Semester 2 EXAM Flashcards
define unemployment
the percentage of the population that is willing and able to work but is not employed
what are the two groups of the labour force
- People who are employed
- People who are not employed but are willing and able
to work
what is the target rate of unemployment in Australia
4.5%
why is our target unemployment rate 4.5%
this is because we always factor in a level of unemployment because there will be people taking a break, moving between jobs technological advancements which would put people out of jobs, etc. but are still willing and able to work
how do you calculate the unemployment rate
unemployment ÷ labour force x 100
what are the 3 categories of unemployment
people are are employed
people who aren’t employed but are willing and able to
work
People who are not in the labour force. they are not
willing and/or able to work.
how do you calculate the labour force
employed + unemployed
explain frictional unemployment
People leave their job in search for another job
Positive type of unemployment
1 of the reasons target rate is not set to 0%
Responsible for a small proportion of unemployment
Duration is usually less than 4 weeks
explain cyclical unemployment
Unemployment that follows the swings in the business cycle
Demand for labour comes from consumer demand for goods and services
At the peak of a boom in the economy (e.g. 2000’s mining boom) cyclical unemployment should be close to 0
Explain structural unemployment
Mismatch of available skills and required skills in a geographical or occupational sector of the economy
In other words it changes to how we produce goods and services to make workers skills redundant
E.g. Bank tellers being replaced by ATM’s, self-
checkouts at Woolworths and Coles etc.
Can be good for the economy if the worker then retrains and up-skills in order to find a new job
Can be bad for the economy if the worker does not retrain and their lack of useful skills turn into long-term unemployment
Explain seasonal unemployment
Occurs when workers are unemployed at
certain times of the year, because their
job does not require work all year round,
it’s seasonal.
E.g. farmers, lifeguards & workers in tourism
What are the effects of unemployment
Lower consumer spending
Lower investment
Lower business and consumer confidence
Lower economic growth
More government spending on welfare (and less on other things)
Creates personal, family and social problems in society
why will there always be some structural unemployment in the economy
Because the goods and services we produce and the way in which we produce those goods and services are always changing, it is expected that there will always be some structural unemployment in the economy
What is Australia’s target rate for inflation
2-3%
Define ‘inflation’
The increase in the general level of prices across a range of goods a services in an economy over a period of time, usually one year.
what do we use to measure inflation
Consumer Price Index (CPI).
It is merely a measure of the overall changes in the price of this basket of goods and services.
It is calculated by the Australian Bureau of Statistics.
Price of CPI basket in base period is given a value of 100 and the prices of the next few years are compared against base year
how often is the rate of inflation reported
It is measured quarterly but only presented annually.
what are some examples of the goods and services that inflation includes
- Housing
- Food
- Transportation
- Recreation
- Education
- Communication
what are the 2 types of inflation
demand pull inflation
cost push inflation
what is demand pull inflation
Occurs when demand increases at a rate faster than the capacity of the economy to produce goods and services. Demand is higher, increases competition of goods and services and businesses increase their prices.
what some causes of demand pull inflation
Full employment causes labour shortages, employers this bid up wages to attract labour, The increased income transpired onto increased consumption.
High levels of foreign demand
Growth in foreign economies, higher incomes for out exporters
Inflationary expectation: if members of an economy expect prices to rise, it bring forward expenditure decision leading to demand and pull inflation
Changes in consumption patterns e.g. if everyone decides to save more and spend less
Monetary considerations – too much credit in the economy.
What is cost push inflation
Occurs when prices are pushed up by rising costs to producers who compete with each other for increasingly scarce resources. The increased costs are passed onto consumers.
What are the causes of cost push inflation
Any input may become a major cost to business e.g. wage increases lead
Labour shortages e.g. wars, people have to fight in wars and less people to do farming
Inflation imported from abroad e.g. the rise in the cos of intermediate resources imported from other countries e.g. oil prices
Government budgetary problems – an increase in the cost of public utilities e.g. electricity, water
give an example of demand pull inflation
Prices for housing in Karratha may go up because they are in high demand in a mining boom, and many miners are bidding for dwellings, which are in higher demand so housing prices in that area go up.
give and example of cost push inflation
Petrol and oil is becoming more and more expensive because it is an increasingly scarce resource. Because it is a scarce resource, it is harder to find and produce, so producers that compete with each other need to increase their prices.
define the business cycle
The regular oscillation of economic activity.
