Economic Growth & Living Standards Flashcards
Explain the methods used to measure material and non-material living standards
GDP - Gross Domestic product - Money value of all the goods and services a country produces. Measures Material living standards.
OECD Better Life Index measures non material living standards like - having a job, income, education, environment and having rights (non material) to freedom of speech, free elections, access to leisure time.
Distinguish between a macroeconomic policy and a microeconomic policy
Macroeconomic policies that the government makes that affects the whole nation
Budgetary policy (money coming in and going out)
Monetary policy (reserve Bank of Australia controls interest rates - high interest rates less $ to spend, low interest rates = more $ to spend)
Microeconomic policy is where the government makes policies that affect a particular company, industry or market. The impact of these policies is on a much smaller scale. EG Taxi industry - more taxis could operate, easier to get a license, Uber was allowed. Means taxi drivers making less money because there were cheaper and other options.
Different types of Government Budgets -balanced, surplus, deficit
A balanced budget: this is where revenue is equal to expenditure
A surplus budget: this is where revenue is more than expenditure
A deficit budget: this is where expenditure is more than revenue
Explain the importance of economic growth
Economic growth is important because if more goods and services are being produced, this means that more people are being employed (and paid wages) to make them. People are then able to spend their wages on a wider variety of goods and services that may improve their living standards. When economic growth falls, it means that there is a decline in the number of goods and services being produced, which usually means a decline in the number of people being employed, and the wages they are paid. In turn, this often means a decline in their living standards
Limitations of GDP as a measure of economic growth
GDP doesn’t look at these important factors for enjoying life…..Having enough leisure time, Spending time with family and friends, Contributing to the community, Having a job that you find rewarding, Enjoying nature, Having good health, Being in a pollution-free environment, Living in a society where income and wealth are distributed fairly
How much economic growth to economists hope to see each year?
they hope to see more than 2%
Explain why GDP is important
If more goods and services are being produced, it means more people are employed and paid wages. Being able to spend wages on a wider variety of goods and services means people may be able to improve their living standards When economic growth falls, means there is a decline in the number of people being employed Less people employed = less wages = decline in living standards
Reasons for inflation, inflation winners and losers
One of the main reasons that prices rise is stronger demand in the economy for goods andservices. If demand is high enough that companies are unable to keep up with demand, can lead to a shortage of goods and services, which leads to price increases.Consumers feeling confident about their income and employment in the future Relatively low interest rates, encouraging consumers and business to borrow more.
Winners: High income earners, Importers (prices overseas cheaper than Aus), Borrowers (lower interest rates).
Losers: Low income earners (less $’s to spend and everything is more expensive), bank savers (dont earn much interest), exporters (goods cost more to buy and send)
Explain why the target range for inflation is 2-3%
If inflation goes higher, wages increase, this extra cost may be passed on to
consumers as higher prices
Higher taxes and interest rates may lead to increased
costs that businesses must bear
Businesses using imported raw materials may have to
pay more if the value of the Australian dollar falls
An increase in oil or energy prices can have a big
impact on costs for may businesses
What tax is collected by the Federal, State and Local governments
Federal: Income tax, Medicare levy, GST
State: Payroll tax, stamp duty and land tax
Local: Rates if you own a property.
The three tax structures used in Australia.
Proportional tax eg Company Tax which is the same for all companies.
Progressive Tax: Higher income = higher level of tax. eg: Income tax.
Regressive tax: Stays the same no matter your income eg tax leaving the airport is the same for everyone.
How do Australian’s benefit from tax collection?
Tax money builds our hospitals, jails, schools, builds our roads and funds the Police.
Provide examples of who must pay tax and who is tax exempt.
Individuals and businesses. Exempt: if you earn less than $18,200 PA, people who are on certain pensions, if you’re a religious or charitable organisation
What are the conditions under which superannuation must be paid by the employer
18 years + earning more than $450 per month before tax.
Under 18 earning more than $450 before tax per month and work more than 30 hours per week
Describe why the ‘Super Guarantee’ Percentage increases each year
So people have enough money saved up for their retirement. Government gradually increases the amount employers must contribute to workers superannuation, so they will have enough when costs of living rise over time
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