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Unit 4 Business Environment - Investigate the economic, social and global environment in which organisations operate

Types of economic systems

An economy is a system for the allocation of scarce resources in the face of unlimited wants. It allows the answer of the three economic questions: What? How? and For Whom?

We can measure the amount of government involvement as a % of GDP. Countries where the proportion of GDP attributed to Government Spending is near 100% are termed Planned or Command Economies, whilst those nearer 0% are termed Free or Market Economies. The vast majority of countries are Mixed Economies.

Gross Domestic Product (GDP) is the most commonly used indicator of national income. It attempts to measure the sum of incomes received by the various wealth creating sectors of the economy: manufacturing, agriculture, service industries.

Government Income: The government needs money to pay for public expenditure . Revenue can be raised through taxation, national insurance contributions, borrowing, charging for services or by selling off state-owned assets.

Government Spending: Public expenditure is spending by central government, local government, and nationalised industries.

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