5 sector model Flashcards
What are the five sectors of the Australian economy?
- Household sector
- Business sector
- Finance sector
- Government sector
- Overseas or foreign sector
What equation represents the equilibrium in the economy?
S + T + M = I + G + X
What does the S stand for?
Savings
What does the T stand for?
Taxations
What does the M stand for?
Imports
What does the I stand for?
Investments
What does the G stand for?
Government spending
What does the X stand for?
Exports
Are savings a leakage or injection?
Leakage
Are investments a leakage or injection?
Injection
What is the Equilibrium condition of savings and investments?
S=I
Is taxation a leakage or injection?
Leakage
Is government spending a leakage or injection?
Injection
What is the Equilibrium condition of Saving, Taxations, Investments and Government Spending?
S+T=I+G
Are imports a leakage or injection?
Leakage
Are exports a leakage or injections?
Injections
A shop assistant collects her weekly wage
Income (Y)
A plastics firm installs a new moulding machine
Investment (I)
Fans buy meat pies at a softball match
Consumption (C)
Australian wheat growers sell grain to China
Export (X)
A schoolgirl opens a building society account
Savings (S)
Unit owner in Byron Bay pays local council rates
Taxation (T)
A car enthusiast buys a vintage Rolls Royce from overseas?
Import (M)
An 80-year-old woman collects her pension cheque
Government Spending (G)
When is the budget outcome a balanced budget?
When government spending (G) is equal to taxation revenue (T), G=T
When is the budget in deficit (owes money)?
When government spending (G) is greater than taxation revenue (T), G > T
When is the budget inn surplus (more money)?
When government spending (G) is less than taxation revenue (T), G < T
For the economy to be balanced what must happen?
total leakages must be equal to total injections
What will happen is leakages are greater than injections?
money supply may contract
What does GDP stand for?
Gross Domestic Product
What does total spending equal?
Total spending = E = C + I + G + (X-M)
How will increased saving effect the equilibrium level of the economy?
fall
How will increased investment effect the equilibrium level of the economy?
rise
How will lower taxes effect the equilibrium level of the economy?
rise
How will lower government spending effect the equilibrium level of the economy?
fall
How will increased export receipts effect the equilibrium level of the economy?
rise
How will decreased import levels effect the equilibrium level of the economy?
rise
How will higher government spending effect the equilibrium level of the economy?
rise
