econ U3 AOS 2 Flashcards
GDP
The total market value of all final goods and services produced in a given time period (usually one year)
The goal of strong and sustainable economic growth
the highest growth rate possible, consistent with strong employment growth, but without running into inflationary, environmental or external pressures. Generally considered to be within the range of 3 - 3.5% per annum.
Why is strong and sustainable economic growth pursued?
To boost material living standards as measured by real GDP per person. Stronger growth increases access to the goods and services that improves our material wealth and lifts living standards.
Sustainable development
Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
Inflation
a sustained increase in the general or average price level over time
The goal of low inflation
2-3% growth in inflation per annum on average over the course of an economic cycle to maintain price stability & purchasing power within the economy.
Bracket creep
Where nominal wage increases, move taxpayers into higher income tax brackets which reduces their real disposable income.
Real wages
the actual purchasing power of income
International Competitiveness
The ability of an economy’s firms to compete in international markets.
Consumer Price Index (CPI)
The most common measure of inflation or average price level of a basket of G+S measured over a period of time and is calculated on a quarterly basis in March, June, September and December
‘fixed’ basket of goods and services
a high proportion of expenditure by metropolitan households.
Approximately 100,000 prices are collected each quarter across the eight capital cities and the ‘basket’ covers a wide range of goods and services, arranged across eleven groups, which are weighted according to their relative importance to the ‘typical’ metropolitan household.
inflation rate =
Price index (end) - Price index (beginning)
———————————————— X100
Price index (beginning)
headline inflation
The price movements of all goods and services contained in the CPI
underlying rate of inflation
A rate of inflation based on consumer price index that excludes goods with highly volatile (unstable) prices. This is most notable in food and energy prices.
Trimmed Mean (CPI)
The prices of all CPI items but removing the top 15% of goods and services whose prices increased the most and the bottom 15% of goods and services whose prices increased the least.
Deflation
A sustained decrease in the general or average price level. This means that prices on average are falling, but it occurs relatively infrequently in Australia.
Disinflation
Refers to fall in the rate of inflation. For example, if Australia’s rate of inflation falls from 4% in year 1 to below 2% in year 2, prices on average are still rising over the period (i.e. inflation still occurs), it’s just that prices are not rising as rapidly in year 2 when compared to year 1.
Employed (ABS)
Over 15 years of age and working more than one hour per week in return for some form of measurable remuneration (such as wages)
Unemployed (ABS)
Over 15, without work or working for less than one hour per week, and actively looking for (more) work.
Goal of full employment
The lowest rate of unemployment that can be achieved without running into excessive inflationary pressure. Often referred to as the NAIRU, and is currently considered to be 4.5%.
