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Economics > AT3 > Flashcards

AT3 Flashcards

1
Q

Ecological Sustainable Development

A

relates to utilising our scares resources to satisfy the needs and wants of present/future generations (intergenerational quality)

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2
Q

Sustainable development of our resources aims to ensure

A
  • Non depletion of non-renewable resources.
  • Biological diversity
  • Increased quality of life
  • Decreasing our air and water pollution
  • Policy makers are aware of the effects of the
    government environmental decisions which are often irreversible
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3
Q

Externality

A

When a third party who was not involved in choosing to incur the cost/benefit is affected

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4
Q

Private Costs and Benefits

A

Borne or enjoyed by produces or consumers who have chosen to produce/buy the good/service

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5
Q

Social costs and Benefits

A

Borne or enjoyed by society in general, cost or benefit is rarely factored in private decisions

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6
Q

Merit goods

A

Beneficial for an individual

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7
Q

Demerit goods

A

Disadvantageous for an individual

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8
Q

Internalise negative externality

A

making the public cost (negative externality) a factor for business. Ie Taxing heavy carbon emitting businesses

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9
Q

Market Failure

A

When a market outcome is unsatisfactory to society

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10
Q

Environmental Issues

A

Environmental Issues

  • Natural environments effects human’s health
  • Pollution – mining and manufacturing associated with industrialisation and globalisation creates pollution
  • Climate change – increasing ‘living standards’ contributes to carbon emissions
  • Resource depletion -> free rider problem and “tragedy of the commons; resources are used more than socially optimal, causing market failure
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11
Q

Environmental destruction

A

A reduction of quantity and quality of natural resources (shifts PPC inwards)

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12
Q

Targets

A

renewable energy target (Australian government target policy designed to reduce emissions from greenhouse gases in the electricity sector). This has legal obligations.

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13
Q

Subsidies

A

A cash payment given by the government to lower price of a good service. Encourage the production of environmentally friendly goods/services

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14
Q

External Stability

A

External stability is an aim of government policy that seeks to promote sustainability on the external accounts so that Australia can service its foreign liabilities in the medium to long run and avoid currency volatility.

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15
Q

Causes of Impact to External Stability

A

1) Current Account Stability
- Key way to measure external stability is using CAD as a percentage of GDP
- CAD greater than 5% of GDP leads to debt accumulation that is unsustainable
2) Dutch Disease: discovery of natural resources simultaneous to increasing demand. Appreciation of currency harming other export industries
3) Changes in Terms of trade also effects external stability
4) Net foreign debt
5) Net foreign Liabilities
6) Exchange rate
7) External stability policies

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16
Q

Current Account Deficit - external stability

A
  • CAD as a percentage of GDP can be used to measure external stability
  • CAD averaged in Aus since GDP
  • CAD greater than 5% of GDP leads to a debt accumulation that is unsustainable
17
Q

Dutch Disease

A

discovery of natural resources simultaneous to increasing demand. Leads to appreciation of currency and thus other export industries fail.

18
Q

Terms of Trade

A

Changes in terms of trade also indicate changes in external stability.
Prior to 2000’s, global commodity prices were falling, and our export prices / TOT was low. Low export revenue caused our growing trade deficit and a worsening of CAD

19
Q

Net Foreign Debt

A

Net foreign debt is the total stock of loans owed by Australian’s to foreigners, minus the total stock of loans owed by foreigners to Australian’s

20
Q

Net Foreign Equity

A

This poses less of a risk because servicing (dividends, profits) only happens when the business/asset is generating a return

21
Q

Exchange Rate

A

Changes in the value of the dollar can make it more difficult to pay off foreign debt

22
Q

Aggregate Demand

A

total amount of demand for goods/services within economy

  • Consumption (household)
  • Investment (business)
  • Government (expenditure)
  • Net Exports
23
Q

Aggregate Supply

A

Total amount of goods and services (productive capacity) an economy can supply
Price increase leads to output increase (expansion in AS)

24
Q

Macro-economic equilibrium - AD/AS diagram

A

Total output demanded = Total output supplied

25
Q

AD/AS Diagram

A

Determines GDP and Price

When aggregate demand shifts outwards…

  • Increased price and output
  • Increase in economic growth
  • Increase in Inflation

When Aggregate supply shifts outwards…

  • Increased output, decreased price
  • Increased economic growth
  • Lower rates of inflation
26
Q

Economic Growth

A

An increase in the output produced by an economy over a period of time (usually one year)
Measured by rate of change in Gross Domestic Product
Real GDP y2 - Real GDP y1 / Real GDP y1 x100

27
Q

Nominal GDP vs Real GDP

A

Nominal GDP

  • Considered market value (influenced by price level)
  • If inflation increase nominal GDP will increase

Real GDP

  • Adjust for inflation
  • Looks at changes in output itself
28
Q

Statistics / Facts - UNEMPLOYMENT

A

5.5% current rate

Should aim to be between 4-5 %

29
Q

Economic Growth in Australia

A

Australia has had strong stable economic growth caused by:

  • Strong productivity growth
  • Rising asset prices
  • Strong Macro-economic management (fiscal, monetary policy)
30
Q

External Stability

A

CAD has historically fluctuated between 3-6% of GDP in Australia and currently sits at around 3.5%
Average value of -3.2%

31
Q

Environmental sustainability

A

by utilising water more efficiently within Australian households we would save $2 billion by 2030

32
Q

Economic growth stats

A

Australai has seen a dip in economic growth

Economics (8 decks)

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