U1 AOS1 Vocab/Concepts

Question 1

Define

Aggregate Demand

Answer 1

total amount of demand for all goods and services produced in an economy

Question 2

Define

Aggregate Demand Policies

Answer 2

government policies such as budgetary policy and monetary policy that are used to stimulate or restrain aggregate demand to promote the achievement of the government’s macroeconomic goals

Question 3

Define

Aggregate Supply

Answer 3

total value of goods and services available for sale in an economy in a given time frame

Question 4

Define

Aggregate Supply Policies

Answer 4

Any government initiative that is designed to reduce the costs of production and/or improve supply conditions for businesses

Question 5

Define

Allocative efficiency

Answer 5

a type of effiency measured by how well resources are being allocated in the economy. The most efficient allocation of resources occurs when living standards and welfare are maximised.

Related to PPF, the point where businesses are providing the exact amount of supply for consumer demand

Question 6

Define

Asymmetric Information

Answer 6

when one party in a transaction lacks relevant information (opposite to perfect information)

Question 7

Define

Barter economy

Answer 7

an economy in which goods and services are traded between two or parties without the use of money

EXAMPLE: shells, bread for meat,

Question 8

Define

Business/Firms

Answer 8

an entity that provides a good or service for sale with the objective of making profit

Question 9

Define

Business Cycle

Economic Cycle/ Boom and Bust Cycle

Answer 9

cyclical movement of economic activity over time, with periods of high rates or postive economic growth (boom) and periods of negative or low rates of economic growth (bust)

Question 10

Graph

Economic Cycle

Answer 10

Expansion, Peak/Zenith, Contraction, [Recession], Trough/Nadir, [Recovery]
—- Real GDP (x) by Time in years (y)
—-Potential output (straight line)

class diagrams onenote

Question 11

Define

Capital

Answer 11

resources that have been made by combining labour and natural resources to create a more sophisticated input in the production process

one of the 4 fators of production

Question 12

Define

Capitalism

Answer 12

an economic system where the majority of productive resources are owned by private individuals and firms

none pure capitalism system, zero government intervention

Question 13

Define

Carbon Tax

Answer 13

a tax on businesess emitting carbon when producing goods and services

AKA Carbon Pricing

Question 14

Define

Ceteris Paribus

Answer 14

holding other things constant/ all else being equal

Question 15

Define

Common access resources

Answer 15

a resource that can provide benefit to society but is not owned by anybody

Because anybody can enjoy its use in common, the risk of over-consumption and ultimate depletion of common resources is a big concern.

Question 16

Define

Comparative Advantage

Answer 16

a theory stating that a country should produce the goods and services it is most efficient at producing, consequently, a country should trade where the opportunity costs of producing are lower than other countries

Question 17

Define

Consumers

Answer 17

economic agents who purchases goods and services

different to expenditure

Question 18

Define

Consumer sovereignty

Answer 18

when consumers primarily determine what will bbe produced via their purchasing decisions

Question 19

Define

Consumption

Answer 19

the use of goods and services by households

Example, expenditure= car, Consumption= provides transportation services

Question 20

Define

Consumption expenditure

Answer 20

The purchase of goods and services for use by households

Question 21

Define

Cost-benefit Analysis

Answer 21

a comparison of the expected costs and expected benefits of a particular course of action or project

• related= the need for trade-offs involves the need for cost-benefit analysis to determine best trade-off–one that minimises opportunity costs
• includes ‘benefit-cost ratio (benefits divided by costs)’ where number larger than 1.0 is good, benefits outweighing the costs and vice versa
• EXAMPLE: Melbourne Metro Rail Project + East West Link Project

Question 22

Define

Direct Tax

Answer 22

a tax paid directly by economic agents, normally based on the income they earn, such as income tax

not GST

Question 23

Define

Disincentive

Answer 23

something that discourages economic agents from making specific decisions, typically through monetary, legal or social penalties

Question 24

Define

Disposable income

Answer 24

total income that households have received minus direct taxes, money left to spend.

Question 25

Define

dynamic efficiency

Answer 25

how quickly resources can be re-allocated from one area to another

Question 26

Define