Term 1 Study

Question 1

Define opportunity cost

Answer 1

Opportunity cost is what you give up when you choose one thing instead of another.

Question 2

What 3 things make something scarce?

Answer 2

limited quantity
more than one use
desirable

Question 3

What are the 4 factors of production?

Answer 3

land, labour, capital, enterprise

Question 4

What does the assumption “ceterus paribus” mean?

Answer 4

all other things remain unchanged

Question 5

What are the 4 economic systems?

Answer 5

traditional, command, market and mixed

Question 6

name 3 characteristics of a traditional economic system

Answer 6

traditional or customs govern economic traditions

little or no use of technology

economic activities revolve around family, tribe etc

Question 7

name 3 characteristics of a command economic system

Answer 7

the government makes all economic decisions

individuals have tiny influence over economic functions

resources, businesses etc are owned by the government

Question 8

name 3 characteristics of a market economic system

Answer 8

economic decisions are made by individuals and the market

resources are owned by individuals

individuals have freedom to make economic decisons

Question 9

name 3 characteristics of a mixed economic system

Answer 9

combines elements of all

government and individuals share the economic decision making

government guide and regulates production of goods and services but resources are owned by individuals

Question 10

what is aggregate demand?

Answer 10

a measurement of the total amount of demand for all finished goods and services produced in an economy

Question 11

how can you measure GDP?

Answer 11

aggregate demand

Question 12

what is the formula for aggregate demand?

Answer 12

consumption (C) + investment (I) + Government expenditure + Exports (x) - imports (M)

Question 13

what are 3 factors that affect consumption expenditure?

Answer 13

interest rates, disposable income, consumer confidence

Question 14

what are 2 factors that affect investment expenditure?

Answer 14

business confidence, interest rates

Question 15

what is a factor that affect government expenditure?

Answer 15

(increase) economic activity = (decrease) government spending

Question 16

How can the government intervene in reference to increasing economic growth

Answer 16

increase investment in infrastructure
improve technology
immigration polices
increase funding for training
encourage workers to enter/remain in the workforce

Question 17

what is the largest contributer to GDP growth?

Answer 17

consumer expenditure

Question 18

what is the desired inflation target?

Answer 18

2-3%

Question 19

how does our economy grow?

Answer 19

injections

Question 20

what is aggregate supply?

Answer 20

Aggregate supply is the total amount of goods and services that businesses in an economy are able to produce

Question 21

what is a subsidy?

Answer 21

money that the government gives to businesses or people to help lower the cost of something.

Question 22

What is the law of demand?

Answer 22

when the price goes up, people buy less, when the price goes down people buy more

Question 23

What is the law of supply?

Answer 23

when the price goes up, businesses produce more of it. When the price goes down, businesses produce less.

Question 24

What is allocative efficiency?

Answer 24

countries resources are allocated to generate the most benefits for an economy

Question 25

What is consumer sovereignty?

Answer 25

consumers have the power to decide what gets produced

Question 26

what actually is GDP?

Answer 26

the total value of all goods and services produced in an economy

Question 27

what is the desired unemployment target?

Answer 27

3-5%

Question 28

what does higher government spending lead to?

Answer 28

more jobs, higher income, more consumer spending, inflation

Question 29

what does higher tax impact?

Answer 29

less disposable income, lower consumer spending, slower growth (contracts the economic activity)

Question 30

what does higher interest rates result in?

Answer 30

lower investment - borrowing money, slower growth but less inflation

Question 31

draw the circular flow of income

Answer 31

check

Question 32

Draw a PPC

Answer 32

check

Question 33

draw the economic cycle

Answer 33

check

Question 34

What are 5 effects an upswing has on an economy?

Answer 34

increase consumer confidence inflation can increase (because we are spending a lot of money) increase business confidence - investments healthy business activity increase in production

Question 35

What are 5 effects a downswing has on an economy?

Answer 35

increase cost of production less people are buying things (lower demand) slow down production we are producing less the economy is overall slowing down

Question 36

What does fiscal policy mean?

Answer 36

The government adjusts spending/taxes to influence economic growth, employment, and inflation.

Question 37

what does monetary policy mean?

Answer 37

The RBA controls interest rates and money supply to manage inflation and economic stability.

Question 38

what does external policy mean?

Answer 38

Policies affecting trade, exchange rates, and international capital flows.

Question 39

what does RBA stand for?

Answer 39

Reserve Bank of Australia

Question 40

What is equity?

Answer 40

the fairness of distribution of resources

Question 41

what does the market equilibrium mean?

Answer 41

quantity of goods + services = consumer demand (stable market)

Question 42

what is Entrepreneurship?

Answer 42

The ability to organize and manage the other factors of production

Question 43

what does elasticity mean?

Answer 43

measures how much one variable changes in response to another changing