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Year 10 - Citizenship

Is UK Government action led by the economy?

How does the economy work?

Unit Summary

Pupils learn what the economy is, what taxes are and consider local and central government spending and risk management.

Lesson Summary

You will learn to explain how we know if the economy is healthy and how the economy affects the UK Government.

Key Notes

  • A healthy economy has GDP growth, low unemployment, stable inflation and strong business investment.
  • In a recession, the Government may borrow money or lower taxes, while in a strong economy, it invests in services.
  • Inflation is important, and the Government aims to keep it low but positive to prevent rapid price rises or slow growth.
  • Taxes may be raised to control inflation in good times, and cut to boost spending in a recession.
  • While areas like defence, law enforcement and elections are less affected by the economy, it still influences decisions.

Vocabulary To Learn

  • economy: the state of a country or region in terms of the production and consumption of goods and services and the supply of money
  • inflation: the rate at which the prices of goods and services rise over time, meaning money gradually loses value

Common Mistakes To Avoid

  • Inflation is always a negative thing because it raises prices of goods and services.

3 Quick Questions (With Answers)

1. Explain the lesson in two key points.

A healthy economy has GDP growth, low unemployment, stable inflation and strong business investment. In a recession, the Government may borrow money or lower taxes, while in a strong economy, it invests in services.

2. What does this key word mean in this lesson? 'economy'

the state of a country or region in terms of the production and consumption of goods and services and the supply of money.

3. Correct this common mistake.

Mistake: Inflation is always a negative thing because it raises prices of goods and services. Correction: A small amount of inflation is actually necessary to keep the economy stable and encourage spending.

More Lessons In This Unit

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