Unit 2 AOS 2B International trade Flashcards
international trade
refers the two-way exchange of goods (products) and services across national borders. It involves Australia exporting or selling goods and services to other countries, as well as us buying imports of goods and services from abroad.
international economics
looks at the global forces at work that help to shape domestic economic conditions.
Australia’s three biggest imports are
intermediate and other (raw materials)
consumption goods (such as cars)
services
Australia’s three biggest exports
mineral fuels (oil)
services (transport)
manufactures (equipment)
Australia’s three main trading partners
china 35.3%
Japan 11.8%
United States/Rebublic Korea 5.8%
balance of goods and services
BOGS represents the total value of goods and services exported minus the total value of goods and services imported, measured over a period
the balance of trade
Is a financial account that records a country’s total value of exports of goods and services (i.e. credits) minus the total value of imports of goods and services (i.e. debits), measured over a period. The trade balance may be a surplus, a deficit or an exact balance
explain credits
When weexportgoods (e.g. minerals, wool) and services (e.g. education and tourism), the money we are paid iscoming into Australiaand hence is recorded as acredittransaction by Australia (and of course a debit by some overseas country).
explain debits
When weimportgoods (e.g. oil, cars and electrical appliances) and services (e.g. transportation, business services and tourism), the money for payment is going out andleavingAustralia and is thus recorded as adebittransaction by Australia (and a credit by some overseas country).
a trade surplus
when there are more credits then debits
e.g $10 million and the value of debits was $6 million, then the trade surplus would be $4 million
a trade deficit
when debits are greater than credits
e.g. value of credits was $8 million and the value of debits was $14 million, then the trade deficit would be $6 million
a trade balance of goods and services
when credits and debits are equal
e.g. value of credits was $10 million and the value of debits was $10 million, then there would be an exact trade balance of $0 million
benefits of international trade
-exports allow local firms to fain more economies of large scale production
-exports help grow AD and increase GDP, employment and incomes
-exports expand Australia’s employment opportunities and average incomes
-imports increase our access to resources and help grow our potential GDP
-By increasing competition imports keep inflation
define economies of large scale
Economies of scale are cost advantages realized by companies when production becomes more efficient.
how do exports allow local firms to gain more economies of large-scale production as a benefit of international trade
increase inefficiency and profitability for firms to manufacture goods on a large scale with bigger production runs, rather than having smaller-scale operations.
because most production costs are fixed and dont increase as firms lift its output.
how do exports help to grow Australia’s GDP and AD
forge in spending on our exports of goods
relative scarcity
referred to as the basic economic problem, It arises because the volume (i.e. quantity) and/or efficiency (i.e. quality) of resources available for production is finite or limited, relative to the level of people’s needs and especially their wants — which are virtually unlimited.
opportunity cost
the loss of other alternatives when one alternative is chosen, arises whenever choices or decisions are made between alternative uses of resources.
what does it mean when there is a point inside the production possible frontier.
A point inside the production possibility frontier represents a production inefficiency. Productive inefficiency means when the resources of an economy are underutilized and there can be an improvement.
what does a point outside of a PPF graph represent
a production level that is unattainable given the resources available and the economy productive capacity.
the three economic agents
Consumers or household sector
Businesses or producers that make up the private sector
Government activities and enterprises that make up the public sector.
define the private sector
The private sector isthe segment of a national economy that is owned, controlled, and managed by private individuals or enterprises. The private sector has a goal of making money and employs more workers than the public sector.
define the public sector
The portion of the economy composed of all levels ofgovernmentand government-controlled enterprises. It does not include private companies,voluntaryorganizations, and households.
define consumer behaviour
Consumer Behaviour: Looks at why, how, where and when consumers choose to purchase or not purchase a good or service
traditional economic viewpoint of consumers
They assumed that consumers sought to maximise their pleasure and minimise their pain
consumers are assumed to act rational, define rationality
consumers motivated by self-interest carefully weigh up the expected costs and benefits of each and every decision with the objective of maximizing their utility
what are teh four traditional explanations of consumer behaviour
- consumers act rationally and in their self-interest.
- consumers make informed and smart decisions.
- consumers maximise utility and marginal benefits from consumption.
- consumers have ordered preferences.
explain marginal benefit of consumption
the law of diminishing marginal utility states that each additional (or marginal) unit of a good or services that is consumed generates less utility (satisfaction) than the previous one.
define an incentive
An incentive is an inducement designed to further encourage behaviour that would otherwise not occur to the same extent.
define a disincentive
is a an inducement designed to further discourage behaviour that would otherwise not occur to the same extent.
government disincentives
impose indirect taxes
laws, regulations and fines
government incentives
payment of subsides
offer tax rebates
explain the government incentive payment of consumer subsidies
The government offers subsidies or cash payments to encourage the consumption of products with personal or societal benefits, such as solar panels, energy-efficient items, childcare, or training for the unemployed. These subsidies make goods and services more affordable or even free, motivating consumers to change their behavior and make beneficial purchases.
nominal GDP
GDP that is measured in current prices and not adjusted for inflation
Real GDP
GDP that is measured where it has been adjusted so that impacts of rising prices has been removed.
define economic growth
reders to an increase in the size of a country’s economy over a period of time.
how is GDP measured
the abs collects data from households, companies and government agencies to separately look at production, income and expenditure.
expenditure
Expenditure refers to the amount of money spent by an individual, organization, or government on goods, services, or other obligations
what is a potential cost of economic growth
rapid economic growth is unsustainable and will limit future economic growth as resources are being exploited, decreasing future generations ability to enjoy economic prosperity.
other reasons
-accelerate inflation
-add to structural unemployment
what is an environmental costs of economic growth
economic growth causes deterioration of common access resources needed for survival. intern acceleration climate change
what is a social cost of economic growth
increase economic acuity = decrease of leisure time
what are teh alternative measures to economic growth
- measure of Australia’s progress (MAPS)
- human development index (HDI)
-green GDP
-gross national happiness
explain an alternative measurement of economic growth green GDP
green GDP
calculated by using data for real GDP and subtracting estimated value of costs of environmental damages.
