Economics

Question 1

Explain what is ‘consumer sovereignty’.

Answer 1

Consumer sovereignty relates to the question: ‘what shall we produce?’ It is the power of consumers to ‘pick winners’ from goods and services that is offered. Consumers of an entire community eventually decide what is to be produced.

Question 2

Name the 3 questions of economics:

Answer 2

What shall we produce?
How shall we produce it?
To whom shall we distribute the goods and services that we produce

Question 3

Describe the two approaches to producing goods and services.

Answer 3

#1: Labour intensive. During production process, more physical labour was used to create goods and services.
#2: Capital intensive. During production process, more  machinery is used.

Question 4

Name the 4 factors of production:

Answer 4

Land, labour, capita, and enterprise

Question 5

What is GDP? Is it a good measure of growth?

Answer 5

GDP is the total monetary value produced in an economy over a year. No, because it ignores factors such as environmental sustainability, equality (GDP per capita), destruction and social cohesion.

Question 6

Rate of inflation is measured by_______

Answer 6

Consumer Price Index

Question 7

In Australia, the government’s target rate of inflation is ______%.

Answer 7

2% to 3%

Question 8

Describe & give example of ‘Frictional Unemployment’.

Answer 8

Temporary unemployment or being between jobs (eg. season unemployment)

Question 9

Describe & give example of Structural Unemployment.

Answer 9

Changes in labour force renders skills obsolete.
Workers do not have a transferrable skill, and the job won’t return. (e.g. technological unemployment: when workers get replaced by machinery)

Question 10

Describe ‘Cyclical Unemployment’

Answer 10

Caused from a recession

Demands for goods and servives fall, demand for labour falls and workers are fired. AKA ‘demand dificient unemployment.

Question 11

Name and describe 2 reasons for a rise in inflation.

Answer 11

Cost-push inflation: relates to increased cost of inputs (like raw materials, iron/gold) which forces people who use these materials to make goods and services to raise their prices for consumers.
Demand-pull inflation: AKA ‘too much money chasing too few goods’. This is where consumer demand for goods and services outstrip the goods and services, forcing prices to rise.

Question 12

Describe 2 effects of rising inflation.

Answer 12

It benefits people who have wealth-producing assets that appreciate in value.
You get less ‘purchasing power’ with the money you own.

Question 13

Define ‘unemployment’.

Answer 13

A situation that arises when people of working age Only actively looking for a job, but cannot find one.

Question 14

What is current rates of unemployment in Australia?

Answer 14

5.5%

Question 15

Name 2 effects of Unemployment.

Answer 15

Economic GDP decreases. There are less workers in the labour forces, and production of goods and services go down. Opportunities are lost.
Reduced purchasing power leads to a decrease in economic activity. It may fuel another cycle of unemployment.
Socially–it impacts people’s self-esteem and well-being. They get isolated from others and develop a sense of shame or depressoin (especially in countries where work ethics are strong).

Question 16

List a few benefits of economic growth.

Answer 16

• increased employment
• increased incomes
• increased purchase power
• increased consumer demand
• increased business investment

Question 17

Business Cycles are identified as having 4 distinct phases, name them:

Answer 17

Trough, upswing, peak, downswing

Question 18

When does financial year begin in Australia?

Answer 18

July 1st

Question 19

Define the ‘fiscal policy’.

Answer 19

When the government adjusts its spending levels and tax rates to monitor and influence a nation’s economy, as well as managing the annual budget, it is called the fiscal policy.

Question 20

Name the non-budget policies that governments use to manage the economy.

Answer 20

Fiscal policy
Productivity
Monetary policy
Macroeconomic policy
Workplace training policy

Question 21

Why do governments regulate business activity?

Answer 21

Business activity is regulated so owners don’t get caught colluding with other businesses to charge unreasonably high prices for consumers. The environment and society is kept safe and living standards are kept up.

Question 22

What is productivity?

Answer 22

People earning more in less time, or produce more.

Question 23

What does UNHDI stand for?

Answer 23

United Nations Human Development Index.

Question 24

Describe the shape of an ‘expanding population pyramind’.

Answer 24

Has a triangular shape, which has a large base with a narrowing tip.

Question 25

What are factors leading to an expanding population?

Answer 25

High fertility/birth rates; low levels of female education and female rights; and less awareness towards birth control.
Lower than average life expectancies. This can be due to poor living conditions and the lack of health facilities and that is responsible for high mortality rates among the elderly.

Question 26

What is an effect of an expanding population?

Answer 26

It results in a strain on the working-age population to support the larger, younger population, making them work in strenuous conditions.

Question 27

Give 3 examples of an expanding population.

Answer 27

Afghanistan, Bangladesh, Kenya, Rwanda.

Question 28

Describe the shape of a ‘constrictive/contracting population pyramid’.

Answer 28

The opposite of an expanding population, it has a larger tip and smaller base.

Question 29

What are factors leading to a contracting population?

Answer 29

High life expectancies and good living conditions in a country, leading to higher number of older people. Increased emigration.

Question 30

Give 3 examples of a contracting population.

Answer 30

European countries like Italy, Australia, Japan.

Question 31

What are the effects of a contracting population?

Answer 31

There is a decreasing population. There is a higher burden placed on younger working-age population to support a larger number of elderly dependents.

Question 32

Describe the shape of a ‘stable/stationary population pyramid’.

Answer 32

Has a rectangular/squarish shape, with same amount of people in all age groups, with a slightly tapered tip.

Question 33

Give 3 examples of a stable population.

Answer 33

USA, Sweden, Netherlands

Question 34

What are the effects of a contracting population?

Answer 34

A stable increase in population over time.

Question 35

What factors lead to a stable population?

Answer 35

High life expectancies, better living conditions, health-facilities, education access. More awareness in birth control and empowerment of women.

Question 36

What are some records of the past that can be reflected in a specific country’s population pyramid? (For example, China).

Answer 36

The one-child policy, abortion of females, scars of world war 2, baby-boom that followed WW2.

Question 37

Name Stage 1 of the DTM (demographic transition model).

Answer 37

High birth rate, high death rate, low natural increase rate, low technology

Question 38

Name Stage 2 of the DTM (demographic transition model).

Answer 38

High birth rate, falling death rate, rising natural increase rate, new technology

Question 39

Name Stage 3 of the DTM (demographic transition model).

Answer 39

Falling birth rate, low death rate, falling natural increase rate, better technology

Question 40

Name Stage 4 of the DTM (demographic transition model).

Answer 40

Low birth rate, low death rate, low natural increase rate, high technologyt

Question 41

What are the economic roles of the government?

Answer 41

• Regulating business cycles
• controlling macroeconomic activities through the fiscal policy
• providing service