Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics - Chapter 11 And 12 > Main Notes > Flashcards

Main Notes Flashcards

1
Q

Compatible: economic growth and full employment

A

E.G creates more demand for goods and services, therefore, we need a larger workforce to cater for the growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Compatible: Full employment and equitable income distribution

A

Lower unemployment means the proportion of people depending on welfare payments will decrease

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Compatible: Price stability and economic growth

A

Keeping inflation low reduces uncertainty and encourages investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Compatible: Efficient resource allocation (productivity) and economic growth

A

Higher productivity means more goods and services are produced for the same number of workers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Conflicting: price stability and full employment

A

The costs of goods and services can increase, because there are not enough workers available

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Conflicting: economic growth and price stability

A

A booming economy puts pressure on the number of workers, their salaries and costs of making goods goes up

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Conflicting: Economic growth and structural unemployment

A

Growth leads to changes in technology, therefore humans are being replaced by robots

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Conflicting: Economic growth and equitable distribution of income

A

People working in expanding sectors (mining) may get more benefit compared to others who aren’t

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Role of government

A

Provision of public goods and services
Provision of welfare services
Regulation of business enterprise
Macroeconomic management

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Policy objectives

A

Sustainable economic growth 3-4%
Low unemployment, frictional being 1-1.5%
Price stability 2-3%
Increasing productivity
Rising standards of living
Having sufficient international currency reserves to meet international transactions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Strengths of fiscal policy

A

Direct, can be implemented immediately

Controls spending tap - better in a recession, increasing level of AD in economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Weaknesses of fiscal policy

A

All lags - recognition, decision and impact lag
It’s inflexible - budget is relatively fixed
Politicians - fake promises to win votes
Needs to match monetary policy, not conflict with it

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What does the government mainly/currently spend their money on?

A

Social security and welfare, health (new hospitals) and education

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

During a trough (government trying to increase spending, reduce taxes)
Expansionary stance

A

Reducing income tax = increases HH purchasing power
Decreases company tax = increases investment
Increased government spending on infrastructure = creates more jobs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

(Ydef -> Yfe)

A

In a trough, the government uses its budget to increase to AE to counter the deflationary gap

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

During a peak (raises taxes, reducing spending within the economy)
Contractionary stance

A

Increased income tax and company tax
Decreased government spending on infrastructure (major projects)
Increases excise taxes - cars, tobacco and alcohol

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

(Yfe -> Yinf)

A

In a boom/peak, the government uses its budget to counter the inflationary gap

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Neutral stance

A

Government neither trying to increase/decrease economic activity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Discretionary stabilisers

A

Reducing fluctuations in economic activity - via government

20
Q

Automatic stabilisers

A

Reducing fluctuations through the B.C - without govt

21
Q

Ways to finance a deficit

A

Sell government bonds
Borrow from the central bank
Borrow from overseas
(Crowding out effects)

22
Q

Crowding out?

A

Do this in order to finance a deficit - selling gov bonds, borrowing from central bank (RBA) and borrowing overseas

23
Q

Crowding in?

A

Relates to the use of a budget surplus; cuts taxes, pay off debts and fund projects

24
Q

Federal budget?

A

Estimated sources of government income and the cost of current and capital expenditure plans for the coming year

25
Q

How do automatic stabilisers reduce fluctuations?

A

Increase leakages when E.A is expanding

Increasing injections into the circular flow (recession, downswing)

26
Q

Ways in which a boom is automatically dampened

A

People save more and pay of their debts
Imports increase
Less unemployment (cyclical) - reduce welfare payments
Making more revenue on taxes because more people are working

27
Q

Expansionary stance

A

Reducing taxes, increase govt spending to increase economic activity

28
Q

Contractionary stance

A

Raise taxes, reduce spending

29
Q

Exogenous factors

A

Natural disasters

May cause the actual outcome to differ from the desired result

30
Q

Budget deficit

A

Expenditure exceeds revenue

31
Q

Budget surplus

A

Revenue exceeds expenditure

32
Q

Use of a budget surplus (crowding in)

A

cuts taxes, pay off debts and fund projects

33
Q

Reducing fluctuations in a trough

A

Increased welfare payments
Decreased tax revenue
(not as many people are working)

34
Q

Sustainable economic growth

A

Measured in real GDP
3-4% target
Increasing capacity to satisfy the material needs/wants of a population

35
Q

What is fiscal policy?

A

Use of government revenue/expenditure in achieving economic objectives

36
Q

What is monetary policy?

A

Interest rates set by the RBA

37
Q

Benefits of low inflation

A

Increased efficiency
Increase in confidence
Increase international competitiveness

38
Q

Costs of high inflation

A

Reduces value of savings
Increases uncertainty
Promotes speculative activity
Imposes unnecessary costs - inflation

39
Q

Full employment

A

Everyone in the work force who is willing to work as a job

Natural rare of unemployment - 4-5%

40
Q

Price stability

A

Occurs when there is little change in the general price level
Target rate at 2-3%

41
Q

Fiscal policy consists of

A
  1. Government expenditure

2. Taxes (imposed by the government)

42
Q

Threefold budget purpose

A
  1. Decides how revenue is raised
  2. Redistributes income from more wealthy to less wealthy
  3. Influences the level of macroeconomic activity
43
Q

Recognition lag

A

Not knowing about an event until after it happens

Unsure where the economy lies in relation to the B.C

44
Q

Action lag

A

Time that passes whilst policy is decided

45
Q

Implementation lag

A

Time between the announcement and particular effect on economic activity

46
Q

What is a government bond?

A

promising to repay borrowed money a fixed rate of interest at a specified time

47
Q

Deflation

A

Reduces the general prices of goods

Economics - Chapter 11 And 12 (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions