AOS 2- Domestic economic goals

Question 1

Living standards

Answer 1

The aggregate welfare of people in a country like Australia, made up of both material factors (such as access to goods and services) and non-material factors (such as quality of life)

Question 2

Material Vs nonmaterial living standards

Answer 2

Material+ economic wellbeing–> quantity of tangible/physical G/S

Nonmaterial= Quality aspects of a persons daily existence

Question 3

Factors effecting living standards

Answer 3

PEACLL

–> access to g/s
–>environment quality
–> physical and mental health
–>life expectancy
–> crime rate
–>literacy rates

Question 4

Reasons to pursue economic growth

Answer 4

One growth in real income. Two Lowering in the unemployment rate.
Three. Increase ability of governments to provide essential services and avoid rising levels of deaths.

Question 5

optimal rate of economic growth

Answer 5

3 to 3.5% over an economic cycle.

Question 6

consequences of not achieving SSEG

Answer 6

Is the low 3% growth in real income is too low. The employment rate will be too high. The government will need to run a budget deficit in order to provide essential services without taxpayers revenue.

Is above 3.5% this can create inflationary pressures external pressures or environmental pressures

Question 7

economic activity

Answer 7

GDP= C+I+G+(X-M).
GNE=C+I+G

Question 8

SSEG

Answer 8

The governments goal for strong and sustainable economic growth is to achieve the highest growth rate possible real GDP of 3 to 3.5%, consistent with strong employment growth but without running into unacceptable inflationary external and/or environmental pressures

Question 9

GDP growth

Answer 9

GDP2-GDP1/GDP1

Question 10

employed

Answer 10

When someone is 15 years of age and over and working more than one hour a week in return for some form of remuneration

Question 11

unemployed

Answer 11

When someone is over 15 without work or working for less than one hour per week and actively looking for more work.

Question 12

hidden unemployment

Answer 12

Unemployed not included in the calculation of our employment as I have given up looking for wor

Question 13

under/disguised employment

Answer 13

Underemployed are individuals who have a job however they would prefer to be working more hours and therefore are unemployed to an extent

Question 14

long term unemployment

Answer 14

Being unemployed for more than 12 months

Question 15

NAIRU

Answer 15

Non accelerating inflationary rate of unemployment –> 4-4.5%

Question 16

Types of unemployment

Answer 16

Structural unemployment: the skills of the unemployed do not match the skills required in the economy

Seasonal unemployment where a person is unemployed because their skills are only demanded during certain times of the year

Frictional unemployment where a person is unemployed for a period of time while they are moving from one job to another

Hard-core unemployment where a person is unemployed due to mental physical or other characteristics that prevent them from receiving a job offer

Cyclical unemployment unemployment occurs when the economy is not operating at its full capacity due to ad deficiencies

Question 17

consequences of unemployment

Answer 17

Loss of GDP, loss of tax revenue, greater income inequality, reduction in living standards.

Question 18

goal of low inflation

Answer 18

Goal of low inflation is to achieve a sustained increase in the general level of prices of between 2 to 3% on average over the medium-term a.k.a. priced stability

Question 19

inflation

Answer 19

PI2-PI1/PI1

Question 20

demand inflation vs cost inflation

Answer 20

Demand inflation is inflation caused by changes factors that increase or decrease aggregate demand. Cost inflation is inflation cause by changes in factors that impact on accurate supply or supply-side pressures or capacity constraints.

Question 21

4 sector circle flow model

Answer 21

incomes flow around economy, long term all sectors are =.

1-factors of production
2- incomes
3-expenditure
4-flow of final g/s

Question 22

aggregate supply

Answer 22

The total volume of goods and services that all suppliers have produced and supplied over a period of time.

Question 23

factors that affect AS

Answer 23

inflation,
quantity of FOP
Quality of FOP
COP
Tech Change
prod growth
Exchange rates
Climatic conditions

Question 24

AD

Answer 24

For some or total value of a expenditure on final goods and services produced by a nation and measured over a period of time equals GDP

Question 25

Private consumption expenditure

Answer 25

Total value of all expenditure on individual and collective goods incurred by resident households and non-profit institution serving households
60% of Ad

Question 26

Private investment expenditure

Answer 26

Expenditure with the purpose of expanding the productive capacity and productivity of firms
15-20% +most volatile

Question 27

Government spending

Answer 27

Includes expenditure by all levels of government federal local and state

G1-current expenditure on goods or services not capital in nature therefore no ongoing benefit created for example health education defence office stationary and salaries- stable

G2-Capital expenditure which is an investment expenditure on goods and services of a capital nature therefore providing ongoing benefit for example physical hospitals schools or roads

20% of AD

Question 28

X-M

Answer 28

Net exports also referred to as trade balance. X is spending on imports by foreign households businesses governments or other institutions. M is spending on imports by Australian households businesses governments or other institutions 60% of imports in the production process.

very volatile, net effect Is around 4% of AD

Question 29

factors affecting AD

Answer 29

Inflation. Disposable income. Interest rates. Consumer confidence. Business confidence. Exchange rates. Levels of economic growth overseas.

Question 30

consequences of high inflation

Answer 30

Erodes purchasing power. Resource miss allocation. Reduces international competitiveness. Redistributive affects. Savings and investment. Wage price spiral.

Question 31

Consequences of low inflation

Answer 31

Consumers delay purchases expect prices to fall reducing private consumption expenditure. Business confidence declines leading to reduce spending decreasing private investment expenditure and layoff employees.