Macroeconomics - L1 Economic Activity

Question 1

What is microeconomics?

Answer 1

A branch of economics that examines individual decision making by firms (producers) and households (consumers), and how this impacts on a particular market for a single good or service.

Question 2

What is macroeconomics?

Answer 2

A branch of economics that examines the workings and problems of the economy as a whole (i.e., consisting of the sum of all markets and industries).

Question 3

What is economic activity?

Answer 3

Economic activity refers to the real value of production (goods and services), employment, incomes and expenditure in an economy.

Question 4

What is production?

Answer 4

Production is the process of converting resources and inputs into goods and services, or the total volume (or value) of goods and services produced over time.

Question 5

Which two sectors make up the macroeconomic two flow model of the Australian economy?

Answer 5

Household Sector
Business Sector

Question 6

What does Flow 1 represent?

Answer 6

The nation’s flow of resources (land, labour, capital) from the Household sector to the Business Sector.

Question 7

What does Flow 2 represent?

Answer 7

The nation’s flow of all incomes paid by the Business Sector to the Household Sector.

Question 8

What does Flow 3 represent?

Answer 8

The nation’s flow of spending or AD for finished goods and services - spending by the Household sector flowing back to the Business Sector.

Question 9

What does Flow 4 represent?

Answer 9

The nation’s flow of finished goods and services produced - G&S going from the Business Sector back to the Household Sector

Question 10

What do ‘Living Standards’ refer to?

Answer 10

The total welfare of all people in a country like Australia, made up of both material and non-material factors.

Question 11

What do material living standards refer to?

Answer 11

The quantity of tangible or physical goods and services available for each person to consume. Material living standards are impacted by monetary factors. Eg. access to goods and services.

Question 12

What do non-material living standards refer to?

Answer 12

The wellbeing and quality of life of the citizens of a country. Non-material living standards are impacted by factors that cannot be measured by monetary factors alone.

Question 13

Identify 5 factors that can affect non-material living standards.

Answer 13

1. Environmental quality
2. Physical & Mental Health
3. Life expectancy
4. Crime rates
5. Literacy rates