significant topics in the business field. Economists do a large number of researches to explore the connection between entrepreneurship and innovation as well as the position they related in economic development. During the process of exploring, a considerable amount of definitions are put forward by experts based on their research knowledge and the analysis of entrepreneurs developed in recent decades. This essay will list the definitions put forward by different economists, then support the ideas that innovation, entrepreneurship and economic development are deeply connected and interacted. Finally, combine with the experience of university group entrepreneurship project, attempt to explain importance role that the creativity and.

Words: 2450 - Pages: 10

. In 1972, under the leadership of President Richard Nixon, the United States resumed its economic relationship with the nation of China; in 1979, a bilateral trade agreement was signed by the two countries. Today, China has become one of the largest trading partners with the United States, trailing only behind Canada and Mexico. The United States benefits with this trade agreement due to the large and growing consumer market for U.S. firms and the Chinese imports cost less due to the low labor cost in China. The nation of China benefits due to the increased integration with world economy through overseas education and trade, creating awareness on issues such as environment and human rights. The numerous benefits of this union between two powerhouses of the world economy bring many negative issues. The first issue that affects many Americans today is the loss of jobs due to outsourcing and importing rather than producing goods here in the United States. From the years 2001 to 2010, the trade deficit with China caused the loss of 2.8 million jobs in the U.S. This affects the Untied States’ economy by increasing the number of Americans receiving unemployment insurance and food stamps. One example of this outsourcing is Nike, Incorporated which produces an estimated forty percent of its shoe output in Chinese factories. However, Nike Inc. justifies this outsourcing because profit margins are dependent on labor cost. Another issue with the union between U.S. and China is the.

Words: 885 - Pages: 4

#### The Relationship Between Business and the Economic Environment

. Economic Growth- GDP Economic Growth… …An increase in an economy’s ability to produce goods and services Gross Domestic Product- represents the value of a country’s national income in one year. An increase in real GDP means that the standard of living within a country is increasing. It is therefore used as a way of measuring a country’s economic growth. The Business Cycle- there are discernable patterns in these levels over time, there will be periods of time when economic activity is rising and other times when the level of economic activity slows down. The Business Cycle The Four Stages of the Business Cycle are: Boom: A period of very fast economic growth, with rising incomes and profits. Inflation will rise and there will be shortages of key skilled worker, leading to high wage increases. High inflation will make the country less competitive, and business confidence will eventually fall due to rising cost. Interest rates are increased to slow down growth. Recession/Downturn: Demand stats to fall as interest rate rise. Real GDP stats to slow and will eventually fall. Incomes and demand fall, as do profits. Some firms will be forced out of business. Possible Strategies during a recession: • Close down arts of the business and make redundancies • Develop new products that appeal to customers as income fall • Lower price to maintain sales • Look to expand, as prices will be much lower than during a boom • Target growth markets overseas Slump/Trough.

Words: 1301 - Pages: 6

#### To What Extent Do National Income Statistics (Gdp) Provide a Good Basis for Comparison Between Countries?

. Economics Essay – To what extent do national income statistics (GDP) provide a good basis for comparison between countries? In the world of Economics, GDP per capita is used to compare the way that countries are coping with different economic climates; such as recession, boom etc. This essay will be assessing whether GDP is the best statistic to use for comparing different countries’ economies. GDP is the most commonly used method by world famous economists to assess how successful an economy is. GDP stands for Gross Domestic Product and is the market value of the official goods that have been transferred in and out in a country over a certain period of time. GDP is a good method for comparing the national incomes of countries because it can be very accurate. This is especially the case when the GDP for a division is divided between the population of a country. This is a statistic called GDP per capita and is a lot more accurate at showing how wealthy a country is because it divides the value of the goods transferred in a country between the whole population. This is clearly a better way of measuring how wealthy a country is because it explains how rich each person is in a country. This is a better way of comparison between countries because it shows how rich the country is in terms of value per person instead of making assumptions. This makes a huge difference because in normal GDP, China is the richest country in the world because it is worth the most as a country.

Words: 726 - Pages: 3

#### Discuss the Relationship Between Persuasion and Attitude Change

. Discuss the relationship between persuasion and attitude change? Persuasion is the use of appeals to reasons, values, beliefs, and emotions to convince a listener or reader to think or act in a particular way. We face persuasive advertisements particularly on a daily basis; from the television to magazines. To explain the psychology of persuasion there are various models; the Hovland-Yale model and the elaboration likelihood model. The Hovland-Yale model states that there several factors that will affect how likely a change of attitude through persuasion is, after all behavioural change cannot occur without attitude change also having taken place. The three most prominent factors are the source, the message and the audience. Hovland et al found that source characteristics played an important role in determining the persuasive nature of any communication. The theory states that people more likely to be persuaded when a source presents itself as credible. For example, people were more likely to be persuaded when hearing the information from an expert. This was supported by Bochner and Insko study, where they found that people were more likely to trust a sleep expert than a non-sleep expert, on matters surrounding sleep. The creditable sources were more influencing towards the audience, where with the non-expert source the audience tried to find ways of discrediting the communicator. The Hovland-Yale model says the content of the message is an important factor. When.

Words: 1858 - Pages: 8

#### Relationship Between a Country&#x27;s Economic Growth and Its Water Pollution

. Economic growth is the increase in the capacity of a country’s economy to produce goods and services. As a means of development and urbanisation, and a reflection of wealth and the living standard in a nation, it remains a key focus of most governments. In this course of action, water bodies may be polluted and contaminated due to waste (e.g. sewage and chemical waste) generated from different sectors of the economy. However, water pollution is not inevitable despite a country’s focus on economic growth, and in fact can be mitigated and controlled. A prominent example would be that of Singapore. Singapore is a highly developed market economy, with the 3rd highest GDP/capita in the world of \$51,709.45 USD (2012). It has been experiencing rapid economic development ever since its independence, with an average GDP growth of 7.7%, developing from a low income to high income country. Over a period from 2000 to 2010, its GDP nearly doubled, from S\$163 billion to S\$304 billion. It is currently ranked among the world’s most competitive economies. At present, industry has become one of the primary pillars of Singapore’s economy, contributing to over a quarter (28%) of its GDP. Of which, in 2010 alone, the chemical industry has contributed S\$38 billion of the output to the country’s economy, a significant rise from S\$28 billion in 2009. As such, it can be seen that Singapore’s economic growth is greatly boosted by this industry. At the heart of the chemical industry is Jurong.

Words: 761 - Pages: 4

#### Relationship Between Economic and Financila Sector Development

. Michael McAleer, email: [email protected] 1 WORKING PAPER No. 4/2010 Conditional Correlations and Volatility Spillovers Between Crude Oil and Stock Index Returns 1. Introduction Stock market and crude oil markets have developed a mutual relationship over the past few years, with virtually every production sector in the international economy relying heavily on this source of energy. As a result of such dependence, fluctuations in crude oil prices are likely to have significant and unavoidable affects on the production sector. The direct effect of an oil price shock may be considered as an input-cost effect, with higher energy costs leading to lower oil usage and decreases in productivity of capital and labour. Further to the direct impacts on productivity, fluctuations in oil prices also cause income effects in the household sector, with higher costs of imported oil reducing the disposable income of the household. Hamilton (1983) mentions that a sharp rise in oil prices increases uncertainly in the operating costs of certain durable goods, thereby reducing demand for durables and investment. The impact of oil prices on macroeconomic variables, such as inflation, real GDP growth rate, unemployment rate and exchange rates, is a matter of great concern for all economies. Due to the role of crude oil on demand and input substitution, more expensive fuel translates into higher costs of transportation, production and heating, which affect inflation and household.

Words: 11901 - Pages: 48

#### Discuss the Relationship Between Entrepreneurship, Innovation and Economic Development. What Role If Any Do Creativity and Problem Solving Play in This Relationship? Refer to Both Theory and Examples from the Business World to Support Your Discussion

. Nottingham University Business School Undergraduate Programmes TITLE OF MODULE: Entrepreneurship and Business (N11440 MY) Title of Work: Discuss the relationship between entrepreneurship, innovation and economic development. What role if any do creativity and problem solving play in this relationship? Refer to both theory and examples from the business world to support your discussion COPY 1 TITLE OF MODULE: Entrepreneurship and Business (N11440 MY) Title of Work: Discuss the relationship between entrepreneurship, innovation and economic development. What role if any do creativity and problem solving play in this relationship? Refer to both theory and examples from the business world to support your discussion COPY 2 Austrian writer, professor, management consultant and self-described “social ecologist,” Peter F. Drucker once said “Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth.” (BrainyQuote, 2014) This essay aims to show how innovation, entrepreneurship and economic development are all linked together as shown in the statement above. Even though many a time the spotlight has been shined on entrepreneurship as the propellant towards success, there are still many factors that have to be taken into account such as creativity and problem solving.

Words: 2233 - Pages: 9

#### Discuss the Relationship Between Entrepreneurship, Innovation and Economic Development. What Role If Any Do Creativity and Problem Solving Play in This Relationship? Refer to Both Theory and Examples from the Business

. In the business world, there are a number of interlinking factors to achieve certain goals such as the most important goal, attaining industry success which directly relate to the economic development of a country as well as the global economy. In such a relationship, entrepreneurship with innovation is the major driving force behind the sustainable economic development and thus, entrepreneurs play the key role in manipulating the factors of production that include land, labour, capital and also the natural resources (Econlowdown, n.d.) to cause economic growth. In short, entrepreneurship contributes to the economic performances by introducing innovations, effectively allocating resources and creating changes. Hence, the aim of this essay is to discuss the nexus of entrepreneurship, innovation and economic development as well as the role that creativity and problem solving play in this relationship. From the business point of view, entrepreneurship is referred to the capacity and willingness to develop, organise and manage a business venture along with any of its risks in order to make profit by using the factors of production (BusinessDictionary.com, n.d.). Clearly, entrepreneurs are the people with particular characteristics and traits of behaviours whereas entrepreneurship is the result of what entrepreneurs do and refers to events and their economic impact (Lumsdaine and Binks, 2006). Innovation on the other hand is one of the key tools that could assist.

Words: 1745 - Pages: 7

#### Discuss the Relationship Between Entrepreneurship, Innovation and Economic Development. What Roles If Any Do Creativity and Problem Solving Play in This Relationship? Refer to Both Theory and Examples from the Business

. In this essay, it would be found out that the relationship between entrepreneurship, innovation and economic development is a multidirectional cycle, which means that they affect each other in two directions. From one direction, when there is a problem entrepreneurs would use innovation which comes from creativity to solve it by entrepreneurship. Innovation deliveries new industries or get exist industries developed and both of those actions will lead economic to develop. The births of new industries encourage people with entrepreneurship to organize new economics. From the other direction, the development of economic absorbs new investments. Those investments include not only labour, land and capital, but also innovation which can improve the new good or service. The development in new industry can also offer money or other capital to encourage people with creativity to innovate. Innovation can be protected by entrepreneurship because it relies on innovation. As Thomson Edison* said, his inventions were from seeing a worthwhile need to be met and trailed after it until it came. So it can be seen as innovations are from solving problem and creativity. As an entrepreneur, spotting a problem and turn it into opportunity by creativity is called entrepreneurship. Entrepreneurship sets innovation to processing first and then gets profits from economic development. As Bolton and Thompson (2000) has recognized, entrepreneurship is about change and innovation. So every.

Words: 898 - Pages: 4

#### Discuss the Relationship Between George and Lennnie

. Discuss the relationship between George and Lennie. The friendship that George and Lennie share forms the core of the novella, and although Steinbeck idealizes and perhaps exaggerates it, he never questions its sincerity. From Lennie’s perspective, George is the most important person in his life, his guardian and only friend. Every time he does anything that he knows is wrong, his first thought is of George’s disapproval. He doesn’t defend himself from Curley because of George’s stern instruction for him to stay out of trouble, and when he mistakenly kills his puppy and then Curley’s wife, his only thought is how to quell George’s anger. He has a childlike faith that George will always be there for him, a faith that seems justified, given their long history together. George, on the other hand, thinks of Lennie as a constant source of frustration. He has assumed responsibility for Lennie’s welfare and has, several times, been forced to run because of trouble Lennie has inadvertently caused. Life with Lennie is not easy. However, despite George’s frequent bouts of anger and frustration, and his long speeches about how much easier life would be without Lennie, George is clearly devoted to his friend. He flees from town to town not to escape the trouble Lennie has caused, but to protect Lennie from its consequences. The men are uncommonly united by their shared dream of a better life on a farm where they can “live off the fatta the lan’,” as Lennie puts it. George articulates.

Words: 311 - Pages: 2

#### Discuss the Relationship Between Sexual Selection and Human Reproductive Behaviour

. Discuss the relationship between sexual selection and human reproductive behaviour (24 marks) In this essay I will be discussing the two theories of sexual selection within humans and their reproductive behaviour. The evolutionary explanation of relationships says humans have an innate drive to reproduce and pass on our genes. Sexual selection is a process within natural selection where characteristics are selected because they’re attractive to the opposite sex, and so this increases reproductive success and passes on these traits to their offspring. Sex differences in sexual selection comes from our evolutionary past and so males and females have different reproductive behaviour; these differences are shown from their mate choice (inter sexual selection), mate competition (intra sexual selection) and differences within their short term and long term mating strategies. Males and females differ in mate selection as the different sexes have different needs which are stemmed from our genetic code which has evolved over millions of years. According to the inter sexual selection theory males and females look for different characteristics in a mate and behave differently to attract these mates. It is important to men that women prioritise physical attractiveness and so men are responsive to those who are young and attractive as it connotes that these women are more likely to be fertile and so the man can reproduce and pass on his genes. Therefore, men are attractive to women.

Words: 1725 - Pages: 7

#### Discuss the Economic Relationship Between Consumption, National Income and Investment

. Discuss the economic relationships between consumption, national income and investment. Aggregate demand is heavily determined by the state of consumption, the spending on consumer goods and service over a period of time; Furthermore income and investment have a very volatile connection with consumption. National income is the total level of output of a country and is calculated by C+I+G+(X-M)= AD however there is three ways in which we can be interpreted. Firstly The expenditure method is the worth of household spending of goods and services, secondly national output is the amount flowing between goods and services from firms to households; finally there is the national income which is the value of income to households from land, capital and labour from firms. The three components must be identical not just equal. Investment is the expenditure on capital goods, that then are used to provide other goods or services. Investment can be effected by the accelerator effect as an increase in nation income results in an increase in investment, however for this theory to take place its not the rate of interest that determines the level of investment but real spending within the economy. Consumption influences national income as it has many determinate’s, however it is important to determine that income is a flow ands wealth is a stock. National income is strongly controlled by confidence as the higher the confidence people feel, the more they will spend. Confidence can be.