outcome two

Question 1

factors that affect living standards

Answer 1

access to goods and services
enviornmental quality
physical and mental health
crime rates
literacy rates

Question 2

define GDP and real GDP

Answer 2

gdp: total amount of production in an economy over a period of time

real gdp: amount of production with the impact of inflation removed

Question 3

describe each flow of the circular flow of income

Answer 3

Flow one: resources of production are provided to businesses (land labour capital)

flow two: income is given to households in return for resources of production

flow three: income is spent on final goods and services, or dispensed as leakages or injections:
(STM and IGX)
Savings → investment,
Taxes → government spending
Import spending → export spending

flow four: total value of goods and services produced by businesses over a period of time

Question 4

define AD + factors

Answer 4

total expenditure on final australian-made goods/services

disposable income
interest rates
consumer confidence
business confidence
the exchange rate
rates of economic growth overseas

Question 5

define AS + factors

Answer 5

total amount of goods and services that suppliers have produced over a period of time

quantity and quality
costs of production
technological change
productivity growth
exchange rates
climatic conditions

Question 6

strong and sustainable economic growth target

Answer 6

3-3.5%

Question 7

consequences of not achieving strong and sustainable economic growth

Answer 7

environmental degradation, high inflation if growth is too high, and high unemployment if growth is too low

Question 8

Natural rate of unemployment/NAIRU

Answer 8

the rate of unemployment that exists when economic growth is relatively strong and sustainable

Question 9

full employment + goal

Answer 9

the rate at which there is no cyclical unemployment

Goal: 5%

Question 10

employed

Answer 10

working either fulltime or part time for more than one hour per week, aged over 15

Question 11

unemployed

Answer 11

actively looking for work, able and willing to take up a job

Question 12

frictional unemployment

Answer 12

a person is unemployed for a period of time while moving from one job to another - this unemployment is not of concern to the government

Question 13

hidden unemployed

Answer 13

people who would like work but are discouraged from seeking jobs

Question 14

underemployed

Answer 14

individuals have jobs but are not working to the capacity that they’d like

long-term unemployed: when the duration of job search is a year or more

Question 15

structural unemployment + causes

Answer 15

the skills of the unemployed dont match the skills required
causes: changing tastes, new technology

Question 16

cyclical unemplyment

Answer 16

unemployment that occurs when the economy is not operating at its full capacity due to a deficiency in AD

Question 17

consequences if unemployment is too high

Answer 17

reduction in living standards, greater income inequality

Question 18

goal of low and stable inflation (price stability)

Answer 18

sustained increase in the average price level of goods and services in an economy over time

goal: 2-3%

Question 19

disinflation

Answer 19

fall in the rate of inflation, prices still increase but not as rapidly

Question 20

measurement of the inflation rate + headline and underlying inflation rate

Answer 20

Consumer Price Index (CPI), it determines the change in the prices of goods and services purchased by a household

headline inflation: figure that captures the price movements of all goods and services contained in the CPI

underlying (core) inflation: price movements of domestic products

Question 21

deflation

Answer 21

sustained decrease in general level of prices

Question 22

demand inflation + causes

Answer 22

caused by increase in AD and leads to strong AD spending

causes: rises in disposable income, strong consumer confidence, lower interest rates

Question 23

cost inflation + causes

Answer 23

caused by reduction in AS

causes: high wages, decreased technological change, deteriorating climactic conditions

Question 24

consequences of high inflation

Answer 24

erosion of purchasing power, lower return on investments, loss of international competitiveness