Page 305 - Cambridge IGCSE Business Studies

24: Government economic objectives and policies

CASE STUDY Unemployment rates in Egypt

Combined with the effects of the global recession in 2008–2009, the Egyptian revolution that started in January 2011

has led to many economic challenges. Since then, Egypt’s economy has seen a declining GDP, rise in unemployment
rate and a widening gap in the balance of payments. The economy is said to be in recession.

Percentage of the labour force
14 14

13 13
12 12

11 11
10 10
9 9

8 8
Jan/09 Jan/10 Jan/11 Jan/12 Jan/13
Figure 24.3 Egypt’s unemployment rate
Source: www.tradingeconomics.com, Central Agency for Public Mobilization & Statistics

TASK
a What percentage of Egypt’s labour force was unemployed in January 2010?
b What percentage of Egypt’s labour force was unemployed in January 2013? 303
c What has been the percentage increase in the unemployment rate since January 2010?
d What are the other characteristics of an economy that is in recession?
e How do you think the political instability caused by the Egyptian revolution in January 2011 aff ected the economy
and the businesses in Egypt?

EXPLORE! Slump

What stage of the business cycle This is when the recession stage of the economy is at its worst. Its key
is the economy of your country in? characteristics are:
Research the factors that
have led to this stage. (Hint: Use ■ very low business confidence with very little investment in new and existing
the internet or ask your teacher businesses
to provide you with business
■ low production of goods and services – many businesses close down
newspapers or journals to do
your research.) ■ low demand for goods and services
■ high unemployment due to low business activity.

How changes in taxes and government spending aff ect
KEY TERMS
business activity
Interest rate: the cost to a In order to achieve their economic objectives, governments affect the economic

person or business of borrowing activities of a country by controlling interest rates (monetary policy), tax rates
money from a lender such as

and government spending (fiscal policies). We will look at monetary policy later in
a bank.
the chapter.
Tax: a charge/fee paid to the
Governments mainly get their income from taxes. A steady growth in the
government on income, goods
and services. economic activity of a country is what most governments aim for. If the growth
is too fast, it may not be long-lasting as the infrastructure to support this growth