Our Economy - Performance Of The Australian Economy Flashcards
What are the indicators of the Australian Economy?
- economic growth
- standard of living
- distribution of income
- environmental sustainability
How is standard of living measured?
what is purchasign power?
- disposable income per capita
- GDP per capita PPP (purchasing power parity)
- ability to demand goods and services
Distribution of Income
- income quintile ratio using the 5 quintiles in 20% incraments
Name macroeconomic policy tools
- fiscal policy
- monetary policy
- policy mix
What is the monetary policy?
- actions of the Reserve Bank Of Australia to effect money supply and interest rates to achieve macroeconomic objectives
Objectives of the monetary policy
- Price stability
- full employment
- economic growth
What are the tools for the reserve bank of australia for affecting the economy?
- Setting interest rates
- adjusting reserve requirements in banks (min. of no. of liquid assests)
- quantitative easing (purchasing government bonds into the economy)
What is the theory of aggregate demand?
Represents total demand for all final goods and services in an economy at a price level
- AD = C + G + I + (X-M)
Consumption, government spending, investment, exports, imports
What are the governments target growths for inflation, unemployment and GDP growth?
- Inflation of 2-3%
- Unemployment of 4-5%
- GDP growth of 3-4%
Fiscal policy
- governments use of taxation and government spending to alter the economic conditions
What are the types of fiscal policy?
- Expansionary (low taxes, high government spending to encourage economic growth)
- Contractionary (high tax, low government spending)
What is microeconomics?
branch of economics concerning the individual economic agents.
- supply and demand
- consumer behaviours
- market structures
What are the 4 areas of microeconomics?
- trade liberalisation
- labour market reforms
- market deregulation
- national reform agenda
Trade liberalisation
Reducing or removing barriers to international trade
- reducing tariffs and quotas
- providing subsidies
- increasing bi-lateral free-trade agreements
Labour Market Reforms
To increase the efficiency and flexibillity of the labour market
- changes to wage levels, working conditions and terms of dismissal
Market deregulation
- removing certain government regulation to increase business competition and reduce prices
Aims of the National Reform Agenda
- boost economic growth and productivity
- raise workforce participation
- improve living standards
What is the national reform agenda?
A broad microeconomic program by the Council of Australian Governments
What is the formula for unemployment rate?
Unemployment rate = no.unemployed/no. in labour force x100
What is the Labour Force?
- 15+
- Willing and able to work
- not institutionalised
- not in military, retired or in full time schooling
3 forms of understating the labour force
- Discouraged workers
- Marginally attatched workers
- Underemployed workers
What are the 4 types of unemployment?
- Frictional unemployment
- Structural unemployment
- Seasonal unemployment
- Cyclical unemployment
Frictional unemployment
- temporary, between jobs
- qualified workers, transferrable skills
Structural unamployment
- Change in labour force = unemployment
- Jobs redundant, no transferrable skills
- technological unemployment
Seasonal unemployment
- results from termination of jobs in differnet seasons
Cyclical unemploynment
- Unemployment from recession
- aka. Demand Deficient Unemployment
- Demand falls -> demand for labour falls -> workers fired
What is the natural rate of unemployment?
- when only structural and frictional unemployment -> economic success
What is Full Employment Output?
- Real GDP output when there is no cyclical unemployment
- Australia’s full employment rate is 4-7%
Impacts of unemployment
- Falling living standards
- Lower national production
- changed government budget position
Inflation, how to measure, forms of inflation
- Lowering purchasing power of money
- Consumer price index (100 000 goods and service to imitate household spending)
- deflation (reverse inflation)
- disinflation (slower inflation)
Who is helped by unanticipated inflation?
- Borrowers
- A business where prices of product rise faster than resources
Who is hurt by unanticipated inflation?
- Lenders at fixed interest rate
- People with fixed income
- Savers
How is inflation measured?
- The inflation rate - % change per year
- Price indicies - measurement of goods and service price change over time
What are the 2 types of wages?
- Real Wage - Adjusted to inflation
- Nomial - wage by money not purchasing power
Formula for Consumer Price Index
CPI = price of market basket/price in base year x 100
What are the issues with the consumer price index?
- Substitution bias
- New products
- Product quality
Quantitative sustainability indexes
- unemployment rate
- inflation rate
Qualitative sustainability indexes
- Geniune Progress Indicator (GPI)
- Measuring Australias Progress (MAP)
- Human Development Index (HDI)
- Liveability Ranking
- World Happiness Report (WHR)
Genuine progress indicator
- Measures the pros and cons of the effect upon society’s wellfare
- environmental damage
- energy resource depletion
- leisure time
- income inequality
- crime rate
Measuring Asustralia’s progress
- by the Australian Bureau of Statistics
- Asseses sustainability
- Society
- Economy
- Environment
- Governance
Human development index
include downsides
- Compares countries wellbeing
- uses positive and negative indicators
- some subjective measures and inaccurate information from countries
Liveability Ranking
- desirability of cities
- culture
- environment
- stability
- healthcare
- education
- infrastructure
World happiness report
How is it measured, what are its factors
- GDP per capita
- social support
- healthy life expectancy
- freedom of choices
- generosity
- corruption
Comparisons with China
Global happiness report, economic growth rate, unemployment, inflation
- Global Happiness Report - 10th, 60th
- Economic growth rate - 1.5%, 5.3%
- Unemployment - 3.8%, 5.3%
- Inflation Rate - 3.6%, 0.3%
