Unit 1-Area of Study 2-Definitions

Question 1

Define:

GDP per capita

Answer 1

Often used as a measure of a country’s average material living standards. It represents the total value of goods and services produced each year, divided by the number of people in the country among whom the goods and services are shared. It assumes that production is divided evenly

Question 2

Define:

Business cycle

Answer 2

Relates to rises and falls in the level of national production or economic activity over a period of time

Question 3

Define:

Expansion

Answer 3

Is when the level of national production is rising between one year and the next

Question 4

Define:

Contraction

Answer 4

Is when the level of national production is falling between one year and the next

Question 5

Define:

Aggregate supply-side factors

Answer 5

Affect an economy’s productive potential and relate to the many conditions that influence the long-term willingness and ability or capacity of producers to make goods and services.

Question 6

Define:

Aggregate demand-side factors

Answer 6

Affect the level of total spending on a nation’s goods and services, thereby affecting the short-term or cyclical level of economic activity

Question 7

Define:

Labour productivity

Answer 7

Relates to the efficiency of workers as measured by the value of GDP per hour worked

Question 8

Define:

Trade liberalisation

Answer 8

Involves a progressive reduction in the levels of protection of local industry from overseas competition, through the cutting of tariffs and signing free trade agreements with other countries. The aim is to increase efficiency by exposing our producers to stronger international competition from imports, and to grow the markets for our exports

Question 9

Define:

Aggregate demand

Answer 9

Is the total annual value of spending on Australian-made goods and ser vices

Question 10

Define:

Inflation

Answer 10

Refers to a situation where most prices paid for a basket of consumer goods and services are rising over a period of time, causing a drop in the purchasing power of money. It may be the result of higher production costs or general shortages of goods and services due to too much spending

Question 11

Define:

Cyclical unemployment

Answer 11

Occurs in recessions as a result of lower spending on locally made goods and services. When spending slows, firms cut production and their demand for resources including labour, causing the level of cyclical unemployment to rise

Question 12

Define:

Efficiency

Answer 12

Refers to the level of output of goods and services produced from a particular quantity of inputs or resources. Greater output gained from inputs usually means there has been a rise in productivity or efficiency and a fall in production costs

Question 13

Define:

Monetary policy

Answer 13

Involves the Reserve Bank of Australia (RBA) using changes in interest rates to help stabilise the level of total spending, economic activity and GDP

Question 14

Define:

Budgetary policy

Answer 14

Involves the federal treasurer using changes in the level of taxes and government outlays to help regulate the level of total spending, economic activity and GDP

Question 15

Define:

Sustainable economic development

Answer 15

A method of expanding the economy’s production levels to meet the needs for goods and services of the present population, without undermining the ability of future generations to meet their own needs