aos2

Question 1

income

Answer 1

total incomes earned by those who have contributed to the production of goods and services produced

Question 2

production

Answer 2

total value of goods and services produced in an economy

Question 3

expenditure

Answer 3

total amount of spending undertaken on goods and services produced

Question 4

household income

Answer 4

all current receipts received by the household or its members which are available or intended to support consumption

Question 5

factor income

Answer 5

arises due to the result of productive activity
it is paid to the factors of production
it is included in the national income estimates
e.g rent/wages/profit

Question 6

transfer income

Answer 6

doesn’t arise due to productive activity and isn’t paid to factors or production and isn’t included in national income estimates
e.g gifts/subsidies/scholarships

Question 7

the difference between factor and transfer income

Answer 7

whether or not income received is for rendering a productive service

Question 8

private/market income

Answer 8

received in market place primarily because individual contributed to the production of goods or services

Question 9

gross income

Answer 9

received in the market place due to contributing to production + direct cash benefits from the government (pensions/childcare)

Question 10

disposable income

Answer 10

gross income minus direct taxes (personal income tax)

Question 11

social wage income

Answer 11

disposable income + indirect government benefits in the form of goods and services (education/healthcare)

Question 12

wealth

Answer 12

value of assets owned by individuals that are handed down through generations

Question 13

relationship between income and wealth

Answer 13

income increases leading to an increase in money left over leading to an increase in saving and investment which will grow overtime leading to an increase in wealth. as the cycle continues the wealth gap grows

Question 14

nominal income

Answer 14

income received by an individual measured overtime. doesnt take into account its purchasing power

Question 15

real income

Answer 15

equal to nominal income after accounting for the impact of changes in inflation. Guide to its purchasing power

inflation greater than rise in nominal leads to a fall in real
inflation less than rise in nominal leads to rise in real
inflation equal to rise in nominal leads to no change in real

Question 16

equity

Answer 16

sufficient income to purchase and access basic goods and services and enjoy reasonable living standards at a level deemed acceptable to society.

fairness

Question 17

equality

Answer 17

everyone has equal access to goods and services and income

Question 18

absolute poverty

Answer 18

people living in situation where they have insufficient income to purchase basic goods and services (food/water/shelter)

Question 19

relative poverty

Answer 19

household has low income compared with what is needed to maintain agreed reasonable living standards

Question 20

henderson poverty line

Answer 20

fixed proportion of average income per average household (2 adults 2 children). government uses line to determine changes needed to welfare benefits to ensure households have a ‘dignified standard of living’

Question 21

effects of poverty on material living standards

Answer 21

impact health and education of those in poverty
households in poverty are less likely to financial means to support healthy diets visit medical professionals and pay for medicine

Question 22

effects of poverty on non-material living standards

Answer 22

poor physical and mental health
poor outcomes limit abilities for change in the future
increase in social unrest which can lead to anti-social behaviour such as crime
develop class system

Question 23

measuring income inequality

Answer 23

ABS collect and analyse: gross household income, household disposable income and equivalised household income where the information will be ranked and placed in quintiles

Question 24

final income

Answer 24

social wage minus production or indirect taxes

Question 25

discretionary income

Answer 25

income available for consumption on goods and services following payment of unavoidable expenses (rent)

Question 26

equivalised household income

Answer 26

disposable income of a household adjusted to take into account the size and consumption of the household

Question 27

lorenz curve

Answer 27

representation of degree of equality in distribution of wealth or income. away from straight line means greater inequality

Question 28

gini co-efficient

Answer 28

``` between 0 and 1. indicator of the degree of inequality in the distribution of wealth. 0.3-0.4 0= equality 1= inequality ```

Question 29

quality of human capital causing income inequality and poverty

Answer 29

``` skills talents and ability differences in workforce. high wage (remuneration) is given when supply of skill is low relative to demand ```

Question 30

unemployment causing income inequality and poverty

Answer 30

people actively seeking jobs but aren't in paid employment.

Question 31

frictional unemployment

Answer 31

unemployed because moving from one job to another

Question 32

structural unemployment

Answer 32

skills available aren't in demand anymore

Question 33

long term unemployment

Answer 33

people unemployed for more than a year

Question 34

luck causing income inequality and poverty

Answer 34

some wealthy households gain fortune through factors such as lottery

Question 35

inheritance causing income inequality and poverty

Answer 35

most wealthy households inherited portion of wealth which can be invested and generate income

Question 36

sovereign indebtedness causing income inequality and poverty

Answer 36

build up of debt incurred by governments when government spending is greater than revenue leading to a budget deficit that requires borrowing and cut spending relative to tax slowing economic activity because a reduction in injunctions leading to unemployment and increase poverty

Question 37

equity in the distribution of income requires

Answer 37

people having sufficient income to buy goods and services people never experience absolute poverty huge inequalities in income are avoided

Question 38

social costs of inequality

Answer 38

``` helplessness and despair mental health problems social unrest and anti-social behaviour 'class system' conspicuous consumption inequality of opportunity ```

Question 39

economic costs of inequality

Answer 39

government and taxpayer costs to support those who need income short term costs to growth decrease AD

Question 40

social cost of equity

Answer 40

less people motivated to create and be entrepreneur less people want to study lots to become doctors/lawyers less people persue goal of increase income and wealth

Question 41

economic cost of equity

Answer 41

quality of nations capital is low decrease levels of labour and productivity, increasing cost of production, increasing inflation, leading to a depreciation in competitiveness, decrease demand for exports, decreasing AD, no economic growth increase unemployment

Question 42

regressive tax

Answer 42

applied uniformly, taking a larger % from low income earners compared to high income earners (GST)

Question 43

market failure occurring due to weak competition

Answer 43

monopolies and oligopolies increase power to set prices, decrease innovation, decrease efficiency, decrease production, increase prices, undermine society's general wellbeing. no incentive to be efficient because high power means can still make profit

Question 44

market failure occurring due to asymmetric information

Answer 44

lack information and knowledge leads to poor decisions, wasted resources, inefficiency

Question 45

market failure occurring due to negative externalities

Answer 45

ignore costs of consumption and production on third party to gain profit leads to overproduction and lowering social wellbeing

Question 46

market failure occurring due to income inequality

Answer 46

unregulated market operations lead to severe income inequality, decreasing efficiency, and low general wellbeing. people with sufficient income participate in market and influence resource allocation therefore necessities of life needed by all are underproduced