Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Economics U3aos2 > U3aos2 > Flashcards

U3aos2 Flashcards

(66 cards)

Start Studying
1
Q

Material living standards

A

refer to the level of economic wellbeing of individuals and their access to goods and services.​

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Non-material living standards

A

refer to quality aspects of a person’s daily existence.​

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Factors affecting living stndards

A

PEACL
-Access to goods and services
-Environmental quality
-Physical and mental health
-Crime rate
-Literacy rates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Gross Domestic Product

A

the final market value of all goods and services produced in the Australian economy over a given period of time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

The Chain Volume Measure of GDP (real GDP)

A

uses prices from previous period and applying them to current period volumes.​

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

GDP =

A

C + I + G + (X – M)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Gross National Expenditure: (GNE)

​

A

total expenditure by Australians on goods and services produced anywhere.​
GNE = C + I + G

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Aggregate demand

A

the sum or total value of all expenditure on final (finished) goods and services demanded by a nation and measured over a period of time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

C = private consumption expenditure

A

total value of all expenditure on individual and collective goods incurred by resident households and non-profit institutions serving households.​

​Includes:​
-Spending on durables (e.g. white goods, cars etc.)​
-Consumer semi-durables (e.g. clothing)​
-Non-durables (e.g. food)​
-Services (e.g. dry cleaning)​

60% of AD​

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

I = private investment expenditure​

A

Expenditure with the purpose of expanding the productive capacity and productivity of firms and the economy:​

-Purchase of new equipment​
-Vehicles​
-Buildings (includes the construction of new homes)​
-Addition to inventories (includes a farmer buyer more cattle)​

15 – 20% of aggregate demand & most volatile

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

G = government spending

A

Includes expenditure by all levels of government (federal, state and local).

20% of Aggregate demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

G1​

A

​(Current expenditure)
on goods or services not capital in nature, therefore no on-going benefit created​

-Health, education, defence, office stationery, government employees salaries​

-Relatively stable component of AD​

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

G2

A

(Capital expenditure​)
Investment expenditure on goods of a capital nature, therefore an on-going benefit is created.​

Physical hospitals and schools (e.g., the buildings), roads, rail and ports (infrastructure)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Balance of Trade

A

Net Exports (X – M)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

X – Exports

A

spending on exports by foreign households, businesses, governments or other institutions.​ Very volatile

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

M - Imports

A

spending on imports by Australian households, businesses, governments or other institutions. (60% of imports are used in the production process)​
Very Volatile

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

five-sector model

A

The Business sector​
The Household sector​
The Financial sector​
The Government sector​
The External sector

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Flows of five-sector model

A

Flow 4- production (flow of final goods and services supplied (GDP))
Flow 2- income (total incomes or the demand for resources)​
Flow 1- available supply of resources)
Flow 3-consumed (total expenditure of aggregate demand (AD))

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Factors influencing AD (Disposable income)

A

What? Gross income – personal income tax​

↑ disp. Y  ↑ purchasing power  ↑ C  upward pres. AD​

↓ disp. Y  ↓ purchasing power  ↓ C  downward pres. AD​

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Factors influencing AD (consumer confidence)

A

What? General optimism or pessimism about the future state of the economy and job security – from a consumer’s perspective​
↑ c’er confid = ↑ optimism & employment ↑ spending e.g.  ↑ C  upward pres. AD​

↓ c’er confid = ↑ pessimism & employment  ↓ spending e.g.  ↓ C  downward pres. AD​

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Factors influencing AD (Business confidence)

A

What? bus. level of optimism and pessimism in the future state of the economy and their profit-making potential
P’ers pessimistic↓spending ↓ spending ↓ I & AD
P’ers optimistic ↑ spending ↑ I ↑ AD

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Factors influencing AD (Interest Rates)

A

Represent the cost of borrowing and incentive to save
IR↑ cost of borrowing↑ spending↓ C&I↓AD↓

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Factors influencing AD (Exchange rates)

A

The value of one nations currency relative to another
AUD apprec. ↓International competitiveness↓X ↑ M ↓AD

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Factors influencing AD (Global economic growth)

A

Levels of economic activity in the economies of major trading partners
Global Growth ↑ X↑ M↓ AD↑

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Aggregate Supply
represents the total volume of goods and services that all suppliers have produced and supplied over a period of time.​ Is influenced by the willingness and ability of producers to produce.
26
Production
the process of converting resources and input into goods and services or the total volume (or value) of goods and services produced over a given time period.
27
Productive Capacity
the point at which production (or GDP) is occurring at the maximum level possible in an economy.​
28
Factors Influencing AD
Dis. Income Cons. Confidence Bus. Confidence Interest rates Exchange rates Global Eco. Growth
29
Factors affecting AS
-quantity of the factors of production -quality of the factors of production -Costs of Production -Technological change -Productivity growth -Exchange rates -Climatic conditions
30
Business Cycle ​
refers to the pattern formed by the cyclical movement of economic activity (or GDP) over time, with four phases (Peak, contraction, trough and expansion).​ ​
31
Strong and sustainable economic growth​
The Government’s goal for strong and sustainable economic growth is to achieve the highest growth rate possible (real GDP of 3 to 3.5%), consistent with strong employment growth but without running into unacceptable inflationary, external and/or environmental pressures.
32
How do we measure “economic growth”?
Total Value Added / Final Market Value Gross Domestic Product = total market value of all goods and services produced in the Australian economy over a given period of time
33
Real vs Nominal GDP
Nominal GDP – is the dollar value of the goods and services produced in a time period, which depends on the volume of what was produced and the price of what was produced. Real GDP – shows the total volume of goods and services that was produced.
34
Consequences of economic growth that is too high - > 3.5%
—Environmental degradation (destruction, depletion, negative externalities) —External pressures ( greater leakages, depreciation of AUD, greater C of M) —High Inflation ($^, purchasing power lower, wage price spiral)
35
Consequences of economic growth that is too low - < 3%
—Higher levels of unemployment = lower levels of household disposable income and lower living standard —Negative impact on government’s ability to deliver essential services.
36
Quarterly growth
GDPPeriod 2 – GDPPeriod 1/ GDPPeriod 1 X 100
37
Employed
when someone is 15 years of age and over and working more than 1 hour a week in return for some form of remuneration (such as wages).
38
Unemployed
when someone is over 15, without work or working for less than one hour per week, and actively looking for (more) work.
39
Disguised unemployment or Under-employment
underemployed are individuals who have a job however, they would prefer to be working more hours and therefore are unemployed to an extent.
40
Hidden Unemployment
unemployed not included in the calculation of unemployment as they have given up looking for work (i.e. not actively seeking work).
41
Long term unemployment
where individuals have been unable to get a job for 52 weeks or more
42
Goal of Full employment
The level of unemployment that exists when the government’s economic growth goal is achieved and where cyclical unemployment is non-existent, generally accepted to be 4 to 4.5% (NAIRU)
43
NAIRU
N.A.I.R.U Non-Accelerating Inflationary Rate Of Unemployment → 4 to 4.5% (Commonwealth Treasury determine this)
44
Labour Force Underutilisation rate
represents the proportion of the of the labour force that is ‘underutilised’, or the extent to which the labour force is not working to its capacity.
45
Labour Force Participation Rate (LFPR)
the proportion of all people aged 15 years and over who are in the labour force.
46
Participation rate and labour force formula
PR= labour force/ working age population x100 LF= employed+ unemployed
47
Frictional unemployment
when people are unemployed between finishing one job and starting another.
48
Cyclical unemployment
unemployment that occurs when the economy is not operating at its full capacity due to aggregate demand deficiencies.
49
Structural Unemployment
The skills of the unemployed do not match the skills required by the economy.
50
Consequences of unemployment > 4.5%
—Loss of output (as measured by GDP) and income due to unemployment —Loss of tax revenue for the government and impact on govt’s ability to provide essential services. —Greater income inequality.
51
Consequences of unemployment < 4.0%
—Builds inflationary pressures in the economy (NAIRU) —Reduces international competitiveness Reduce living standards
52
Goal of low and stable inflation
to achieve a sustained increase in the general level of prices of between 2 – 3% on average over the medium term. RBA’s goal is commonly referred to as “Price stability”
53
Inflation
a sustained increase in the general or average price level over time.
54
Disinflation
a situation where there is a slowdown in the rate of inflation, and prices are rising more gently than previously
55
Deflation
a decrease in the average price level over time. This is a negative inflation figure, for example−1.5%
56
Consumer Price Index (CPI)
is the most reliable indicator of inflation and is an indicator of average changes in retail prices for those 80,000 goods and services that represent a high proportion of the expenditure for a typical Australian metropolitan household
57
CPI formula
Cost of market basket in given year/ cost of market basket in base year x 100
58
Headline vs underlying inflation
CPI headline: capture price movements of all goods and services contained in the CPI CPI Underlying: all groups excluding volatile items”.
59
Demand Inflation
Inflation caused by changes factors that increase or decrease Aggregate Demand
60
Cost Inflation
Inflation caused by changes in factors that impact on aggregate supply or supply side pressures or capacity constraints.
61
Consequences of inflation being above 3%
—Erodes purchasing power —Development of a wage price spiral —Distortion of spending and investment decisions — Lower returns on investment —Reduces international competitiveness, (i.e. local producers are at a competitive disadvantage)
62
Consequences of inflation being below 2%
—Consumers delay purchases as they expect prices to fall (i.e. deflation), =downward pressure on private consumption expenditure —Businesses confidence declines
63
Leakages
savings taxes imports
64
Injections
investments gov. spending exports
65
economic growth, inflation and unemployment rate China GDP growth
1.5% 4.1% 4.1% 5.2%
66

Economics U3aos2 (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions