Atar notes summarised cue cards

Question 1

Inflation definition

Answer 1

sustained increase in general price level over time

Question 2

How is inflation measured in australia

Answer 2

CPI index, calculated by taking averadge price of a basket of consumer goods weighted based on their relative importance then compared to last years

Question 3

GDP definition

Answer 3

measure of totoal amount of production that occurs in an economy over a period of time

Question 4

Real GDP

Answer 4

value by using previous prices and current volumes to determine total production value

Question 5

Material living standards

Answer 5

ability of households to acess goods and services

Question 6

non material living standards

Answer 6

aspects that contribute to the quality of life, unconnectedd to material possesions

Question 7

factors affecting living standards

Answer 7

-acess to goods and services: higher incomes and more goods, does not account for countries with large gaps between upper and middle classes
-environmental quality
-physical and mental health
-life expectancy
-crime rates (less money on law enforcement if AD is higher)
-literacy rates

Question 8

issue with the circular flow model

Answer 8

all aspects are deemed as equal as it does not include the leakages or injections of an economy

Question 9

financial sector

Answer 9

consumers choose to save money in banks, banks temporarily use this to invest in capital

Question 10

Governemnt sector

Answer 10

workers must pay tax, government use this money to spend on products that help the economy/ for disadvantaged households

Question 11

External sector

Answer 11

some people in australia spend money on improts while others in diffrent countries spend money on exports

Question 12

boom definition

Answer 12

when high levels of economic growth are not sustainable

Question 13

largest component of the sectors

Answer 13

C -60%

Question 14

I is worth

Answer 14

15-20% of aggregrate demand

Question 15

G 1 refers to

Answer 15

current expnditure the government pays for to maintain day to day processes (e.g wages and pens/ pencils for workers)

Question 16

G2 refers to

Answer 16

government investing/ infastructure expenditure (e.g building new airports, roads, infasturture)

Question 17

percentage of G

Answer 17

20%

Question 18

percentage of x

Answer 18

20-24%

Question 19

percentage of m

Answer 19

20-24%

Question 20

factors that influence AD

Answer 20

-exchange rate
-rates of growth overseas (if higher= more exports, if lower= less exports)
-business confidence
-consumer confidence

Question 21

on a graph of AD we label x and y as

Answer 21

x= real GDP
y=prices

Question 22

what does it mean by a inverse relationship between quantity demanded and price in AD

Answer 22

-as price increases the quantity demanded decreases
-as price decreases the quantity demanded increases

Question 23

reasons for an inverse relationship between price and quantity demanded in AD

Answer 23

-wealth effect, as a price increases people feel less wealthy and opposite if there is a decrease in price
-intrest rate effect, lower prices mean more saving money and a lower cost of living, high supply of money to be borrowed
-international competitiveness, ability of australian firms to compete with foreign firms in terms of price and quality, if our prices are low more overseas firms will want to buy our products

Question 24

Aggregrate supply

Answer 24

tototal value of goods and services that all producers in australia are willing and able to supply overtime (highest once economy reaches Productive capacity)

Question 25

Factors influencing Aggregrate Supply

Answer 25

-cost of production -productivity growth -climactic conditions -government restrictions -business confidence -quantity of resources ( more resources discovered, more immigration) -quality of resources (mire skilled labour, better technology) -exchange rates (AUD appreciates meaning you can buy more )

Question 26

looking at the graph display each point on the AS graph

Question 27

Looking at the graph display each point on the AS and AD graph

Question 28

first stage of keynesian model

Answer 28

1. flat level, wage level below which people fefuse to work due to AD being so low, results in a flat section, Real GDP is low aswell as inflation

Question 29

second stage of keysian model

Answer 29

2. as price levels pick up, firms become more willing to supply to a market, economy approaches its productive capacity

Question 30

third stage of the keysian model

Answer 30

3. at these high prices the economy is working at its productive capacity with no spare resources, represented by the steepness of the ppc, only can be changed if there are better supply side conditions (climactic conditions, discovery of new resources, immigration)

Question 31

the goal of strong and sustainable economic growth

Answer 31

strong=wants this to be strong so we can avoid spare capacity (unemployment), results in higher incomes thus more tax sustainable=higher is not always better, if too high there is execissive inflation pressure, reduced intertemporal efficiency

Question 32

governments goal of strong and sustainable growht is

Answer 32

fastest rate if increase in production of goods and services that does not cause inflationary, external, or environmental pressures real GDP at 3-3.5%

Question 33

consiquences if economic growth is too high

Answer 33

-environmental degredation (escilation of negative externalities, destruction of ecosystems) -higher inflation rates (little to no productive capacity left) -external pressures that weaken the trade balance and currancy

Question 34

the consiquences if economic growth is too low

Answer 34

-higher unemployment -weaker govt. financial conditions recduced ability to provide adequate community resources

Question 35

highest rate of inflation was in

Answer 35

2021-22 ( 6.1 %), highest in 32 years

Question 36

recent changes in GDP have been unsustainable such as

Answer 36

0 percent in 2019-2020 to 1.5 in 2020-21 and 3.6 in 2021-22

Question 37

lowest inflation in the last few years

Answer 37

in 2022 it was at 3.2 its lowest in 44 years

Question 38

recent aggregrate demand effects effecting the economy

Answer 38

-business confidence -consumer confidence -disposable income

Question 39

calculation for adjusting GDP at current prices

Answer 39

chain volume GDP for year 2 = Price index in the base of reference year / price index in the year to be adjusted x GDP at market prices in the year to be adjusted/ ------ ---------1--------------

Question 40

goal of inflation and unemployment by the government

Answer 40

inflation=2-3% Unemployment=4-4.5%