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ECONOMICS YR 12 > Everything IDK > Flashcards

Everything IDK Flashcards

1
Q

KAFTA

A
  • Since late 2014
  • 4th largest trading partner
  • Tariff-free exports rising from 84% to 99% in the next 20 years
  • Two-way trade has increased more than 50% in 3 yrs
  • KAFTA will boost Australia’s economic output by $5 billion by 2030
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2
Q

CHAFTA

A
  • Since 2015

- Currently, 86% of Australian exports are tariff-free

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3
Q

AANZFTA

A
  • 2009
  • Free Trade agreement between 12 member nations
  • Complementary economies
  • 20% of Australia’s trade in goods and services
  • By 2020 96% will be tariff-free
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4
Q

What is the Trend in CAD

A

Pre-GFC = 6%
Post-GFC = 3%
2007-08 - CAD improved because of cyclical factors —> a global boom in minerals & energy exports
Plus decreased global interest rates & increased savings domestically + decreased domestic growth

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5
Q

What are the Cyclical Factors affecting Balance on Goods and Services

A

Exchange Rate
Terms of Trade
Domestic Growth
International Business Cycle

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6
Q

What are the Structural Factors affecting Balance on Goods and Services

A

Narrow Export Base

International Competitiveness

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7
Q

What are the Cyclical Factors affecting the Net Primary Income

A

Exchange Rate/Valuation Effect
Domestic & Global Interest Rates
Domestic Business Cycle/Company Profits

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8
Q

What are the Structural Factors affecting the Net Primary Income

A

Savings-Investment Gap

Fiscal Consolidation

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9
Q

What factors affect international competitiveness

A
  • Low inflation
  • Increased productivity
  • Appreciation of the AUD
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10
Q

What are the effects of a fall in international competitiveness

A

Australia export less and import more, worsening the CAD

As production sinks, real wages will fall and unemployment will rise

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11
Q

Why has Australia’s Terms of Trade deteriorated in recent times

A

Australia’s ER has fallen in recent times from a high of $1.11 US in Sept 2011 to around $0.67US at present. Consequently, imports are more expensive to purchase leading to an increase in the Import Price Index.

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12
Q

What are the indicators of globalisation

A
  • Trade in Goods and Services
  • Financial Flows
  • Investment and TNCs
  • Technology, Transport, Communication
  • International Division of Labour and Migration
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13
Q

Asia-Pacific Economic Cooperation (APEC) Forum

A
  • Formed in 1989 in response to EU and NAFTA
  • 41% of the world’s population
  • 54% of world GDP
  • 44% of world trade
  • Not a secluded trading bloc
  • Contributed to tariff levels falling
  • Created 500,000 Australian jobs between 1989-2010
  • APEC is 75% of Australian trade
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14
Q

What are the factors that strengthen the international business cycle

A
  • trade flows
  • investment flows
  • TNCs
  • financial flows
  • technology
  • global interest rates
  • commodity prices
  • international organisations
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15
Q

Factors that weaken the international business cycle

A
  • domestic interest rates
  • government fiscal policies
  • other domestic economic policies
  • exchange rates
  • structural factors
  • regional factors
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16
Q

What are the global factors for differences between nations

A
  1. Global Trade System
  2. Global Finance Architecture
  3. Global Aid and Assistance
  4. Global Technology Flows
17
Q

What are the domestic factors for differences between nations

A
  1. Natural Resource Endowment
  2. Labour Supply and Quality
  3. Institutional Factors
18
Q

What are the main factors causing an appreciation of the Australian Dollar

A
  1. An increase in Australian interest rates or decrease in overseas interest rates
  2. Improved investment opportunities in Australia or deterioration in foreign investment opportunities
  3. A rise in commodity prices and an improvement in Australia’s Terms of Trade
  4. An improvement in Australia’s IC
  5. Lower inflation in Australia
  6. Increased demand for Australia’s exported goods and services
  7. Expectations of a currency appreciation based on forecasts of one of the above factors
19
Q

What are the main factors causing a depreciation of the Australian Dollar

A
  1. An decrease in Australian interest rates or increase in overseas interest rates
  2. Deterioration in investment opportunities in Australia or improvement in foreign investment opportunities
  3. A fall in commodity prices and an deterioration in Australia’s Terms of Trade
  4. A deterioration in Australia’s IC
  5. Higher inflation in Australia
  6. Increased demand for Australia’s imported goods and services
  7. Expectations of a currency depreciation based on forecasts of one of the above factors
20
Q

What factors cause a change is AS

A
  • Population growth
  • Discovery of new resources
  • Workers acquiring new skills
  • Increased capital
  • New technology
  • Improved efficiency
  • Govt. Policies - Microeconomic
21
Q

What are the factors causing unemployment?

A
  • Deficiency in AD
  • Contractionary macroeconomic policy
  • Constraints on EG
  • Rising PR
  • Structural Change
  • Technological Change
  • Productivity
  • Inadequate levels of training and investment
  • Labour costs
  • Labour market inflexibility
22
Q

What are the negative economic consequences unemployment?

A
  • Opportunity cost of lost output and income
    As the economy’s resources are not being used to their full capacity, real GDP is lower than what it could potentially be and national income is reduced and frim achieve fewer profits, lowering investment
  • Lower living standards
  • Loss of human capital (Hysteresis)
    -Costs to the government
  • Lower wage growth
23
Q

What are the negative social consequences of unemployment?

A
  • Income Inequality
  • Personal and Social Problems
  • Unemployment for particular groups
24
Q

What is the Transmission Mechanism

A

Explains how changes in the stance of monetary policy pass through the economy to influence economic objectives such as inflation and EG

1) saving and investment channel
2) cash-flow channel
3) asset prices and wealth channel
4) exchange rate channel

25
Q

In which ways can the govt. finance their debt.

A
  • Borrowing from the Private Sector:
    Sell treasury bonds domestically under a tender system, buyers will buy at a certain rate of interest, if interest rates are too high the ‘Crowding out Effect’ leads to a reduction in private sector spending and investment.
  • Borrowing from Overseas
    To minimise the crowding out effect, while still stimulating growth, govt. borrow from overseas, directly adding to Australia’s foreign debt.
  • Borrowing from the RBA (Monetary Financing)
    Govt. printing more money and since 1982 (deregulation of the financial sector) it hasn’t happened
  • Selling Assets
    Like Commonwealth land. Financing burden is simply shifted from the public sector to the private sector
26
Q

What are the economic targets?

A

Economic Growth: 3% to 4% in real GDP
Full Employment: NAIRU
Price Stability: 2% to 3% inflation
External Balance: CAD < -5% of GDP

27
Q

What are the economic costs of income inequality

A 
Reduces overall utility 
Reduce EG 
Creates conspicuous consumption 
Creates poverty &amp; social problems 
Increases cost of welfare support
28
Q

What are the economic benefits of income inequality

A

Encourages labour force to increase education & skils
Encourages the labour force to work longer & harder
Makes labour force more mobile
Encourages entrepreneurs to accept risks
Creates the potential for higher savings and capital formation

29
Q

What are the social costs of income inequality

A 
Social class divisions 
Poverty
30
Q

What are the social benefits of income inequality

A

Could produce a “larger pie” from which all members of society could benefit

31
Q

What are market induced structural changes

A
  • Technology
  • Behaviour
  • Trade and global specialisation
  • Resource discovery and depletion
32
Q

What are government induced structural changes

A
  • Trade and investment liberalisation
  • Infrastructure and general government reforms
  • Labour market
  • Taxation
  • Environment
33
Q

What is included in product market reforms

A
  • Deregulation of telecommunications
  • Deregulation of transport industries
  • Deregulation of Agriculture
34
Q

What is included in factor market reforms

A
  • Deregulation in the financial sector
35
Q

What are the limitations of economic policies

A
  • Time lags
  • Political constraints
  • Global influnces
36
Q

Define multiplier

A

Measure the increase in GDP when there is an increase in injections.
A change in one of these expenditure components is multiplied through the rest of the economy, stimulating further spending.

37
Q

What are the reasons for external stability?

A
  • Changes in TOT
  • Fluctuating ER
  • Level of economic activity in Australia
  • Level of economic activity in major trading partners
  • Increases in Net foreign debt (CAD, Depreciation)

ECONOMICS YR 12 (16 decks)

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