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Unit 1 & 2 Economics > Unit 1 Outcome 2 > Flashcards

Unit 1 Outcome 2 Flashcards

1
Q

What are the costs and benefits of economic growth?

A

Costs:
. to create goods and services requires the use of resources
. labour that is necessary to ensure that we are able to grow
Benefits:
. ensures new jobs are created
. correlation between economic growth and environmental sustainability
. standard of living gets better

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2
Q

What is economic growth?

A

. This is when a nation increases the volume of goods and services produced over a period of time.
. Economic growth consists of booms and recessions and can have both positive and negative externalities
. this growth is generally measured on real GDP.

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3
Q

What are living standards?

A

They refer to how well-off a nation is overall. Living standards can be split into material living standards and non-material living standards.

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3
Q

What are trade-offs?

A

They are costs based on what has to be sacrificed or given up, following a decision or choice.

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4
Q

What is sustainable economic development?

A

. Expanding the economy’s production levels to meet the increasing needs of the present without compromising the ability of future generations to meet their own needs.
. eg. minimise the use of non-renewable resources

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4
Q

What are examples of trade-offs?

A

. Does having even more goods and services available in rich countries actually make us happier and better off overall?
. What have we given up (the opportunity cost) to achieve this material affluence?
. What damage has economic growth inflicted on the natural environment, and has it contributed to global warming and climate change?
. Can the rapid depletion of natural resources, which we have seen up to this point, keep going indefinitely?
. Will the living standards of future generations suffer because of the choices we make?

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5
Q

What are the limitations to the GDP as a measure of production and living standard?

A

. GDP excludes most mon-marketed production
. GDP uses some inaccurate ‘guestimations’ of some types of production
. GDP fails to take account of negative externalities that lower non-material living standards
. GDP meeds to be adjusted to take account of population size
. GDP fails to take account of the way goods, services and incomes are distributed or shared

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6
Q

What is GDP?

A

. Gross Domestic Product (GDP) is the measure of total annual value of goods and services produced or sold by a nation over a year, minus the costs used up in production.
. This is calculate quarterly to measure any change in the volume or total market value of the goods and services produced.

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8
Q

What is the business cycle?

A

This relates to the rises and falls in the level of national production or economic activity over a period of time. The business cycle consists of periods of expansions/recoveries, peaks (perhaps a boom), contraction/slowdown, troughs (perhaps recession) and domestic economic stability.

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9
Q

What is an expansion/recovery?

A

When the level of national production or economic activity is rising between one year and the next. Here it is common to see strong levels of spending, unemployment rates fall and inflation accelerates.

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10
Q

What is a peak?

A

When national production or economic activity has reached its highest level. This is where the rate if growth usually starts to ease.

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11
Q

What is a boom?

A

When the level of national production or economic activity is too high and the economy is overheating, resulting in inflation.

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12
Q

What is a contraction/slowdown?

A

When the level of national production or economic activity is falling between one year and the next. Typically this means that national spending is down, unemployment is rising and inflation starts to ease.

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13
Q

What is a trough?

A

When national production or economic activity has fallen to its lowest level in the economic cycle.

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13
Q

What factors effect Australia’s rate of economic growth?

A

. aggregate supply-side factors

. aggregate demand-side factors

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14
Q

What is a recession?

A

When the level of national production or economic activity falls and there is a negative rate of economic growth measured over two or more consecutive quarters (6 months or more). Her unemployment rises whilst inflation slows.

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15
Q

What is a Depression?

A

This is a big recession which occurs when the drop in national production or economic activity has fallen dramatically over a period of time.

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16
Q

What is domestic economic stability?

A

This is the ideal economic condition for an economy to be in. This is where there is simultaneous achievement of a strong and sustainable rate of economic growth, low inflation and full employment.

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17
Q

Explain the following component of aggregate demand: Private consumption

A

This represents household spending which is designed to help satisfy our needs and wants for goods and services. eg. good, holidays and clothing.

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18
Q

What is aggregate demand?

A

This is the total value for goods and services in an economy at a given time. The growth in the components of Aggregate demand is affected by changes in demand conditions/factors.

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18
Q

What variables affect private consumption/household spending?

A 
Taxes 
- increase will reduce capacity to spend
- decrease will raise capacity to spend
Consumer confidence 
- (belief in the economy being okay)
Interest rates
- decrease will discourage investment spending
- increase will encourage investment spending
Income 
- increase = more spending
- decrease = less spending
19
Q

What is the aggregate demand equation?

A

AD = C + I + G + X - M

20
Q

What are the components of the aggregate demand equation?

A 
C - private consumption/household spending
I - private investment/business spending
G - government spending 
X - exports
M - imports
20
Q

What variables affect private investment/business spending?

A

Company taxes
- decrease encourages new investment spending
- increase discourages new investment spending
Interest rates
- increase discourages investment spending
- decrease encourages investment spending
Business confidence
- (belief in economy being okay)

21
Q

Explain the following component of aggregate demand: Private investment

A

This represents businesses spending on machinery and buildings. This is designed to help expand a firms productive capacity, as these help make other goods and services.

21
Q

What variables affect Government spending?

A 
Tax income
- increased unemployment = more welfare
- decreased unemployment = less welfare 
Population growth 
- aged care issues to deal with 
Inflation
- increase means government spending lowers
- decrease means government spending rises
22
Q

What variables affect exports?

A

Exchange rate

  • decrease in the Australian dollar makes exports cheaper
  • increase in the Australian dollar makes exports more dearer
23
Q

Explain the following component of aggregate demand: Government spending

A

This represents government outlays that are designed to help satisfy the needs and wants of the community and industry for goods and services. eg. health, education, and childcare.

24
Q

What variables affect imports?

A

Exchange rate

  • decrease in the Australian dollar makes imports dearer
  • increase in the Australian dollar makes imports cheaper
25
Q

Explain the following component of aggregate demand: Exports

A

This represents expenditure by people overseas on Australian-made goods and services. This is designed to help satisfy their needs and wants.

27
Q

Explain the following component of aggregate demand: Imports

A

This represents the expenditure by Australians on foreign-made goods and services. This is designed to help satisfy our needs and wants.

29
Q

What are some benefits of Australia’s mostly strong economic growth?

A

. creates more jobs
. increases personal incomes
. can improve international trading position
. can sometimes slow inflation
. can improve material and non-material living standards

30
Q

What are negative externalities?

A

Negative externalities are any undesirable consequences or costs placed on a third party due to the economic activities of an individual or firm. These externalities can include pollution, exhaustion of resources, stress, crime, lack of open space, traffic congestion.

31
Q

What are externalities?

A

They are spillovers of social or economic costs or benefits that are paid for or deceived by third parties. They arise from the economic activities of others and can be either positive or negative.

32
Q

What are positive externalities?

A

They are benefits that arise during production or consumption of goods and services, which are enjoyed by people or third parties who are outside the particular economic activity.

36
Q

What is the carbon tax?

A

This is an environmental policy which places a tax on the 500 worst firms emitting carbon. This is done in the hope that it will encourage firms to move to cleaner energy such as wind, solar and hydro as they wouldn’t receive tax then.

37
Q

What is the carbon emissions trading scheme?

A

When a price is put on carbon emissions, but or is deduced by demand and supply for pollution permits in the market.

38
Q

What are the advantages and disadvantages of the carbon tax?

A

Disadvantages:
. only paid by Australia’s 500 worst polluters
Advantages:
. reduction of negative externalities or market failure

39
Q

What are some of the Australian Government’s policies ?

A

. carbon tax
. carbon pollution reduction scheme
. the proposed ‘direct action’ climate change policy

40
Q

What is the Kyoto agreement?

A

This is an international agreement designed to limit greenhouse gas emissions. It was adopted in Kyoto, Japan on the 11th of December 1997 and it entered into force on the 16th of February 2005.

41
Q

What are the advantages and disadvantages of the carbon emissions trading scheme?

A

Disadvantages:
. more expensive for businesses
. means they have to cut costs or raise prices
Advantages:
. better for environment
. deters businesses from dirty energy and onto cleaner energy
. reduced market failure involving negative externalities in the form of climate change

43
Q

What are carbon emissions?

A

They are the greenhouse gases or carbon dioxide released into the atmosphere. The main source of these emissions lies heavily in the burning of fossil fuels and these emissions also contribute to global warming.

45
Q

What is a carbon footprint?

A

The amount of carbon dioxide released into the atmosphere as a result of the activities of an individual, organisation or community. You can also calculate the total set of greenhouse gas emissions/the level of someones carbon footprint.

51
Q

What is the influence of households on economic growth and the environment?

A

. Consumers spend on needs and wants to have the highest standard of living.
. In current times consumers are conscious of the environmental impact of their purchases, choosing to install/use products such as solar panels, water tanks, household items such as shower heads and lighting that use less non-renewable resources.

52
Q

What is the influence of businesses on economic growth and the environment?

A

. Businesses respond to consumers spending choices.
. They have to decide what renewable and non-renewable resources to use and consider environmental factors such as recycling and waste.
. Due to consumers being aware of what businesses do, they need to be careful about what decisions are made.

53
Q

What is the influence of the government on economic growth and the environment?

A

. The government has been focusing on improving the worsening environmental issues whilst continuing economic growth.
. Unfortunately there are negative externalities as a result of economic growth such as deforestation, destruction of the ozone layer and rising sea levels.
. The government has signed up to the Kyoto agreement and has therefore also made environmental policies such as the carbon pollution reduction scheme, carbon tax, and the proposed ‘direct action’ climate change policy.
. This was all done in an attempt to reduce environmental damage whilst continuing economic growth.

65
Q

What occurs in times of strong economic growth - including expansion and boom?

A 
High Employment
- low unemployment
- confidence in future jobs
- high incomes
=
More Spending
- increase in sales
- expansion
- increase in profits
= 
Government 
- increased taxes (GST, Pay G) 
- less people on welfare
66
Q

What negative externalities associated with economic growth and worsening environmental issues have sparked alarm?

A 
. rising greenhouse gas emissions
. global warming 
. destruction of the ozone layer 
. extreme weather events including prolonged droughts, floods and bush-fires
. melting of the polar ice caps 
. rising seas levels
. acid rain
. deteriorating air quality
. deforestation
. lack of healthy environmental river flows
. toxic substances entering food chain
. waste disposal issues
. destruction if biodiversity
67
Q

How are economies around the world tackling climate change?

A

. renewable energy targets
. appliance and building standards
. carbon pricing
. and introducing vehicle performance standards.

68
Q

What are examples of how countries are tackling climate change?

A

Mexico
. plans 33% renewable energy by 2018
. distribution of 22.9 million free energy saving light bulbs
. 12th largest greenhouse gas emitters in the world
. in 2012 they were the 2nd nation in the world to enact a national climate change legislation

India
. double tax on coal production
. 3rd largest emitters of greenhouse gas in the world
. wants to prioritise economic development

Japan
. 2015 vehicle performance standards
. going to allow solar energy coming from panels in space
. was abel to reach its 2015 regulatory targets

69
Q

What is the GDP among other countries?

A 
. India 6.9%
. Japan 1.6%
. China 7.7%
. France 0.3%
. Croatia -0.9%
. New Zealand 2.5%
. Greece -3.3%

Unit 1 & 2 Economics (7 decks)

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