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Economics 1,2 > Unit 2 AOS 1 > Flashcards

Unit 2 AOS 1 Flashcards

1
Q

What is macro economics

A

= considers performance of economy as a whole

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2
Q

What is economic activity

A

= production, income, expenditure taking place across whole economy

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3
Q

What is income (economic activity)

A

= total incomes that have been earned by those who have contributed 2 the production of g/s produced

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4
Q

What is production (economic activity)

A

= total value of g/s that are produced in the economy

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5
Q

What is expenditure (economic activity)

A

= total spending undertaken on g/s being produced

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6
Q

What are leakages

A

= removal of money from the economy

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7
Q

What are examples of leakages

A
  • Savings = money saved rather than spent on g/s
  • Taxes = money paid 2 gov.t in form of tax
  • Imports = money that is spent on g/s that have been produced over seas
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8
Q

What are injections

A

= addition of money into the economy

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9
Q

What are examples of injections

A
  • Investment demand = spending on capital items
  • Gov.t spending = spending of gov.t on g/s
  • Export demand = money spent on AUS g/s by overseas residents
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10
Q

What is the nature and meaning of trade offs in economics
(big answer)

A

-> involves all the possible things that we give up when decisions are made to use our scarce resources to gain something else
- arise b/c resources are insufficient 2 allow us 2 have all things we like
- while producing + consuming more g/s -> better M.L.S, sometimes this requires forgoing aspects that support our N.M.L.S

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11
Q

What is aggregate demand

A

= total expenditure on g/s produced in economy over a period of time

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12
Q

What is the aggregate demand formula

A

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

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13
Q

What is consumption expenditure

A

= total value of all expenditure on individual + collective consumption by resident households + x-profit institutions serving households

approx. 60% AD

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14
Q

Factors impacting consumption expenditure

A
  • Disposable income
  • C’er confidence
  • Interest rates
  • Rate of population growth
  • Budgeting policies affecting taxes + gov.t spending
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15
Q

What is investment expenditure

A

= purchase of new equipment + plant, buildings + vehicles

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16
Q

Factors impacting investment expenditure

A
  • Bus confidence
  • Interest rates
  • company tax rates
  • Global economic conditions
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17
Q

What is government expenditure

A

= includes all demand 4 g/s by Fed, State, Council gov.t
-> G1 = gov.t current expenditure ( funding i.e military )
-> G2 = expenditure on infrastructure

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18
Q

Factors impacting government expenditure

A
  • Lvl of unemployment
  • Lvl of inflation
  • Speed of population growth
  • Economic cycle
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19
Q

What are net exports

A

-> Exports = expenditure on domestic g/s by foreigners
-> Imports = expenditure on foreign produced g/s by members of an economy

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20
Q

Factors impacting exports

A
  • Exchange rate
  • Overseas economic conditions
  • Natural disasters
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21
Q

Factors impacting imports

A
  • Exchange rate
  • Trends in local economic conditions
  • C’er + bus confidence lvls
  • Our inflation rate
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22
Q

What affects the AD curve 2 increase, shift right

A
  • Inc c’er confidence + bus confidence
  • Inc overseas eco activity
  • Weaker AUD
  • Dec interest rates
  • Dec taxes
  • Inc gov.t spending
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23
Q

What affects the AD curve 2 decrease, shift left

A
  • Dec c’er + bus confidence
  • Falling overseas eco activity
  • Stronger AUD
  • Inc interest rates
  • Increase taxes
  • Dec gov.t spending
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24
Q

What are the factors that cause a shift in AD

A
  • Change in general level of prices
  • Disposable income ( Gross income- tax)
  • Interest rates
  • Consumer confidence
  • Business confidence
  • Exchange rates
  • Level of overseas economic growth
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25
What is consumer confidence What is business confidence
CC: general opt/pess re. future state of the economy + job prospects - from c'er perspective BC: general opt/pess re. future state of the economy + ability 2 generate a profit - from a firm's perspective -> need to mention opt/pess in both
26
EXAM TIP - AD: -> What to talk about when prompted with either "components" or "factors"
components -> talk re. letters in formula Factors -> talk re. 7 factors
27
What is Aggregate supply
= represents the total volume of g/s that all suppliers are willing + able 2 produce -> x components of AG
28
What is production
= process of converting resources + inputs into g/s / total volume of g/s produced over a period of time
29
What is productivity
= measured by output per unit of input
30
What is productive capacity
= the point @ which production (GDP) is occurring @ max lvl possible in an economy
31
Factors that affect AS
1) change in general lvl of prices (inflation) 2) The quantity of factors of production 3) the quality of factors of production 4) cost of production 5) Technological change 6) Productivity growth 7) Exchange rates 8) Climatic conditions
32
What is economic growth measured by
= GDP growth -> aim for 3-3.5%
33
What is employment measured by
= unemployment rate -> aim for 4.5%
34
What are price levels measured by
= Inflation rate -> aim for 2-3%
35
What is economic growth
= rate @ which economic activity grows over time, determined by changes in real lvl of production from year 2 year
36
What is GDP
= final volume of g/s produced during particular period of time, usually a yr
37
What is GDP per capita
= GDP divided by the size of pop
38
How to calculate GDP
= C+I+G+(X-M)
39
What does a rise in GDP indicate
- inc in final market value of g/s produced over time h/r could have occurred b/c increase prices rather than inc volume of g/s produced
40
What is real GDP
= quantities produced are valued @ prices in a base yr rather than current prices -> measure of economic output that accounts for the effects of inflation/deflation
41
What is nominal GDP
= measures country's GDP using current prices. without adjusting 4 inflation
42
What are material living standards
= L.S measured by access 2 g/s -> more tangible
43
What are non-material living standards
= intangible aspects impacting a person's quality of life
44
How does economic growth impact material living standards
-> more production, income + expenditure t/f more access = inc income 2 purchase (as long as it is in line with inflation) = more production t/f more g/s
45
How does economic growth impact non-material living standards
-> improvements e.g - dec. rates of income - have jobs t/f less stress re. money - access 2 health care + improved education - quality of g/s inc
46
Limitations of real GDP / per capita
- Excludes most x-marketed production - GDP uses inaccurate "guestimations" of some types of production - Fails 2 take into account -ve externalities that dec N.M.L.S - X measure changes in quality of g/s from 1 quarter 2 next - Fails 2 take into account the way g/s + incomes are distributed + shared
47
What is the human development index
= indicator of economic development + wellbeing created by combining a range of economic + social indicators h/r x consider environmental considerations
48
How does HDI measure M.L.S
= GDP per capita h/r adjusted 2 remove variations of purchasing power in different countries
49
How does HDI measure N.M.L.S
= life expectancy + education standards
50
What is gross national hapiness
= composite indicator made up of several indicators i.e GDP per capita; social support; health + life expectancy; freedom 2 make choices; generosity; trust -> based off national surveys then ranked
51
What are the alternatives to GDP
- Measure of Australia's progress - Genuine progress indicator - HDI - GNI
52
What is economic prosperity
= high incomes per person + being able 2 consume / purchase more g/s, now + in the future -> also having job + avoiding inflation, since these affect purchasing power + incomes
53
What is the issue of pursuing economic prosperity
- Long term economic prosperity b/c uses up natural + other resources -> opportunity costs t/f trade off b/n economic prosperity + environmental sustainability - Inequitable income dispersion -> wealthy benefit more than poor
54
What is environmental sustainability
= preservation of natural environment into future by ensuring current practices do x contribute 2 environmental harm + erosion of natural resources
55
What is sustainable economic growth
= method of expanding economy's production levels 2 meet needs 4 g/s of the present population without undermining the ability of future generations 2 meet their own needs
56
What are the environmental costs of economic growth
- Climate change -Depletion of natural resources - Deterioration of common access goods
57
What are the economic costs of economic growht
- Add 2 structural unemployment - Accelerate inflation - Growth now may limit future growth
58
What are environmental policies
= any gov.t policy designed 2 protect Aus physical/natural environment from damage/depletion
59
Why do we need policies relating 2 environmental impact of climate change
= result of impact of eco growth has had on our environment, gov.t dev many laws that seek 2 preserve natural environment + achieve environmental sustainability
60
Different environmental policy approaches
1) Regulation + Legislation 2) Market based Approaches 3) Direct Action

Economics 1,2 (7 decks)

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