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Commerce > Economics AT3 > Flashcards

Economics AT3 Flashcards

1
Q

GDP definition

A

Total value of all goods and services produced in the economy in a single year

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2
Q

Periods of GDP

A

Contraction – decreasing economic activity (GDP)
Expansion– increasing economic activity (GDP)
Recession – 2 quarters of falling GDP
Depression – 4 quarters of falling GDP (sustained recession)

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3
Q

How is GDP measured and what is it

A

Aggregate Demand - a measurement of the total amount of demand for all finished goods and services produced in an economy.

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4
Q

GDP formula

A

C + I + G1 + G2 + (X-M) (Private sector consumption + Private sector investment + Government spending/investment + Exports - Imports)

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5
Q

Problems with measuring GDP

A

Does not consider income distribution or impacts to environment

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6
Q

GDP Per Capita meaning

A

The value of goods and services that each member of the economy has access to.

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7
Q

Problems with GDP Per Capita

A

More productivity not equal to higher standards of living, environmental impacts

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8
Q

Target Economic (GDP) growth

A

3-4%

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9
Q

Types of income

A

Income from labour (wages, salary, etc.),
Income from property or wealth (dividends, rent, etc.)
, Income from the government (social welfare payments, transfer payments, etc.),
Income in kind - company-lended assets

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10
Q

Laissez-faire capitalism

A

No interference with income distribution (Free Market)

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11
Q

Egalitarian

A

Egalitarian societies (Australia) value equality and fairness, freedom of dignity, religion and respect the rule of law.

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12
Q

Income distribution example

A

Over half of Australia’s wealth is owned by the top 20% of income earners.

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13
Q

Macroeconomics meaning

A

The study of the national economy and impacts of aggregate demand

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14
Q

Microeconomics meaning

A

The study of individual people and businesses and the interaction of those decisions in the market.

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15
Q

Adam Smith

A

Market based economy with free trade, prices based on supply and demand and no govt. intervention

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16
Q

Karl Marx

A

Socialist economy, Government distribution of goods and services

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17
Q

John Maynard Keynes

A

Mixed economy, price and activity based on supply and demand and some degree government regulation

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18
Q

Mixed economy meaning

A

a system in which individuals and businesses make their own decisions with a degree of government involvement.

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19
Q

Roles of government in mixed economy

A

Producer of goods and services (services and infrastructure), Redistribution of income (taxes), Controller of commercial lives (taxes), Regulator of economic activity

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20
Q

Monetary Policy definition

A

The Reserve Bank of Australia (RBA) sets interest rates to affect the amount of consumption, savings and investment (C), (S), (I)

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21
Q

RBA purpose

A

The RBA is Australia’s central bank and is a product of the Reserve Bank Act 1959. Australia’s government bank and influences amount of money in short term money market

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22
Q

Direct and indirect taxes with examples

A

Direct taxes are levies imposed directly onto the incomes of individuals and companies. E.g. Personal income tax, capital gains tax, medicare levy
Indirect taxes are taxes placed on the sale of goods and services and added onto the price of items. E.g. GST, Excise duty (unhealthy tax cigs, etc.), Customs duties (tax levied on imported goods)

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23
Q

Target inflation

A

2-3%

24
Q

Cash rate meaning

A

the interest rate that banks pay to borrow funds from other banks in the money market overnight

25
Q

Process of RBA

A

Current economic and financial conditions, Outlook for economy, Financial stability risks —> Policy recommendation —>Board meeting —> every first tue of month except jan —> Public communication

26
Q

Microeconomics purpose

A

Microeconomics strives to improve productivity of markets, support competition and improve consumer outcomes

27
Q

Trade liberalisation

A

involves removing barriers to trade between different countries and encouraging free trade.
Tariffs: a tax on imports that raise the price of imported goods.
Quotas: a limit on the quantity of imported goods.
Subsidies: government spending to support local producers
Example: Australia-U.S. Free Trade Agreement (AUSFTA) 2005

28
Q

Labour market reforms

A

Labour Market reforms are policies that reduce labour controls and eliminate government power in the Labour Market to increase productivity.
Pros: Increases worker productivity, potential for higher wages, more employment
Cons: Working conditions worse, longer working hours, Common law contact which may be exploitable
Example: Decrease in working week in Chile from 45 to 40 hours bill passed 2023

29
Q

Market deregulation

A

The removal of any unnecessary government controls, restrictions and supervision in various areas of the economy.
Pros: Promotes government economic goals such as lowering inflation, higher employment, etc.
Cons: Loss of important collective wants due to high costs and conflict between shareholder and consumer interests
Example: Eastern suburbs bus services

30
Q

National Reform Agenda

A

A collection of measures designed to strengthen the competition and level of efficiency in product and service markets. (1995 establishment of ACCC (Australian Competition and Consumer Commission))
Makes illegal certain anti-competitive practices illegal such as price fixing (collab higher prices) or predatory pricing (manipulating prices to drive competition bankrupt)
Examples: prosecuted three east coast gas producers that control 90 plus percent of the east coast gas production and reserves in Australia

31
Q

CPI and Purchasing Power meaning

A

Consumer Price Index - Measures the change in Purchasing Power and Real Income
Purchasing Power - The value of a currency expressed in terms of the number of goods or services that one unit of money can buy.

32
Q

Real income

A

Income adjusted for inflation

33
Q

Inflation formula

A

Price_y2 - Price_y1 / Price_y1 x 100% (Year 2 = current year and year 1 = previous)

34
Q

Regiment

A

basket of goods and services whose prices are surveyed to calculate inflation

35
Q

Purchasing power/Real income formula

A

Income - (income x inflation rate) = Real income

36
Q

Demand Side inflation

A

Factors that lead to an increase in demand exceeding the current level.

37
Q

Supply side inflation

A

Factors that lead to an increase in the cost of producing goods and services.

38
Q

Cost Inflation

A

a sustained increase in the price of goods and services caused by producers passing on increased production costs to consumers

39
Q

Example of supply side inflation

A

Banana price increase after $180m damage from storm in Queensland 2021

40
Q

Balance of Trade

A

(X-M) the difference between the value of a country’s exports and the value of its imports over a specific period of time
Free Trade = minimal barriers to trade

41
Q

Free trade

A

minimal artificial barriers to trade

42
Q

Protectionism

A

protection of local businesses through tariffs, quotas and subsidies

43
Q

bilateral agreement

A

an agreement between two nations

44
Q

Multilateral Trade Agreements

A

three or more nations agreement

45
Q

Income Distribution

A

The relocation of productive income amongst participants in the production process to other dependent members of the economy.

46
Q

Income

A

Income is the money received in return for a factor of production (wages, rent, interest, profits)

47
Q

Budget Deficits and Surpluses

A

Budget deficits are designed to be expansionary; and budget surpluses are designed to be contractionary

48
Q

When asked on expansionary and contractionary

A

make sure to talk about why leakages are greater/less than injections

49
Q

How is inflation measured

A

Measured with CPI calculated every quarter by ABS and measures the change in price of a basket of local and imported goods and services

50
Q

Fiscal Policy Definition

A

A macroeconomic policy where governments use a budget to redistribute and reallocate income and resources within an economy

51
Q

Subsidies

A

An amount of money given to local producers to help them lower their price and compete with imports

52
Q

Exports

A

goods and services sold by local businesses to overseas consumers

53
Q

Economy

A

all activities undertaken for the purpose of production, distribution and consumption of goods and services in a region or country

54
Q

Labour

A

the human skills and effort required to produce goods and services

55
Q

Environmental policy

A

Environmental policies: Measures that improve the quality of the environment.
Example: Paris agreement 2016 to reduce greenhouse gas emissions

Commerce (5 decks)

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