Economics

Question 1

What do material living standards refer to?

Answer 1

Refers to a person or families level of income that provides them with the ability to purchase more goods and services

Question 2

What does economic growth refer to?

Answer 2

Economic growth refers to increasing the level of national output or production between one year and the next.

Question 3

What do non-material living standards refer to?

Answer 3

Refers to aspects relation to the quality of our lives, usually related to happiness.

Question 4

When does economic growth exist?

Answer 4

Economic growth exists when a country’s economy gets bigger over time. It occurs when there is a rise in total volume of goods and services produced by a nation between one year and the next.

Question 5

How to compare one years economic growth to another?

Answer 5

To make ones years economic growth comparable with another’s, the exaggeration of the value of production caused by the effects of inflation or generally rising prices is removed statically. This is referred to as real GDP.

Question 6

Average material living standards formula

Answer 6

GPD (millions) / total population size (millions)

Question 7

Identify and explain two types of factors affecting Australia’s economic growth

Answer 7

• Demand side factors - anything which alters spending in the short term
• Supply side factors - anything which alters the supply of resources available for production, and the economies long term productive capacity

Question 8

What does opportunity cost refer to?

Answer 8

Opportunity cost refers to the next best alternative that has been forgone when an economic decision has been made.

Question 9

What is sustainable economic development?

Answer 9

A method of expanding the economy’s production levels to meet the needs for goods and services of the present population, without undermining the ability of future generations to meet their own needs.

Question 10

The benefits and costs of economic growth

Answer 10

Benefits: Cost:

• Employment. - Inflation
• Personal incomes
• International trade
• Living standards

Question 11

Explain how employment is a benefit of economic growth

Answer 11

Strong economic growth helps to create extra jobs. This helps to reduce unemployment rates.

Question 12

Explain how inflation is a negative of economic growth?

Answer 12

When an economy grows quickly it may become stretched to its productive capacity causing a shortage of resources and this can cause inflation, where prices rise.

Question 13

International trade

Answer 13

International trade involves Australia buying imports from overseas and selling exports to overseas. As the volume of Australian exports grow it contributes to a higher economic growth. This helps to grow employment and jobs, as well as increases the personal incomes and their material living standard.

Question 14

Living standards

Answer 14

Living standards depend on the volume and range of goods and services available. When the economy’s production grows faster than its population, there is generally more goods and services for people to enjoy which would make each person better off.

Question 15

What can economic growth do?

Answer 15

Economic growth can increase our material living standards, but because it uses resources, it may cause environmental damage that lowers society’s wellbeing

Question 16

Explain how personal income is a benefit of economic growth

Answer 16

Strong economic growth helps to raise personal income. This can increase the purchasing power of families so they can afford to buy more goods and services then before. In addition, a growing economy also lifts the revenue collected by the federal government. This money can become available to pay for public services such as health and education.

Question 17

Name the:

• Current economic growth rate
• Current annual inflation rate
• Unemployment rate

Answer 17

2. 3%
3. 5% - low
4. 3%

Question 18

What is a progressive tax?

Answer 18

A progressive tax is a tax where higher income earners are taxed at a higher rate than low income earners.

Question 19

Name and explain the four trends of economic growth

Answer 19

Expansion - economic activity is growing
Peak/boom - economy is operating at or near its productive capacity
Contraction/slowdown - economic activity is falling
Trough/recession/depression - economy has idle resources and is far from productive capacity

Question 20

Define recession

Answer 20

A recession is when GDP falls over two consecutive quarters, i.e. A period of six months or more.

Question 21

Define and name some demand factors

Answer 21

Anything where people spend more money

• A rise in disposable income
• A rise in economic activity in China
• A rise in Australian interest rates
• Increased consumer confidence in Australia
• A rise in total unemployment rates

Question 22

What are two factors that will increase supply

Answer 22

1. Increased volume of resources

2. Increased efficiency in resource production

Question 23

Define inflation

Answer 23

Inflation refers to a general rise in prices charged through good and services over a period of time.

Question 24

How do monetary policies promote economic growth?

Answer 24

The reserve bank of Australia can lower interest rates. This will make it cheaper for businesses and consumers to borrow money. Businesses will increase investments and consumers will increase in consumption which will increase aggregate demand and economic growth.

Question 25

How does the Budgetary policy promote economic growth?

Answer 25

The budgetary policy involves the federal treasurer changing the rates of tax and government spending. Cutting taxes will increase each persons level of income, which allows them to purchase more goods and services.