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commerce 200hr > economics > Flashcards

economics Flashcards

1
Q

Draw the 5 sector circular flow of income. Labell all sectors and flows.

A

household sector puts in economic resources (labour) and consumption into the firms sector and firms give households income and goods and services
leakages and injections
savings-finacial sector-investment
taxation-government sector-governemt expenditure
imports-overseas sector-exports

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2
Q

define interdependence

A

they are reliant on one another

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3
Q

define and identify leakages

A

the decrease level of income in circular flow of income
savings (S), taxation (T), import (M)

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4
Q

define and idetify injections

A

they increase level of income in circular flow of income.
such as invesment (I), government expenditure (G), exports (X)

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5
Q

define the household sectors

A

(consumers) hold economic resources of households such as land, labour, capital and enterprise who sell their resources to the firms in exchange for an income, their income is the. used to buy various goods and services this is know as consumption

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6
Q

defune the firms sector

A

use the resources of households to produce goods and services, know as production

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7
Q

define inflation

A

a general increase in prices and fall in purchasing value of money. prices fo up across a number of sectors in the firms

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8
Q

why does inflation occur?

A

inflation is done when demand increases or there is a shortage of supply and businesses want to take advantage of the increase in consumer spending

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9
Q

define “basket of goods”

A

it is used to measure inflation by buying the same things over the months and comparing prices, if they went up or down

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10
Q

define interventions

A

used to stop-hyperinflation and to smooth the business cycle

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11
Q

what are the types of interventions and what do they do

A

government (fiscal policy)- tax, taxes are raised to slow things down in the business cycle, taxes are lowered to speed things up in the business cycle
RBA (monetary policy)- interest rates, IR is raised to slow business cycle, IR is lowered to speed uo business cycle

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12
Q

what is a buyer’s market

A

when there is more supply than demand therefore prices are lowered

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13
Q

what is a seller’s market

A

when there is more demand than supply therefore prices are raised

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14
Q

define the finacial sector

A

refers to financial institutions such as bankcs that as intermediaries (link) between the savers and borrowers in an economy. they receive the savings of individuals and businesses and then lend this money to others who need to borrow money

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15
Q

define the government sector

A

refers to local, state and federal governments
taxes (leakages)- the government collects taxes from individuals and businesses when they earn an income or profit
goverment expenditure (injection)- when governments spend money raised through taxation on public and private facilities

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16
Q

define equilibrium (in the context of the circular flow model) and its impact on the GDP

A

when leakages and injections are equal and balanced. GDP remains the same, stable, unchanged

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17
Q

define disequilibrium and its types

A

when leakages and injections are unbalanced
S+T+M>I+G+X (leakages>injections)
S+T+M<i></i>

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18
Q

describe how the different types of disequilibrium impacts the GDP

A

S+T+M>I+G+X (leakages>injections) - GDP reduces because leakages are greater than injections
S+T+M<i></i>

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19
Q

how do businesses and households interdepend on each other

A

businesses depend on households to provide labour and purchase products
households depend on businesses for their major source of income and to probide goods and services

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20
Q

how do financial institutions and households interdepend on each other

A

financial institutions depend on households to deposit their savings (enables them to loan those funds to businesses)
households depend on financial institutions to enable them to save their money (to keep it safe and to pay interest to the household)

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21
Q

how do governemnts and households interdepend on each other

A

governments depend on housefilds to pay taxes
households depends on governements to provide public infrastructure and services (including roads, highways, police, hospitals)

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22
Q

how do businesses and financial interdepend on each other

A

business depend on financial institutions as a source of funds tk facilitate expansion of their business
financial institutions depend on businesses as a source of revenue for the banks in earning interest on loans

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23
Q

how do government depend on the businesses and households

A

government depends upon the actions and decision of households and businesses in order to increase the level of GDP in the economy

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24
Q

how do businesses and households depend on the government

A

businesses and households depend on the government to determine spendings in order to ensure the economy achieves sustainable growths

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25
Q

identify economic indicators

A

production/output (GDP)=C+I+G+(X-M)-it is the amount of money produced over the year, unemployment - it is the number of people out of work, wages, consumer spending/consumption, prices/inflation (CPI)

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26
Q

what happens when an economic indicator changes

A

the change of one indicator has an impact on the business cycle

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27
Q

Define GDP (gross domestic product)

A

the value of total production (output) of goods and services in the economy and it is used to measure economic activity

28
Q

define a peak/boom in the business cycle

A

a period of strong economic growth

29
Q

define recession in the business cycle

A

a period of strong economic contraction, caused by lack of spending, which is 2 consecutive quarters (6 months) of negative GDP growth - more leakages (less money flowing in the economy) and less injections

30
Q

what is RBA

A

reserve bank of australia

31
Q

define depression in the business cycle, what are the impacts

A

a severe and sustained recession resulting in many business failures, high and sustained levels of unemployment and sometimes falling prices

32
Q

define expansion in the business cycle

A

-production increases
-unemployment decreases
-wages increase
-consumer spending increases
-prices increase
-it is a period of strong economic growth

33
Q

define contraction in the business cycle

A

-production decreases
-unemployment increases
-wages decrease
-consumer spending decreases
-prices decrease
-GDP decreases

34
Q

what is a market

A

the exchange process between sellers and buyers

35
Q

define ‘seller’

A

the producer of goods or services who make the supply available, they want to sell at the highest price

36
Q

define ‘buyer’

A

consumers or those making purchases who create a demand for the goods and services they want to buy at the lowest price

37
Q

define ‘demand’

A

the quantity of a product that consumers are willing and able to buy at a particular price

38
Q

define ‘supply’

A

the quantity of a product that businesses are willing to sell at a particular price

39
Q

what is the law of demand

A

the relationship between price and quantity demanded as price increases, quantity demand falls as prices decrease, quantity demand rises

40
Q

what is the law of supply

A

the relationship between price and quantity supplied as price increases, quantity supplied rises as prices decrease, quantity supplied falls

41
Q

define market equilibrium

A

-when the amount being supplied meets the amount being demanded
-demand equals supply
-the point at which buyers and sellers agree on a price

42
Q

define shortage, what happens

A

when demand is greater than supply, this causes prices to increase

43
Q

define surplus, what happens

A

when supply is greater than demand, this causes price to fall/go on sale

44
Q

explain the demand curve (in relation to price)

A

a change in price cause a movement along the demand curve which is either a contraction (left) or expansion (right) in demand
goes like:
\
\
\
\
goes that way —–>

45
Q

explain what happens to the supply curve

A

a change in price causes a movement along the supply curve which is either a contraction (left) or expansion (right) in supply
goes like:—^
/
/
/
/

46
Q

define price mechanism

A

refers to the force of supply and demand in determining price and quantity of goods sold

47
Q

what is the relationship between market equilibrium and price mechanism

A

supply and demand are equated in a free market though the price mechanism

48
Q

what causes the supply and demand curve to shift

A

factors other than price can cause the supply and demand curve to shift (not move along) to the left or right

49
Q

What makes the supply and demand curve shift to the right

A

increase in demand or supply shift the curves to the right

50
Q

what makes the supply and demand curve shift to the left

A

decrease in demand or supply

51
Q

what is a shift (for the demand or supply curve)?

A

when the entire demand curve or supply curve changes, moves over, shifts left or right

52
Q

What government bodies protect consumers?

A

the ACCC (Competition and Consumer Act) and ASIC (Corporations Act)

53
Q

How does economic growth and decline happen?

A

consumer confidence -> spending increases -> firms increase production, meeting demand -> more jobs -> household income increases -> inflation -> demand falls (households can’t afford) -> production falls -> less jobs needed -> consumer confidence falls -> less spendings

54
Q

How is inflations measured?

A

Inflation is measured by comparing changes in the Consumer Price Index (CPI).

54
Q

What is the Consumer Price Index (CPI)?

A

CPI represents the number of a normal household a.k.a. a ‘basket of goods’ which is items that more people buy regularly

55
Q

How to calculate GDP?

A

AD= consumption(C) + investment (I) + government spendings (G) + (exports(X) - imports(M))

56
Q

List reasons for increase in demand.

A

-a rise in consumer income
-changes in consumer tastes & preferences (want more of…)
-an increase in the size of the population
-a substitute good becomes more expensive
-a complementary good becomes cheaper
-prices are expected to rise in the future
-shifts right

57
Q

List reasons for decreases in demand.

A

-a fall in consumer income
-changes in consumer tastes & preference (want less of…)
-a decrease in the size of the population
-a substitute good becomes cheaper
-a complementary good becomes more expensive
-prices are expected to fall in the future
-shifts left

58
Q

What perspective does demand come from?

A

demand comes from households or consumer desire or ability to buy a product
demand = consumer perspective

59
Q

What perspective does supply come from?

A

supply is driven by firms willingness or ability to sell a product
supply = firms perspective

60
Q

List reasons for increase in supply.

A

-increased efficiency
-a fall in the cost of production
-improved climatic conditions
-an increase in the number of suppliers
-shift right

61
Q

List reasons for decrease in supply.

A

-decreased efficiency
-an increase in the cost of production
-unfavourable climatic conditions
-a decrease in the number of suppliers
-shift left

62
Q

What is the government policies for environmental protection?

A

-part of the governments budget goes to environmental protections
-the main legislation is the Environmental Protection and Biodiversity Conservation Act 1999

63
Q

What items were traded between communities in customary trading practices?

A

-pearl shells from Kimberley coast
-orche(red)
-songs
-boomerangs
-hooked spears

64
Q

Who traded with who in customary trading practices?

A

-great trading meetings were held on the Murray River
-people from all over: east, west, north, south
-at the heart of Arnhem Land culture
-Papua New Guinea, China

commerce 200hr (3 decks)

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