1: Economic Activity and Australia's Goals Flashcards

Question

What is non-market activity?

Answer 1

Consists of production that is not sold and occurs mostly within individual households, such as personal housework and gardening, or the black market. Its value is not included in GDP making GDP an underestimation.

Answer 2

- value of some items may be guesstimated or imputed = uncertain levels of statistical error

Answer 3

- using the chain price index to statistically remove the effects of inflation/deflation is a potentially inaccurate process

Answer 4

- the spending approach — by summing up the total value of spending on Australian-made goods and services - the incomes approach — by summing up the total value of all incomes generated from the production of goods and services

Answer 5

- lagging indicators: WHAT ECO ACTIVITY HAS BEEN LIKE IN THE PAST shows changes in eco activity some time after events have occurred as they take time to respond. E.g CPI or Inflation rates and changes in weekly average income, GDP - coincident indicators: WHAT ECO ACTIVITY IS LIKE CURRENTLY move very closely with changes in actual levels of eco activity. Eng. Changes in monthly retail sale - leading indicators: WHAT ECON ACTIVITY WILL BE LIKE IN THE FUTURE allow economic forecasts or predictions to be made about future levels of economic activity. E.g. changes in eco activity in trading partners, consumer confidence index etc.

Answer 6

Long term trend patterns: looking at 10 years or more of economic activity to find trends Cyclical (AD) patterns: when stats follow a fairly regular wave-like pattern with peaks and troughs. GDP, UE, CAD, Inflation Seasonal patterns: when patterns are similar at the same time each year. Eg December sales Erratic Patterns: once off events ay cause a spike in eco activity e.g. commonwealth games

Answer 7

refers to the volatility of the level of economic activity in an economy.

Answer 8

- short-medium term cyclical swings in level of economic activity/GDP - long-term upward trend in the level of economic activity/ GDP

Answer 9

3 - 8 years or longer

Answer 10

rising GDP growth falling UE Inflation rising (injections > leakages) = growth in size of economy

Answer 11

GDP highest Unemployment lowest Inflation highest high rates of EG dangerous inflationary boom: consumer prices rise by over 3%

Answer 12

GDP rising more slowly or even falling Unemployment rising Inflation slowing (as businesses discount their prices to clear their unwanted and unsold stocks of goods)

Answer 13

GDP lowest point or even a negative rate Unemployment highest Inflation lowest point or even negative rate (deflation) If GDP falls during at least two consecutive quarters, it is a recession.

Answer 14

A period of negative GDP lasting for at least two consecutive quarters. Associated with high levels of cyclical employment and low inflation.

Answer 15

A prolonged recession involving very high cyclical unemployment, caused by a significant fall in aggregate demand.

Answer 16

ideal level of economic activity where, simultaneously, there is low inflation, a strong and sustainable rate of GDP growth and low unemployment. GDP growth rate: 3% Low unemployment: low -- 4.5-5% Low inflation: low -- 2-3%

Answer 17

A period of slow GDP growth (stagnation) along with high structural unemployment and rapid cost inflation. It reflects less favourable aggregate supply conditions. GDP: rising at slow or negative rate Unemployment: high Inflation: high

Answer 18

It assumes that high inflation and unemployment are opposites and cannot coexist

Answer 19

Illustrates the flow of money, resources and goods/services in an economy Identifies some of the macroeconomic variables affecting country's economic conditions, showing hoe they are interrelated.

Answer 20

- Things that slow aggregate demand and decrease economic activity - E.g. Savings, taxes, import spending (S+T+ M)

Answer 21

- Things that boost aggregate demand and increase economic activity - E.g. Investment spending, government spending, export spending (I+G+X)

Answer 22

1. household sector: Australia's population; sells resources to businesses, receives income in return, uses this to demand finished goods and services (to satisfy needs/wants) 2. business sector: Australian trading firms; buy resources from households, convert them into finished G/S and supply to households 3. financial sector: Financial institutions (e.g. banks, stock exchange, finance companies etc.); borrow savings (S) from households and lend to customers for investment spending (I) 4. government sector: Governments; collect taxes (T) to pay for government spending (G) 5. overseas sector: Trading partners; import G/S (M) to satisfy needs/wants and sell exports (X)

Answer 23

Household sector supplies resources to business sector

Answer 24

Represents demand for resources by the business sector through payment of income to the household sector

Answer 25

Represents aggregate demand (total value of all types of demand for Aussie G/S) Some income ends up in leakages, other ends up as in injections: - private consumption of G/S (C) -- injection - household saving in financial sector (S) -- leakage (as C is lowered) -- financial sector injects some (S) back into model by lending to businesses for private investment spending (I) -- injection - paying government taxes (T) -- leakage (as C is lowered) -- some (T) injected back into model is used to pay for government consumption/investment (G) - spending on imports (M) -- leakage -- compared to overseas spending on exports (X) -- injection.

Answer 26

Represents aggregate supply (total production of goods and services by the business sector). Thus, reflects GDP.

Answer 27

Represents the total of spending on Australian-made goods and services over a year. It is made up of C + I + G + (X − M)

Answer 28

The total production of goods and services over a period of time by the nation’s businesses. Note: It is especially affected by the availability of a nation’s resources and the efficiency with which these resources are used

Answer 29

AD determines short-term cyclical levels of economic activity: - Leakages>Injections - lower AD = firms discount prices and cut output = slowed GDP = increased unemployment = fall in average incomes = slowing economic activity (contraction) -- similar to recession

Answer 30

While AS is influenced in the short-term by changes in AD, in the long-term, the potential national level of output is determined by the quantity and efficiency of resources available for production. Thus, especially in the longer term, AS - determined partly by the resources available - affects potential level of GDP

Answer 31

- Private Consumption (C): household expenditure to satisfy needs/wants -- 60% of AD NB: Purchases of new properties by household is factored in INVESTMENT not Consumption Spending. - Private Investment (I): Private business capital spending on products used to make other goods and services -- under 22% + most volatile - Government consumption (G1): Public expenditure on G/S to help satisfy community's needs/wants e.g. defence spending, day-to-day running costs like telephone calls -- 17% - Government investment (G2): Government capital or investment expenditure on equipment needed to produce public social and economic infrastructure -- 3% - Net exports (X-M): Difference between foreign spending on Australian exports and local spending on imports -- 18-24% each

Answer 32

Macroeconomic influences on the level of spending at various price levels.

Answer 33

epic b&b ted (think lorelai and rory gilmore) ``` exchange rate of $A population growth interest rates consumer confidence business confidence budget terms of trade economic conditions overseas disposable income ```

Answer 34

Expectations of households about future income, employment prospects and inflation. Affect decisions about whether to spend or whether to save. ``` Weak confidence lifts household savings and depresses C = slow AD and economic activity. Strong confidence (reverse effect) -- depresses households savings and lifts C = higher AD and economic activity ```

Answer 35

Money available for spending after payment of direct tax and receipt of welfare. Affects C and M. Fast growth in disposable income lifts C and M = boosts AD and economic activity Slower growth in disposable income depresses C and M = slow AD and economic growth

Answer 36

Faster rate = multiplication of needs and wants = higher expenditure on C, G, M = boosts AD and economic activity Slower rate = fewer needs and wants = depresses expenditure on C, G, M = reduces AD and economic activity

Answer 37

Firm's expectations about their level of future sales and profits. Strong confidence lifts (I) = boosts AD and economic activity Weak confidence depresses (I) = reduces AD and economic activity

Answer 38

The annual cost of borrowing or reward for saving money. Rise in interest rates depresses C and I (borrowing money becomes more expensive and saving money - leakage - becomes more profitable) = slow AD and economic activity Fall in interest rates lifts C and I (borrowing money becomes less expensive and saving money becomes less profitable) = boost AD and economic activity

Answer 39

Affects C, I, G1, G2, X and M

Answer 40

make more/less likely to spend | Affect C, I and G spending

Answer 41

downturn in economic activity overseas depresses X (lower injections) = reduced AD and economic activity economic growth overseas lifts X (increase injections) = boosts AD and economic activity

Answer 42

Ratio of average export prices compared to average import prices Terms of trade index = Export price index/import price index x100 Rise in terms of trade index lifts value of X relative to M = boosting AD and economic activity Fall in terms of trade index depresses values of X relative to M = slowing AD and economic activity

Answer 43

The price at which the Australian dollar is swapped for other currencies. Depreciation of $A = AUD fallen in value; can buy less with one dollar = Xs more price competitive compared to Ms = boosts value of Xs relative to Ms = boosts AD and economic activity Appreciation of $A = AUD increased in value; can buy more with one dollar = Ms more affordable compared to Xs which are more expensive = slows net exports (depresses value of Xs relative to Ms) = slows AD and economic activity

Answer 44

An overall guide to the value of the Australian dollar measured against other currencies, each weighted according to their relative importance in Australia's trade.

Answer 45

(movement not shift) Increases in general level of prices reduces purchasing power and thus decreases spending. Higher price levels will tend to have a neg effect on int comp. if growth in average prices (inflation) is higher than it is in other countries, there will be reduced demand for Australian exports. Increase in leakages and reduction in injections thus AD falls

Answer 46

If Australia's interest rate is greater relative to other countries, this represents a higher reward for savings to foreign investors. Foreign investors then go to the foreign exchange market (FEM) demanding AUD, which raises demand for AUD relative to supply. This causes the AUD to appreciate in value.

Answer 47

Tot is the ratio of export prices relative to import prices. A rise in the tot, holding volume constant means there is a rise in export prices relative to import prices. In the FEM, this means the demand for AUD has increased relative to the supply thus the AUD has appreciated in value.

Answer 48

The main determinants of a nation's productive capacity, especially in the long-term, at various price levels)

Answer 49

volume & efficiency of labour/capital/natural resources | the number of new businesses versus closures

Answer 50

- POPULATION'S AGE STRUCTURE e.g. Australia's ageing population causing labour shortages - PARTICIPATION RATES proportion of people aged 15+ who are able and willing to work affects size of labour force - GOVERNMENT AS POLICIES affect access to and quality of labour resources e.g. immigration policies, education policies, policy about welfare access, financial assistance with children , policy about welfare access e.g. pension access age, financial assistance with children (impacts whether parents join labour force) - LABOUR PRODUCTIVITY influenced by access to capital, use of incentives, skills etc. - AMOUNT OF LEISURE TIME AND HOURS OF WORK

Answer 51

- INVESTMENT (public and private) can increase capital inputs - INTEREST RATES high deter investment and growth of AS while low encourage investment and growth of AS - OUTLAYS ON TECH AND R&D can increase volume and efficiency of capital resources - TAX RATES low rates incentivise higher (I) = more efficient capital resources = increased productive capacity. also, incentivise greater participation in labour force. high rates depress (I) = less efficient capital resources = productive capacity does not grow. also, disincentivise participation in labour force. - ADEQUACY OF NATIONAL INFRASTRUCTURE good infrastructures helps cut costs and improve efficiency = increased productive capacity = higher AS; poor infrastructure hinders ability to minimise costs and maximise efficiency = cannot expand productive capacity = limited AS

Answer 52

- MINERAL EXPLORATION using tech to find new minerals and natural inputs - LAND MANAGEMENT lifting productivity and sustainability of mining/farming practices - COMBATTING CLIMATE CHANGE policies to reduce global warming (e.g. carbon tax) to avoid reduction of productive capacity due to destruction of natural resources caused by climate change

Answer 53

- LABOUR COSTS lower costs boosts profits and reduces closures = boosts productive capacity and AS; higher costs reverse effect - EFFICIENCY increasing productivity by enhancing skills, using tech etc. boosts productive capacity and AS - INTEREST RATES lower rates incentivise firms to increase (I) to grow productive capacity and AS; high rates reverse effect - COST OF RESOURCES influence profits and thus whether firms grow/shrink - EXCHANGE RATE affect production costs and hence profits and thus whether firms grow/shrink. Also influences competitiveness, sales and profits of local companies that export - affecting the growth in productive capacity and AS. - NEW TECHNOLOGY using new tech can impact efficiency, costs, competitiveness and survival - BUSINESS SIZE bigger firms create economic of large-scale as costs spread more thinly over greater volume of output. Can lower costs and boost profits. Able to expand productive capacity and increase AS. - TAX RATES lower rates reduce business closures and incentivise firms to increase (I) and expand productive capacity and AS. higher rates reverse effect. - OTHER GOV AS POLICIES e.g. trade liberalisation forcing local firms to maximise efficiency, payment of subsidies to particular industries, provision of economic infrastructure, environmental policies to battle climate change

Answer 54

Illustrates the relationship between AS and AD and shows the key factors which impact the economy's equilibrium level of economic activity.

Answer 55

- level of real GDP - levels of employment and unemployment - average level of prices/ inflation rate

Answer 56

RISE: contraction in real GDP purchased per year. FALL: expansion in real GDP purchased per year.

Answer 57

1. Purchasing power effect: higher prices reduce purchasing power = can afford less 2. Import substitution effect: households encouraged to buy cheaper imports 3. Interest rate effect: when general prices rise, so do interest rates. borrowing money becomes more expensive, contracting spending.

Answer 58

buyers prepared to purchase larger quantities of local products at all price levels whole AD line shifts to the right

Answer 59

buyers are prepared to purchase fewer quantities of local products at all price levels whole AD line shifts to the left

Answer 60

MUCH EXCESS CAPACITY (horizontal section) - low national output - easy to expand production in response to little/no increase in price - high unemployment - low inflation LIMITED ACCESS CAPACITY (intermediate section of elbow) - bigger rises in price needed to increase production profitably - gradual onset of full employment NO EXCESS CAPACITY (vertical section) - overemployment - larges rises in price not enough to prompt increase in production - rapid inflation

Answer 61

firms become more willing and able to life supply, increasing potential GDP whole AS curve shifts outwards

Answer 62

Producers less willing and able to produce at general prices prevailing, cutting potential level of GDP whole AS curve shifts inwards

Answer 63

Causes an equilibrium which produces... 1. Maximum GDP growth 2. Very low cyclical unemployment -- increased demand for labour resources + labour shortages 3. Rapid demand inflation -- boom -- production can't keep up causing widespread shortages = rising prices and demand inflation = reduced purchasing power = decline in living standards

Answer 64

Causes an equilibrium which produces... 1. Slower GDP growth -- perhaps causing recession 2. Higher cyclical unemployment -- (lower demand for labour due to slow GDP) 3. Lower demand inflation -- higher unsold stock = price discounting to clear

Answer 65

Causes an equilibrium which produces... 1. A strong and sustainable rate of economic growth 2. Full employment -- relatively low unemployment rates 3. Low inflation and prices -- no widespread shortages or surplus of goods and services = material living standards maximised

Answer 66

Causes an equilibrium which provides... 1. Stronger and more sustainable rate of economic growth -- higher GDP 2. Slower cost inflation -- lower costs and higher profits = firms can cut prices to be more competitive 3. Lower structural unemployment and more jobs -- fewer firms close down and other expand more rapidly

Answer 67

Cause an equilibrium which leads to... 1. Lower or stagnant level of GDP 2. Rising cost inflation -- rising costs & falling profits force firms to lift prices 3. Rising structural unemployment -- firms close down and workers lose jobs + stagflation

Answer 68

When the prices of most goods and services are rising.

Answer 69

The quantity of goods and services that incomes will buy, after allowing for effects of changing prices

Answer 70

involves aiming for an average increase in the general price level of 2-3% per annum over the course of the business cycle (typically measured by the CPI) - a rate that is consistent with other government macroeconomic goals.

Answer 71

No. This would not be consistent with other macroeconomic goals as zero inflation would require weak economic growth and high cyclical unemployment.

Answer 72

- Consumer price index (CPI) | - the underlying inflation rate (the core inflation rate)

Answer 73

A measure of inflation or the average level of prices paid by households for a basket of goods and services.

Answer 74

REGIMEN the range of g/s included in the basket whose prices are to be measured PRICES SURVEYED prices surveyed from representative range of metropolitan retail outlets from private (e.g. Coles, Myer, Kmart) and public sector (e.g. local council property rates) WEIGHTING OF ITEMS weighted according to relative importance in overall household expenditure. more expensive and frequently purchased items have greater bearing on index trends than less significant items. BASE YEAR price changes are compared to the price of regimen in a base year (representative starting period)

Answer 75

= number of points increase in CPIx100/value of CPI in first year

Answer 76

Measure of inflation generated by removing volatile items (that are from the headline CPI regimen to obtain an inflation rate that is more truly reflective of ongoing or core changes in the level of prices.

Answer 77

DIFFERENT SIZED REGIMENS measure prices of different baskets of goods and services. headline has bigger regimen. underlying removes volatile items whose prices are affected by one-off events. DIFFERENT STATISTICAL RESULTS headline usually shows higher rates if volatile items' prices are rising faster than other items due to one-off events. if prices of volatile items are falling faster than other items, headline rate is lower than underlying rate. DIFFERENT USES headline CPI used as guide to changes in the cost of living for households, underlying CPI used by RBA to inform what decisions to make about manipulating interest rates to slow persistent or core inflationary pressures.

Answer 78

Prices surveyed are only those paid by metropolitan households, may therefore not represent the cost of living for people residing outside of metropolitan areas. The weighting of items in the regimen may not be appropriate for all households and may fail to reflect the actual household expenditure. This can make the measure misleading. E.g. if meat prices pushed CPI up, this would be misleading for vegetarian households.

Answer 79

Demand inflation | Cost inflation

Answer 80

Rise in general prices caused by excessive aggregate demand when economic is NEAR productive capacity Occurs in boom when spending (demand) outstrips production (supply), causing widespread shortages.

Answer 81

Rise in general prices caused by less favourable aggregate supply factors that undermine profits by increasing production costs or decreasing availability/efficiency of resources, forcing them to increase prices to protect profits. - reverse: lower production costs = can reduce prices to compete and still make good profit = easing cost inflation pressures

Answer 82

reduced GDP - can be shown on diagram

Answer 83

weaker AD conditions = rise in stocks due to falling sales = widespread price discounting by sellers = slowing demand inflation during a contraction (recession/depression; can lead to deflation :( )

Answer 84

Rapid Inflation hurts undermines efficiency in RESOURCE ALLOCATION INTERNATIONAL COMPETITIVENESS eroded HOUSEHOLD AND BUSINESS SPENDING behaviour changes eventually causes UNEMPLOYMENT RATE OF ECONOMIC GROWTH slowed incomes and purchasing power redistributed UNEVENLY REMEMBER THERE ARE 6 2-3% is ideal rate of inflation (goal of low inflation); 2X3=6 consequences of rapid inflation

Answer 85

Some peeps gain purchasing power while most peeps' living standards go down e. g. - fixed income = income don't keep up with rising prices = poorer vs. flexible income = can get rising incomes = richer. - exporters less internationally competitive = fall sales, incomes = poorer vs. importers get higher sales, incomes = richer - borrowers of money = down disposable income cos interest rates rise = poorer vs. lenders = higher income cos interest rates rise = richer - some peeps also lose jobs and have to be on welfare payments = poorer

Answer 86

prices of shares, property and other assets rise faster than general inflation rate, so people redirect resources away from sustainable and productive long-term uses (e.g. business investment) to more speculative investments that rise faster in value, undermining efficiency in resource allocation

Answer 87

- local sales suffer as consumers switch to cheaper imports - exports likely to go down as overseas consumers prefer importing from countries where inflation is slower - imports>exports = exchange rate depreciates = reduced purchasing power and living standards

Answer 88

- demand inflation can incentivise businesses to increase investment spending to grow productive capacity = increasing potential economic growth OR can undermine consumer/business confidence so they slow spending, leading to recession - inflation leads to higher interest rates = further undermine confidence = slow credit-based spending = depressing economic growth and material living standards

Answer 89

- international competitiveness reduced = firms producing items for local or export markets can't compete against cheaper imports = depressed profits = closures = higher structural unemployment - business/consumer confidence down = slowed spending = lower profits (AS) = lower employment can depress both material and non-material living standards (e.g. low self-esteem, higher family tensions, crime rates etc.)

Answer 90

- causes higher interest rates = encourage saving and discourage credit-based consumption and investment spending - erodes confidence = slowing consumption and investment spending = adding to unemployment = eroding incomes and purchasing power - wealth effect -- rising prices for shares and property makes some people richer = they may spend more in the short-term

Answer 91

Increase in the level of production of G/S between one year and the next

Answer 92

annual percentage rise in real Gross Domestic Product (GDP)

Answer 93

the fastest possible rate of increase in production of G/S (3-3.5% real GDP growth) so as to cause employment growth without leading to inflationary, environmental, or external pressures.

Answer 94

Achieving a annual rate of increase in real GDP at which the economy can increase production of G/S without compromising the living standards of future generations (by depleting natural resources and reducing their ability to satisfy their needs and wants). a.k.a ecological sustainability

Answer 95

- 3 of the flows are equal in monetary value -- GDP (flow 4), total expenditure (flow 3), total incomes paid (flow 2) are all equal -- hence, estimates of GDP made using three different ways: 1. GDP(E) = total market value of expenditure (AD) 2. GDP(I) = total market value of incomes paid to suppliers of resources 3. GDP(P) = total market value of final G/S produced each year = value added in production by firms each year = total market value of sales minus cost of all inputs bought by firms

Answer 96

- inflation exaggerates rise in market value of G/S produced - deflation leads to underestimation of market value of G/S produced = misleading impression of change in national production (GDP)

Answer 97

Using chain volume GDP as measure of economic growth :)

Answer 98

- GDP is an underestimation caused by exclusion of non-market production e.g. black market, cash economy, household/individual non-market activity e.g. home repairs, DIY - Some values included in GDP are rough estimates that may be inaccurate as some G/S aren't sold/market in orthodox way e.g. cost of providing public goods, farm production consumed on farm - Quality changes may not be reflected in GDP e.g. quality can increase while price paid comes down - Statistical errors in adjusting for inflation and deflation

Answer 99

MATERIAL LIVING STANDARDS: - does not account for uneven distribution of incomes - population size - gdp only reflects rise in material living if its rate of increase is higher than that of population increase (causing GDP per capita to rise) NON-MATERIAL LIVING STANDARDS - changes in hours worked and leisure time - if economic growth results from workers working longer hours, leisure time may decrease, eroding non-material living standards - negative externalities - costs for third parties that lower non-material living standards e.g. pollution, overcrowding etc.

Answer 100

- short-term cyclical rate of economic growth influenced by AD factors which determine extent to which the economy's available productive capacity is used - longer-term potential sustainable rate of economic growth is determined by AS factors that govern economy's productive capacity

Answer 101

- helps raise real incomes and material living standards - creates more jobs and lowers unemployment - improves government's financial and ability to provide essential services

Answer 102

strong rate of economic growth that is faster than increase in population = rise in GDP per capita = real incomes per head and purchasing power rise = higher material living standards slower rates reverse effect

Answer 103

stronger rates of economic growth = businesses employ more resources to lift production = boosting jobs and reducing cyclical unemployment -- raises per capita incomes, consumption and material living standards + non-material living standards (improved mental health, reduced family tensions etc.) slower rate have reverse effect stronger rates due to technological advancement or aggressive cost-cutting or efficiency measures may temporarily cause rise in structural unemployment = fall in incomes, consumption and material living standards for some people (in short-term)

Answer 104

Incomes rise as GDP grows faster and less people on welfare as unemployment decreases, hence government makes more income through taxation and loses less through outlays and welfare = lower budget deficit and possibly budget surplus = can finance higher levels of welfare and outlays for the neediest + better infrastructure for public + public goods = improve society's wellbeing as more needs and wants met

Answer 105

A person over age of 15 years or over, who is able and willing to work, has a paid job.

Answer 106

When persons aged 15 years or over, who are 'actively looking for work', cannot find it.

Answer 107

Having the lowest rate of unemployment, around 4.5-5% of the labour force, consistent with achieving low inflation and other government economic goals.

Answer 108

No. There shouldn't be cyclical unemployment caused by weak AD, slow economic growth and recession.

Answer 109

Loss of jobs due to weak AD conditions, and a downturn in economic activity or recession. (think of contraction on business cycle)

Answer 110

People aged 15 years or over who are able and willing to work and are either employed or unemployed.

Answer 111

Reluctantly accepts that there will always be some natural unemployment., even in a healthy economy

Answer 112

The lowest rate of unemployment that does not cause inflation to rise (perhaps 4.5-5%). Due to seasonal, frictional, hard-core and seasonal factors, and associated with AS conditions.

Answer 113

1. STRUCTURAL FACTORS New tech makes some jobs obsolete e.g. ATMs; mismatch of skills held by unemployed and jobs available; business relocation/closures; microeconomic policies (e.g market deregulation) 2. FRICTIONAL FACTORS People unemployed during job search between one job and the next 3. SEASONAL FACTORS Some unemployment may occur at same time each year e.g. fruit pickers ``` 4. HARD-CORE FACTORS Personal characteristics (e.g. disability, criminal record) which make it harder to stay employed and hold down job ```

Answer 114

Non-Accelerating inflation Rate of Unemployment (NAIRU) = the lowest possible rate of unemployment that will not significantly accelerate inflation

Answer 115

= labour shortages = increased wage costs = unfavourable AS conditions as production costs higher (ACE) = firms pressured to pass on higher costs to consumers by raising selling prices to protect profits = cost inflation

Answer 116

- Aged 15 or over - Working full-time or part-time for more than 1 hour per week of pay Yes.

Answer 117

- aged 15 or over - actively seeking full-time or part-time work but unable to find it - able and willing to take up job in week prior to survey period

Answer 118

= number of people unemployed/total number of people in labour force x 100

Answer 119

Represents the proportion of people aged 15 and over who are members of the labour force (employed or unemployed)

Answer 120

= total number of people in labour force/ total number of people aged 15 or over in the population x 100

Answer 121

Number of unfilled job offers or positions

Answer 122

Refers to the extent to which the available labour is not working at its capacity

Answer 123

= Unemployment rate (%) + Underemployment rate (%)

Answer 124

Refers to the average number of weeks for which a person is unemployed

Answer 125

People who would like to work but are discouraged from seeking work for some reason (e.g. repeated failure to find work), meaning that they have left the labour force and are not 'actively looking for work'.

Answer 126

The underuse of workers who have jobs but are not working to their capacity e.g. working part time and wanting more hours, left idle, skills not used

Answer 127

- Definitions of employed and unemployed are somewhat random e.g. requirement that person works for over 1 hour per week - The hidden unemployed are not accounted for; including them would lead to much higher unemployment rate - Changes in participation rate and other factors (e.g. duration of unemployment) could cause unemployment rate to look better or worse - Not all people (only 0. 7% of Aus Pop) surveyed; thus stats may not be representative of true employment figures

Answer 128

- Cyclical Unemployment | - Natural Unemployment, including structural, frictional, seasonal and hard-core unemployment

Answer 129

Changing AD conditions: WEAK AD CONDITIONS reduced spending = firms notice rising stocks and lower demand = firms cut production = weakened demand for labour = rise in cyclical unemployment STRONG AD CONDITIONS heightened spending = firms notice falling stocks and higher demand = firms lift production = increased demand for labour = fall in cyclical unemployment

Answer 130

About 5% of the labour force or less (the government's goal in this area). This figure represents the non-accelerating rate of unemployment or NAIRU - the lowest unemployment rate that will not result in increased inflation.

Answer 131

Loss of jobs caused by businesses altering their way of producing goods and services and trying to cut costs and lift efficiency. It can be caused by... - use of tech - mismatch between skills of unemployed and job vacancies - business closures and relocation due to high costs, poor profits and lack of international competitiveness (influences by AS conditions) - some recent government aggregate supply policies

Answer 132

When people are unemployed between finishing one job and starting another.

Answer 133

A type of unemployment resulting from the termination of jobs at the same time each year due to the regular change in seasons e.g. ski instructors, fruit pickers etc.

Answer 134

The inability to secure a job due to personal characteristics e.g. pessimistic attitude due to past failures, criminal record, physical appearance, over-generous welfare etc.

Answer 135

GILT cos you aint providin for the fam GDP loss Income inequality increases Living standards deteriorate Tax revenue lost

Answer 136

Resources (labour) not used to full capacity and are idle. Thus, economy cannot reach PPF and potential level of economic activity and production (GDP) is not reached.

Answer 137

High unemployment reduces average incomes as people lose their jobs. Usually the middle or lower class are disproportionately affected by this as they are more likely to be affected by business closures and downsizing while the rich, who may have invested in assets, can grow richer. Thus, income inequality widens. High unemployment = less people undertaking paid work = lower average incomes = more people below line of poverty = widens the income gap between rich and poor.

Answer 138

Material living standards decline as average income decreases, causing purchasing power and consumption levels go down. Non-material living standards decline as being without job may cause low self-esteem, health, relationships and lead to higher crime rates + Budget deficit might happen due to loss of tax revenue, thus gov can invest less in other areas like edu, healthcare and provision of public goods = reduced non-material living standards.

Answer 139

High unemployment means less people pay income taxes and spend on G/S (lowering revenue through GST), reducing budget receipts. More people qualify for welfare, so budget outlays to provide this support increase = likely budget deficit

Answer 140

Very high unemployment: lower average incomes = lower spending = weak AD = slow demand inflation Very low unemployment: higher average incomes = higher spending = strong AD = accelerate demand inflation

1: Economic Activity and Australia's Goals Flashcards

(169 cards)