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Economics 3,4 > U3 AOS2 > Flashcards

U3 AOS2 Flashcards

1
Q

What are living standards

A

= aggregate welfare of ppl in country e.g Aus, made up of material + non material factors

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2
Q

What are material living standards

A

= refer 2 lvl of economic wellbeing of individuals + qty of tangible / physical g/s available 4 each person 2 consume

(tangible factors)

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3
Q

What are non material living standards

A

= quality aspects of a person’s daily existence (intangible factors)

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4
Q

Factors affecting MLS + acronym

A

PEACLL

1) access 2 g/s -> real gdp per capita
2) environmental quality
3) physical + mental health
4) life expectancy
5) crime rates = inc crime rate -> inc insurance premium
6) literacy rates -> inc employment opportunities

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5
Q

Factors affecting NMLS + acronym

A

PEACLL

1) access 2 g/s -> satisfaction
2) environmental quality -> -ve externalities
3) physical + mental health
4) life expectancy
5) crime rates
6) literacy rates

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6
Q

What are the conflicting relationships b/n MLS and NMLS

A
  • Environmental trade off
  • Health + social trade off
  • Material trade off
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7
Q

What is GDP and the equation for gdp

A

= final market value of all g/s produced in Aus economy over a given period of time

GDP = C+I+G+(X-M)

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8
Q

What is real GDP

A

= uses prices from previous period + applies them 2 current period volumes

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9
Q

What is gross national expenditure (GNE)

A

= total expenditure by Aus on g/s produced anywhere

GNE =C+I+G

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10
Q

What are the 4 flows of the economy

A

1) flow of available supply of resources
2) flow of demand for resources
3) flow of total expenditure of AD
4) flow of final g/s supplied

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11
Q

What are leakages

A

= part of income earned by households x immediately spent on Aus g/s, instead diverted through financial, government and or external sectors

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12
Q

What is the financial sector

A

= savings + investment -> money used in C or I

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13
Q

What is the government sector

A

= taxes + gov.t spending on infrastructure / via C once welfare transfers spent

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14
Q

What is the external sector

A

= spending on M which dec AD + spending on X that inc AD

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15
Q

What is aggregate demand

A

= total value of all expenditure on final finished g/s produced by a nation + measured over a period of time

=gdp

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16
Q

What is the AD equation

A

= (C+I)+(G1+G2)+(X-M)

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17
Q

What is private consumption expenditure

A

= total value of all expenditure on individual + collective goods incurred by resident households + xprofit institutions serving households
60% of AD

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18
Q

What is private investment expenditure

A

= expenditure with purpose of expanding productive capacity + productivity of firms

(15-20%) AD

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19
Q

What is government expenditure

A

-> includes expenditure by all lvls of gov.t

G1 = current expenditure -> g/s x in capital nature i.e health, edu, defense

G2 = capital expenditure -> g/s in capital nature i.e physical hospitals, roads, schools (infrastructure)

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20
Q

What are exports

A

= spending on exports by foreign economic agents

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21
Q

What are imports

A

= spending on imports by Australian economic agents

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22
Q

What are factors that impact AD

A

1)Inflation
2) Disposable income (gross income - income tax)
3) Interest rates
4) Consumer confidence
5) Business confidence
6) Exchange rates
7) Levels of economic growth

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23
Q

What is aggregate supply

A

= represents the total volume of g/s that all suppliers have produced + supplied over a period of time
-> influenced by willingness + ability of p’er 2 produce

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24
Q

What is production

A

= process of converting resources + inputs into g/s / total volume of g/s produced over a given time period

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25
Q

What is productivity

A

= measured by the output per unit of input

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26
Q

What is productive capacity

A

= point @ which production (GDP) is occurring @ maximum lvl possible in an economy

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27
Q

What are the factors that affect AS

A

1) Inflation
-> S.T = inc profit t/f inc willing + able
-> L.T = inc wages + expenses t/f overall x affect on AS`
2) Qty of factors of prod
3) Qual of factors of prod
4) Cost of production
5) Tech changes e.g NBN
6) Productivity growth
7) Exchange rates
-> Depreciation = inc cost of imports
-> Appreciation = dec cost of imports
8) Climatic conditions

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28
Q

What is the optimal rate for strong + sustainable economic growth

A

= 3-3.5%

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29
Q

What is the optimal unemployment rate

A

= 5%

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30
Q

What is the optimal inflation rate

A

= 2-3% over the median term

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31
Q

What is disposable income

A

= total income household received for participation in the production process plus government transfer less direct tax

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32
Q

What is discretional income

A

= disposable income available 4 consumption following the payment of all non avoidable expenditures e.g interest rates affect discretionary income, not disposable income

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33
Q

What is the business cycle

A

= cyclical movement of economic activity over time
-> Peaks, contractions, troughs, expansions

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34
Q

What is the nature of a peak

A
  • strong rates of eco growth
  • high levels of inflation
  • low levels of unemployment
  • spending + confidence are high
  • production is strong + capacity is heavily utilised
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35
Q

What is the cause of a peak

A
  • high c’er + bus confidence
  • high prosperity 2 spend / take on new debt
  • fall in household savings ratio
  • high levels of global economic growth
  • fall in leakages relative 2 injections
36
Q

What are the issues of a peak

A
  • if a “boom” it may be unsustainable
  • inflationary pressures especially if capacity constraints
  • asset prices can inc rapidly
  • inc current account deficit
37
Q

What is the nature of a contraction

A
  • slowing rates of economic growth
  • decreasing lvls of inflation
  • decreasing lvls of unemployment
  • inc underutilisation rate, in particular labour market
38
Q

What is the cause of a contraction

A
  • Due 2 high inflation, capacity constraints + higher interest rates, it will correct itself
  • inc volume of production becomes difficult
  • inc inflation
  • leakages start to rise and injections fall
39
Q

What is the nature of a trough

A
  • minimum point of the cycle
  • low lvls of production = high unemployment
  • low inflation
  • underutilisation of capacity
  • leakages higher than injections
40
Q

What are the causes of a trough

A
  • low levels of spending due 2 low c’er confidence
  • high levels pf household saving due 2 dec c’er confidence
  • low levels of investment due 2 low bus confidence
  • low levels of disposable income
  • slow rates of economic growth
41
Q

What is the nature of an expansion

A
  • Inc levels of production
  • inc job vacancies t/f dec unemployment
  • inflationary pressures building in the economy
42
Q

What are the causes of an expansion

A
  • inc c’er + bus confidence
  • inc consumption + investment expenditure
  • inc gov.t expenditure
  • low interest rates
43
Q

What is economic activity

A

= refers 2 the expenditure, production + income that takes place in an economy when g/s are produced + sold

44
Q

What is gross national income

A

= measurement of a country’s income including all income earned by a country’s residents, business + earnings from foreign sources

45
Q

What is the goal of strong and sustainable growth

A

= the government’s goal 4 strong + sustainable growth is 2 achieve the highest growth rate possible (real GDP of 3-3.5%) consistent with strong employment growth but without running into unacceptable inflationary, external and or environmental pressures

46
Q

What is sustainable growth

A

= growth / economic development that meets the needs of the present without compromising the ability of future generations 2 meet their own needs so the achievement of intertemporal efficiency

47
Q

What is nominal GDP

A

= $value (final market value) of g/s produced in a period of time, which depends on the volume of what was produced + the price of what was produced

48
Q

What is real GDP

A

= final market value of g/s using previous period’s prices t/f adjusting for inflation

49
Q

What is the difference between nominal and real GDP

A

= if inflation is adjusted for

50
Q

What is the equation for measuring quarterly GDP growth

A

= (GDP2-GDP1) / GDP1 X 100

51
Q

Reasons to pursue economic growth

A

1) Growth in real income
-> from inc production -> inc labour t/f inc incomes -> inc M + NMLS
2) Lowering the unemployment rate
-> inc domestic production requiring inc labour
3) Inc ability of gov.t 2 provide essesntial services + avoid inc debt levels
-> inc employment -> inc tax revenue

-> overall link is the improvement 2 L.S that they bring

52
Q

What is jobless growth

A

= inc output achieved via inc productivity of existing inputs so gov.t needs 2 ensure growth rate exceeds rate of growth in productivity

53
Q

What is greater than population growth

A

= economic growth needs 2 exceed population growth rate, best measured by real GDP per capita

54
Q

Consequences of a growth rate below 3%

A
  • dec growth in real income, potentially no growth
  • inc / stagnant unemployment rate
  • cause a budget deficit t/f gov.t x offer services + inc debt
55
Q

Consequences of a growth rate above 3.5%

A
  • Unsustainable
    -> can create inflationary pressures that negatively impact real income growth
    -> can create external pressures
    -> can create environmental pressures from depletion of natural resources + degradation of environment
56
Q

What does it mean by employed

A

= when someone 15 years of age and older is working more than 1hr a week in return 4 some form of remuneration

57
Q

What does it mean by unemployed

A

= when someone is 15 and over without work or working less than 1hr per week, + actively seeking employment / more work

58
Q

What is hidden employment

A

= unemployed x included in calculation of unemployment as they have given up looking for work

59
Q

What is long term unemployment

A

= being unemployed for more than 12 months

60
Q

What is underemployement

A

= individuals who have a job h/r, they would prefer to be working more hrs + t/f unemployed to an extent

61
Q

What is full employment

A

= the level of unemployment that exists when the gov.t economic growth goal is achieved + where cyclical unemployment is non existent, generally accepted 2 be 4-4.5% non accelerating inflationary rate of unemployment (NAIRU)

62
Q

How to calculate the labour force

A

L.F = employed + unemployed

63
Q

How to calculate the unemployment rate

A

U.R = unemployment / labour force x100

64
Q

What is the labour force underutilisation rate

A

= represents the proportion of the labour force that is “underutilised”, the proportion of individuals x working the number of hrs they would like 2

65
Q

How to calculate underutilisation rate

A

Under R= (Unemployed + underemployed) / labour force x 100

66
Q

What is the labour force participation rate

A

= measures the % of the working age population who are either working / actively seeking employment

67
Q

How to calculate the labour force participation rate

A

LPR = Labour Force / Working age population x 100

68
Q

What is structural unemployment

A

= skills of the unemployed do x match the skills required by the economy

69
Q

What is seasonal unemployment

A

= where a person is unemployed b/c their skills are only demanded during certain times of the year

70
Q

What is frictional unemployment

A

= where a person is unemployed 4 the period of time while they’re moving from 1 job 2 another

71
Q

What is hardcore unemployment

A

= where a person is unemployed due 2 mental, physical, or other characteristics that prevent them from receiving job offers

72
Q

What is cyclical unemployment

A

= unemployment that occurs when the economy is x operating @ its full capacity due 2 AD deficiencies

73
Q

What are the consequences of unemployment

A
  • loss of GDP
  • loss of tax revenue
  • greater income inequality
  • reduction in living standards
74
Q

What is the goal of low inflation

A

= 2 achieve a sustained inc in general lvl of prices of b/n 2-3% on average over the medium term

75
Q

What is inflation

A

= sustained inc in general / average price levels over time

76
Q

What is disinflation

A

= dec rate of inflation
e.g quarter ending in march 2017 inflation is 1.9% and then the quarter ending in June 2017 comes in at 1.5%

77
Q

What is deflation

A

= dec in the average price lvl over time. Literally a -ve inflation figure

78
Q

What is consumer price index (CPI)

A

= most reliable indicator of inflation that determines change in prices of g/s purchased by average Aus household
-> collects prices of 100000+ g/s (basket) which is then weighted 2 reflect relevant importance 2 each Aus household

79
Q

How to calculate inflation from the consumer price index

A

I.R = (CPI end - CPI start) / CPI start X100

80
Q

What is CPI headline inflation

A

= capture price movements of all g/s contained in the CPI (normal)

81
Q

What is CPI underlying inflation

A

= headline inflation that excludes volatile items i.e fruit, veg, fuel.

82
Q

What is the RBA underlying trimmer mean

A

= removal of top and bottom 15% that has inc most / least

83
Q

What is the RBA underlying weighted mean

A

= price change that sits in the middle of the range / 50th percentile

84
Q

What is demand inflation

A

= inflation caused by changes in factors that inc / dec AD

85
Q

What is cost inflation

A

= inflation caused by changes in factors that impact on AS / supply side pressures / capacity constraints

Economics 3,4 (6 decks)

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