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economics unit 2 > aos2 > Flashcards

aos2 Flashcards

1
Q

income

A

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

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2
Q

production

A

total value of goods and services produced in an economy

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3
Q

expenditure

A

total amount of spending undertaken on goods and services produced

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4
Q

household income

A

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

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5
Q

factor income

A

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

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6
Q

transfer income

A

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

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7
Q

the difference between factor and transfer income

A

whether or not income received is for rendering a productive service

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8
Q

private/market income

A

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

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9
Q

gross income

A

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

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10
Q

disposable income

A

gross income minus direct taxes (personal income tax)

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11
Q

social wage income

A

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

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12
Q

wealth

A

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

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13
Q

relationship between income and wealth

A

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

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14
Q

nominal income

A

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

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15
Q

real income

A

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

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16
Q

equity

A

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

fairness

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17
Q

equality

A

everyone has equal access to goods and services and income

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18
Q

absolute poverty

A

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

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19
Q

relative poverty

A

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

20
Q

henderson poverty line

A

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’

21
Q

effects of poverty on material living standards

A

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

22
Q

effects of poverty on non-material living standards

A

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

23
Q

measuring income inequality

A

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

24
Q

final income

A

social wage minus production or indirect taxes

25
Q

discretionary income

A

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

26
Q

equivalised household income

A

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

27
Q

lorenz curve

A

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

28
Q

gini co-efficient

A 
between 0 and 1. 
indicator of the degree of inequality in the distribution of wealth. 
0.3-0.4
0= equality 
1= inequality
29
Q

quality of human capital causing income inequality and poverty

A 
skills talents and ability differences in workforce.
high wage (remuneration) is given when supply of skill is low relative to demand
30
Q

unemployment causing income inequality and poverty

A

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

31
Q

frictional unemployment

A

unemployed because moving from one job to another

32
Q

structural unemployment

A

skills available aren’t in demand anymore

33
Q

long term unemployment

A

people unemployed for more than a year

34
Q

luck causing income inequality and poverty

A

some wealthy households gain fortune through factors such as lottery

35
Q

inheritance causing income inequality and poverty

A

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

36
Q

sovereign indebtedness causing income inequality and poverty

A

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

37
Q

equity in the distribution of income requires

A

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

38
Q

social costs of inequality

A 
helplessness and despair
mental health problems
social unrest and anti-social behaviour 
'class system'
conspicuous consumption 
inequality of opportunity
39
Q

economic costs of inequality

A

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

40
Q

social cost of equity

A

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

41
Q

economic cost of equity

A

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

42
Q

regressive tax

A

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

43
Q

market failure occurring due to weak competition

A

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

44
Q

market failure occurring due to asymmetric information

A

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

45
Q

market failure occurring due to negative externalities

A

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

46
Q

market failure occurring due to income inequality

A

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

economics unit 2 (3 decks)

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