Economics - Chapters 12.1-12.4

Question 1

Define GDP:

Answer 1

Gross Domestic Product.

It measures total value of all goods and services produced within an economy over the course of 12 months.

Question 2

Define GDP Per Capita:

Answer 2

A measure of a country’s economic output that accounts for its number of people.

Divide country’s GDP by its total population

Question 3

What does GROSS mean?

Answer 3

Total

Question 4

What does Domestic mean?

Answer 4

Production within a country

Question 5

What does Product mean?

Answer 5

Goods and Services.

Question 6

What is Economic Growth?

Answer 6

An increase in the amount of goods and services produced per person within a specific period of time.

Question 7

How is Economic growth measured?

Answer 7

By using the three indicators; GDP, Inflation and Unemployment rate.
By comparing one year’s indicator percentage (Eg GDP) to the pervious year’s percentage. The percentage change is the level of economic Growth or Contraction in a country. -

Question 8

What is a Recession?

Answer 8

It is when 2 or more consecutive quarters of negative growth or economic growth fall occurs

Question 9

What is a depression?

Answer 9

It when the economic growth decreases for 2+ years and therefore there is mass decrease in available credit, increase in unemployment and little consumer confidence.

Question 10

What is Inflation?

Answer 10

Inflation is when the general level of prices paid for goods and services over a certain period of time increases.

General rise in prices over time; measured by using a selection of 100 000 goods and services, then they compare prices from this year to the pervious year.

Question 11

Define CPI

Answer 11

Consumer Price Index is a sample of final products used to measure inflation.

Question 12

What is unemployment rate?

Answer 12

It it’s the percentage of people who are in the labour force and are unemployed. (The labour force includes those who are unemployed and employed).

Unemployment is the state of looking for a job but being unable to find one due to a variety of factors that must be met.

Question 13

What is the labour force?

Answer 13

Number of employed and unemployed people within a population who have the ability to work.

Needs to be:
15+ 
Not a full time student 
Not part of military service 
Has the ability to work (no physical disabilities) 
Works part of 1 or more a week

Question 14

What are the types of unemployment? Explain them…

Answer 14

• Seasonal unemployment; growing seasons, sales seasons etc
• Cyclical unemployment; changes in business cycles means that jobs are reduced
• Frictional unemployment; transitioning between jobs
• Structural unemployment; replaced or made redundant due to technology advancement
• Hardcore unemployment; lacking the personal skills to be employed anywhere

Question 15

What is underemployment?

Answer 15

The under use of a worker due to a job that does it use the worker’s skills or is a part time, leaves the worker idle

Question 16

What is the Poverty line?

Answer 16

Minimum level of an income deemed adequate in a particular country

Question 17

What is Youth employment?

Answer 17

15-24 year olds that are unemployed; they don’t have a job but is actively seeking for work

Question 18

What is Part time?

Answer 18

A form of employment that carries fewer hours (>30hrs) per week than a full time job.
They work in shifts

Question 19

Why is it important for economic growth?

Answer 19

When there is economic growth them there is a higher production of goods and services and more employed people
-Employment means a Greater income which means More spending -> greater spending and a greater spending will increase living standards of citizens.

If the there is a negative growth or a contraction in the economy then it means decrease in available credit, increase in unemployment and little consumer confidence.

Decline in goods and services produced— decline in the number of people being employed and the wages they are paid and which means less spending and a decrease in living standards.

Question 20

What are the limitations of GDP?

Answer 20

Limitations

• it is a measure of a Single factor in the economy
• it is Not evenly distributed through all members of society
• there is Social/environmental consequences of producing more goods and services

Question 21

What is the target rate of GDP? What is the Current rate of GDP?

Answer 21

Targeted rate: 3.25-3.5%

Current rate: 2.3%

Question 22

What is a quarterly?

Answer 22

3 consecutive months of the year ... 
Eg January - March, 
       April-June, 
       July-September 
       October-December

Question 23

What causes inflation?

Answer 23

• consumers feeling confident about their income and employment in the future
• businesses feeling confident about the future - expand business operations-> employ more staff->
• trading partner countries of Australia performing well and demanding the economy’s exported goods and services
• lower taxes
• relatively low interest rates

Question 24

Who are the Inflation winners?

Answer 24

Winners

• High-income earners: income increases at the same rate or faster than inflation
• Borrowers: Borrow with a fixed interest rate, purchase now
• Importers: Price of imported goods are cheaper than those locally produced

Question 25

Who are the Inflation losers?

Answer 25

• Low/middle-income earners: Incomes don’t increase as fast as inflation
• Bank savers: Money in the bank may not buy as much as it did previously
• Exporters: Exported goods become more expensive, demand from overseas falls

Question 26

What is the target rate and the current rate of inflation in Australia?

Answer 26

Target Rate: 2-3%

• Current Rate: 1.3%

Question 27

What causes unemployment?

Answer 27

When production or GDP is weak and spending in the economy has decreased
— businesses may cease to hire new staff and cut employees to save money
— increased overseas competition(making it difficult for Australian business to compete ) so they take the business overseas for cheap labour or may shut down
— labour saving advanced technology may be introduced

Question 28

The Cost of Items Increase Because:

Answer 28

• Increased Demand
• Increased Cost of Production
• Increased Wages/Pay/Income

Question 29

How does interest rates influence inflation?

Answer 29

High interest rates - lower spending

Low interest rates - more money so more spending

Question 30

Why are low-middle class income earners losers of inflation?

Answer 30

• The income of the low-middle class income earners will not increase along with inflation percentage rate increases
• the higher prices of goods and services will mean that they can only buy little variety of goods and services and only a certain portion of their needs and wants will be satisfied (less spending)

Question 31

Why are exporters losers of inflation?

Answer 31

The exporting companies will have to spend a lot of money for the production of goods and services in the economy due to the inflation and the increased prices of goods and services. But the price the goods and services will be sold overseas will not have make enough profit or will not fulfil the money used for the production of goods and services produced.

Question 32

Why are bank savers losers of inflation?

Answer 32

Money in the bank may not buy as much as it did previously

Question 33

What are the social effects of unemployment?

Answer 33

• Psychological effects ( depression from not working )
• loss of skill from the workforce
• reduced living standards
• increased crime
• reduced life expectancy
• it may possibly impact their child’s opportunities
• mental illness issues,
• family breakdown due to financial stress

Question 34

What effect does unemployment have on the economy?

Answer 34

• reduction in overall GDP
• Likely reduction in government revenue – less money to spend on good and services (due to lower income taxes)
• Must pay more to assist the unemployed in the form of social benefits and welfare programs
• economic stress
• tight budgets
• financial hardship
• edging closer to the poverty line