Marco (Low inflation, Sustainable Eco Growth, Full Employment) Flashcards

1
Q

Benefit of using GDP as a measurement of economic activity

A

GDP is widely used in different parts of the world which gives economists the ability to compare countries growth rates.

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2
Q

Benefit of using GPI as a measurement of economic activity

A

GPI measures material and non-material living standards which gives a better idea of economic wellfare

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3
Q

Benefit of using MAP as a measurement of economic activity

A

Gives a good explanation of “is life in Australia getting better?” as GDP and GPI don’t really account for Australia’s well-being.

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4
Q

Coincident Indicators

A

Coincident indicators reflect more closely with the actual level of economic activity. They are published regually at short intervals to tell us what is happening now. e.g changes in retail sales

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5
Q

Cost Inflation

A

Exists when firms increase prices due to an increase in costs

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6
Q

Cyclical unemployment

A

Cyclical unemployment is the loss of jobs due to weak aggregate demand side conditions, a lack of AD and a downturn in economic activity or recession.

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7
Q

Demand Inflation

A

Occurs in a boom when demand overtakes supply and there is a shortage

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8
Q

Disguised Unemployment

A

Part time workers who would prefer to be full time.

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9
Q

Four key indicators of performance (MAP)

A

Society, Economy, Environment and Governance.

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10
Q

GDP

A

Gross Domestic Product is an estimate of the level of economic activity. It represents total annual value of goods and services produced by a nation.

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11
Q

GDP is averaged between…

A

GDP(E) -Expenditure on G/S, GDP(I) - Income, GDP (P) - Total G/S Production

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12
Q

GPI

A

Genuine Progress indicator uses GDP data, but makes both negative and positive adjustments to reflect the good or bad effects on society, welfare of different types of activity and spending. e.g environmental damage, road accidents, family breakdown, volunteer work and DIY housework.

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13
Q

Headline CPI

A

Consumer Price Index is a measure of inflation or the average level of prices of a basket of goods and services purchased by typical metropolitan households.

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14
Q

Hidden Unemployment

A

Individuals who would like a job or would like to work more hours (however discouraged for various reasons and therefore have left the labor force). These people are not actively looking for work, therefore are not recorded.

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15
Q

How can a decrease in the participation rate lead to a decrease in unemployment?

A

When those unemployed stop looking for work.

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16
Q

How can deflation have an adverse effect on the economy?

A

Consumers stop spending as they could buy the item cheaper in the future.

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17
Q

Labor Force

A

The Labor Force includes people over 15 years old who are either employed or unemployed.

18
Q

Leading Indicators

A

Leading Indicators allow economic forecasts or predictions to be made about the likely future level of economic activity. e.g housing approvals, business confidence, consumer sentiment.

19
Q

Limitation of using CPI as a measurement of inflation

A

Weighting of items may be inappropriate and unreflective for some households. e.g meat inflation for a vegetarian household.

20
Q

Limitation of using GDP as a measurement of economic activity

A

GDP does not include non market activities such as volunteer work and illegal production.

21
Q

Limitation of using GPI as a measurement of economic activity

A

Deductions and additions are subjective. e.g environment may not be as important to certain people.

22
Q

Limitation of using MAP as a measurement of economic activity

A

Measures are subjective, based on personal opinions and preferences.

23
Q

MAP

A

Measuring Australia’s Progress involves using a range of measures of progress to build up a picture of changes in our material and non-material well-being.

24
Q

NAIRU

A

Non-Accelerating Inflation Rate of Unemployment, that is unemployment that is not low enough to cause inflation.

25
Q

Natural Unemployment

A

Natural Unemployment of perhaps around 4.5-5 percent is unavoidable, even in a healthy economy. it occurs due to the existence of structural (new technology), frictional (time spent transitioning), hard-core (criminal record) and seasonal factors.

26
Q

Participation Rate

A

Participation Rate represents the proportion (%) of those people aged 15 years and over who are members of the labor force; that is employed and unemployed. (Excludes retirees and those unemployment who are not looking for a job.)

27
Q

Regimen

A

The regimen refers to the range of goods and services included in the basket whose prices are to be measured.

28
Q

The Goal of Full Employment

A

The goal of full employment refers to a situation , which an acceptable number of people are unable to find a job ( in Australia this is around 4-5%), where unemployment is at its lowest attainable level with zero cyclical unemployment, and without inflation going beyond its target zone.

29
Q

The Goal of Low Inflation

A

The economic goal of low inflation is where inflation (a sustained increase in the general price level) is kept within the target band of 2-3 percent over the course of the business cycle, as measured by the Consumer Price Index (CPI)

30
Q

The Goal of Sustainable Economic Growth

A

The economic goal of sustainable economic growth refers to a sustainable increase in the volume of goods and services produced from one year to the next; meaning that the achievement of economic growth should not come at a cost to other economic goals and living standards, as measured by Gross Domestic Product (GDP)

31
Q

Underemployment

A

Highly skilled workers in low skill/paying jobs.

32
Q

Underlying Inflation Rate (CPI)

A

The underlying inflation rate is measured by removing volatile items affected by one off events, such as fresh food and fuel from the normal CPI regimen in order to obtain an inflation rate that is more truly reflective of ongoing changes in the levels of prices.

33
Q

Underutilisation rate

A

The underutilisation rate combines the unemployment rate and underemployment rate into a single figure that represents the percentage of the labor force that is willing and able to do more work

34
Q

Unemployment

A

Unemployment is when those aged 15 and over who are actively looking for work and cannot find a job.

35
Q

Lagging Indicators

A

Lagging indicators show changes in economic activity some time after the event has occurred because they take time to respond. e.g GDP

36
Q

GDP per capita

A

Real GDP per capita refers to the volume and quantity of goods and services produced per head of population per unit of time. (alternate measure of growth)

37
Q

Recession

A

An economy is said to enter a recession when the real value of production falls in at least two successive quarters (six months)

38
Q

How to calculate the unemployment rate

A

unemployment rate = unemployed/labor force x 100

39
Q

Those not in the labor force

A
Retired
Stay at home parents
Full time students
Elderly
Prisoners
Disabled
Discouraged worker
40
Q

Limitations of measuring the cyclical unemployment rate

A

Excludes two major groups which would make our unemployment rate much higher; hidden employment and disguised/underemployment
Many people lie and say they are looking for work out of fear of losing benefits