Unit 2 AOS 2B International trade

Question 1

international trade

Answer 1

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.

Question 2

international economics

Answer 2

looks at the global forces at work that help to shape domestic economic conditions.

Question 3

Australia’s three biggest imports are

Answer 3

intermediate and other (raw materials)

consumption goods (such as cars)

services

Question 4

Australia’s three biggest exports

Answer 4

mineral fuels (oil)

services (transport)

manufactures (equipment)

Question 5

Australia’s three main trading partners

Answer 5

china 35.3%

Japan 11.8%

United States/Rebublic Korea 5.8%

Question 6

balance of goods and services

Answer 6

BOGS represents the total value of goods and services exported minus the total value of goods and services imported, measured over a period

Question 7

the balance of trade

Answer 7

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

Question 8

explain credits

Answer 8

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).

Question 9

explain debits

Answer 9

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).

Question 10

a trade surplus

Answer 10

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

Question 11

a trade deficit

Answer 11

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

Question 12

a trade balance of goods and services

Answer 12

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

Question 13

benefits of international trade

Answer 13

-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

Question 14

define economies of large scale

Answer 14

Economies of scale are cost advantages realized by companies when production becomes more efficient.

Question 15

how do exports allow local firms to gain more economies of large-scale production as a benefit of international trade

Answer 15

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.

Question 16

how do exports help to grow Australia’s GDP and AD

Answer 16

forge in spending on our exports of goods

Question 17

relative scarcity

Answer 17

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.

Question 18

opportunity cost

Answer 18

the loss of other alternatives when one alternative is chosen, arises whenever choices or decisions are made between alternative uses of resources.

Question 19

what does it mean when there is a point inside the production possible frontier.

Answer 19

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.

Question 20

what does a point outside of a PPF graph represent

Answer 20

a production level that is unattainable given the resources available and the economy productive capacity.

Question 21

the three economic agents

Answer 21

Consumers or household sector
Businesses or producers that make up the private sector
Government activities and enterprises that make up the public sector.

Question 22

define the private sector

Answer 22

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.

Question 23

define the public sector

Answer 23

The portion of the economy composed of all levels ofgovernmentand government-controlled enterprises. It does not include private companies,voluntaryorganizations, and households.

Question 24

define consumer behaviour

Answer 24

Consumer Behaviour: Looks at why, how, where and when consumers choose to purchase or not purchase a good or service

Question 25

traditional economic viewpoint of consumers

Answer 25

They assumed that consumers sought to maximise their pleasure and minimise their pain

Question 26

consumers are assumed to act rational, define rationality

Answer 26

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

Question 27

what are teh four traditional explanations of consumer behaviour

Answer 27

1. consumers act rationally and in their self-interest. 2. consumers make informed and smart decisions. 3. consumers maximise utility and marginal benefits from consumption. 4. consumers have ordered preferences.

Question 28

explain marginal benefit of consumption

Answer 28

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.

Question 29

define an incentive

Answer 29

An incentive is an inducement designed to further encourage behaviour that would otherwise not occur to the same extent.

Question 30

define a disincentive

Answer 30

is a an inducement designed to further discourage behaviour that would otherwise not occur to the same extent.

Question 31

government disincentives

Answer 31

impose indirect taxes laws, regulations and fines

Question 32

government incentives

Answer 32

payment of subsides offer tax rebates

Question 33

explain the government incentive payment of consumer subsidies

Answer 33

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.

Question 34

nominal GDP

Answer 34

GDP that is measured in current prices and not adjusted for inflation

Question 35

Real GDP

Answer 35

GDP that is measured where it has been adjusted so that impacts of rising prices has been removed.

Question 36

define economic growth

Answer 36

reders to an increase in the size of a country's economy over a period of time.

Question 37

how is GDP measured

Answer 37

the abs collects data from households, companies and government agencies to separately look at production, income and expenditure.

Question 38

expenditure

Answer 38

Expenditure refers to the amount of money spent by an individual, organization, or government on goods, services, or other obligations

Question 39

what is a potential cost of economic growth

Answer 39

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

Question 40

what is an environmental costs of economic growth

Answer 40

economic growth causes deterioration of common access resources needed for survival. intern acceleration climate change

Question 41

what is a social cost of economic growth

Answer 41

increase economic acuity = decrease of leisure time

Question 42

what are teh alternative measures to economic growth

Answer 42

- measure of Australia's progress (MAPS) - human development index (HDI) -green GDP -gross national happiness

Question 43

explain an alternative measurement of economic growth green GDP

Answer 43

green GDP calculated by using data for real GDP and subtracting estimated value of costs of environmental damages.

Question 44

explain an alternative measurement of economic growth human development index

Answer 44

The Human Development Index (HDI) measures a country's development based on three key dimensions: health (life expectancy), education (mean and expected years of schooling), and standard of living

Question 45

explain an alternative measurement of economic growth measure of Australia's progress

Answer 45

The Measure of Australia's Progress (MAP) assesses Australia's overall wellbeing by tracking changes in areas like economy, society, environment, and governance.

Question 46

explain an alternative measurement of economic growth gross national happiness

Answer 46

Gross National Happiness (GNH) measures a country's progress based on the happiness and wellbeing of its people, focusing on factors like health, education, environment, and cultural values, rather than just economic growth.

Question 47

factors affecting aggregate supply

Answer 47

-quanity and efficiency of capital, labour and natrual resources available for production. -cost of production (and whether prism are closed down or opening up) - climate event -pandemic lockdowns, wars and disruptions to supply chains - government policies

Question 48

productive capacity

Answer 48

is the maximum volume of output of an economy

Question 49

factors affecting aggregate demand

Answer 49

-level of disposable income -level of consumer confidence - level of business confidence -impact of changes in taxes and government spending - level of interest rates -value of the Australian dollar -overseas economic activity -population size

Question 50

AD factor impacting the C component

Answer 50

disposable income

Question 51

AD factor impacting the I component

Answer 51

interest rates

Question 52

AD factor impacting the G component

Answer 52

the level of unemployment (governments spend more money to account of welfare programs)

Question 53

AD factors impacting the X component

Answer 53

overseas economic conditions

Question 54

AD factors impacting the M component

Answer 54

the value of AUD

Question 55

leading indicators and example

Answer 55

can help predict where the economy may be heading in the future. for example consumer confidence

Question 56

lagging indicator and example

Answer 56

show changes in teh economy some time after the event has occurred as it take time to measure. e.g. GDP

Question 57

coincidence indicators and example

Answer 57

a measurement that moves closely to the actual change in economic activity e.g. retail sales and share prices

Question 58

stages of the business cycle

Answer 58

-the peak -the slowdown -the trough -the recovery

Question 59

sectors of the 5 sector flow model

Answer 59

households businesses sector financial sector government sector overseas sector

Question 60

the 5 flows of the business sector

Answer 60

flow 1. flow of natural, capital and labour resources supplied flow 2. flow of incomes to owners selling resources flow 3. flow of total spending on Australians products =aggregate demand flow 4. flow of final production of goods and services.

Question 61

relative price

Answer 61

is the price of a good or service in terms of another

Question 62

price mechanism

Answer 62

how forces of demand and supply interact to create a new equilibrium

Question 63

of relative price affects allocation of resources

Answer 63

when the relative price of one good increases this sense of a price signal to producers that there is profit to me made so they reallocate their resources towards the production of that good.

Question 64

the law of demand

Answer 64

the inverse relationship between price and quantity demanded where as price decreases quantity demanded increases. whereas as price decreases quantity demanded increases

Question 65

the law of supply

Answer 65

the positive relationship between price and quantity supplied where, as price increases the quantity of goods produced increases, whereas as price decreases the quantity of goods produced decreases.

Question 66

normative economics

Answer 66

subjective judgements and evaluation about the economy

Question 67

positive economics

Answer 67

objective statements refering to facts and statistics about the economy.

Question 68

micro economics

Answer 68

is the part of economics concerned with single factors and the effects of individual decisions. operations of a single firms

Question 69

macro economics

Answer 69

the brach of economics concerned with care-scale or general economic factors interest rates

Question 70

pure competition

Answer 70

extreme competition where many markets produce the same goods e.g. vic markets a price taker with no market power - ease of entry -strong competition -no product differentiation

Question 71

pure monopoly

Answer 71

a price maker as there is no competition, often less efficient. -lots of barriers of entry -no competition -product differentiation

Question 72

monopolistic competition

Answer 72

involves quite a few firms such as clothing brands and are price takers -ease of entry -strong competition -somewhat product differentiation

Question 73

oligopoly

Answer 73

several large firms that control the output of an industry. and is more efficient then pure monopoly -barriers to entry -somewhat competition -product differentiation

Question 74

a limitation of GDP

Answer 74

it doesn't measure how evenly goods and services are distributed

Question 75

role of government

Answer 75

economic stabilisation is to make sure the economy is preforming within their objectives by ensuring employment, inflation and GDP is stable by implementing policies to manipulate consumer behaviours (achieving three goals.)

Question 76

the labour market

Answer 76

The labour market is an institution where the conditions of demand for labour by firms and the supply for labour by households, interact to determine wages (i.e. the price of labour) and conditions of employment

Question 77

the law of demand for labour

Answer 77

the D for labour (by businesses) expands as the price or wage falls or, in reverse, contracts as the wage rises.

Question 78

the law of supply in labour

Answer 78

the S of labour (by households) expands as the price or wage rises or, in reverse, S contracts as the wage falls

Question 79

non price factors that affect the demand for labour

Answer 79

1. Changes in the level of consumer demand for goods and services 2. The number of businesses wanting to buy labour (hire more labour) 3. The efficiency of labour 4. The level of business profitability 5. Whether there are substitutes for labour available 6. Government Policy

Question 80

non price factors affecting the supply of labour

Answer 80

1. Demographics, population structures, and the participation rate of the population in the labour force 2. Net immigration rates 3. People’s work life balance 4. Government policy 5. Restrictions on entry into occupations 6. Trade unions

Question 81

stronger labour market conditions occur when..

Answer 81

the demand for labour rises relative to the supply, perhaps because of rising economic activity or the onset of a boom. In this situation, wages increase faster, people work longer hours and labour shortages can appear.

Question 82

there are weaker labour conditions when...

Answer 82

develop when the demand for labour falls relative to the supply. It is often caused by a slowdown in economic activity or recession. In this situation, wages rise more slowly or fall, and people work fewer hours or become unemployed.

Question 83

Ideal labour market conditions:

Answer 83

Ideally, labour market conditions should neither be too strong causing labour shortages and perhaps wage-price inflation, nor should they be too weak where unemployment and lower incomes depress living standards. The Australian government seeks to achieve its goal of full employment. This is defined as the lowest rate of unemployment (perhaps somewhere around 4.0–4.5 per cent of the labour force) that does not cause the inflation rate to increase.

Question 84

Factors that have influenced growth in the size of the labour market

Answer 84

natural increase in population growth and net migration

Question 85

Cyclical unemployment

Answer 85

Cyclical unemployment is caused by generally weaker aggregate demand factors that slow spending on Australian-made goods and services.

Question 86

Natural unemployment

Answer 86

(especially structural unemployment) is caused by changing aggregate supply conditions that alter the way goods and services are produced and/or whether firms expand or close down

Question 87

causes of cyclical unemployment

Answer 87

consumer confidence, business confidence, disposable income, government spending, interest rates and overseas economic activity.

Question 88

Causes of natural unemployment

Answer 88

* structural unemployment (the most important cause) * frictional unemployment * seasonal unemployment * hardcore unemployment.

Question 89

strucutral unemployment

Answer 89

* It occurs because of structural change where businesses alter the way they go about producing goods and services and try to cut costs or lift efficiency.

Question 90

Structural unemployment change can arise from the following causes:

Answer 90

* Use of new technology * A mismatch of skills among the unemployed * Some government aggregate supply policies

Question 91

participation rate

Answer 91

Participation rate: the proportion of those aged 15 and over who are in the labour force

Question 92

factors that have slowed the wage growth

Answer 92

1. Weaker labour productivity growth 2. High levels of immigration (growing the supply of labour) 3. Higher levels of unemployment (where supply > than demand) 4. Declining union membership

Question 93

factors that have lead to labour

Answer 93

* Australia’s ageing population – skills being lost due to retirement * The desire for a work-life balance * The COVID-19 Pandemic

Question 94

examples of aggregate demand policies

Answer 94

budgetary policies monetary policies

Question 95

Budgetary policy

Answer 95

(sometimes also called fiscal policy) relates to the projected changes in the level and composition of federal government revenues (receipts or incoming money) and expenses (outlays or outgoing money) for the year ahead.

Question 96

* Budget expenses

Answer 96

arise from various types of government outlays on public goods such as defence, health and education, involving both government consumption spending and government investment spending, as well as transfer payments including welfare.

Question 97

* Budget revenues

Answer 97

come from direct taxes like those on personal income and company profits, and from indirect taxes such as excise or tariffs, along with non-tax revenue.

Question 98

purpose of budgetary policies

Answer 98

to improve the welfare or living standards of all Australians, or to achieve the most efficient allocation of the nation’s resources. Importantly, it is used to reallocate the nation’s resources to the production of goods and services or activities that maximize our collective material and/or non-material standards of living

Question 99

sources of government budget revenue

Answer 99

indirect taxes non-tax revenue direct taxes

Question 100

direct taxes

Answer 100

are levies on the incomes revised by individuals and companies, perhaps involving incomes such as those from wages and salaries, profit, interest, dividends and rent

Question 101

indirect taxes

Answer 101

Indirect taxes are taxes on goods and services, like sales tax or VAT, which are paid by consumers but collected by businesses on behalf of the government.

Question 102

non tax revenue

Answer 102

comes form sources other then taxation such as profits from the operation of government businesses, fines and interest on loans.

Question 103

Expansionary Budgetary Policy

Answer 103

policy involves changes in the level of government tax receipts and government spending where this is a reductions in taxes on personal incomes and companies and increases in government outlays and spending on national infrastructure and welfare

Question 104

job keeper

Answer 104

reductions in taxes and rises in government outlays including the $90 billion for the JobKeeper wage subsidy scheme.

Question 105

contractionary budgetary policies

Answer 105

* When the economy expands too quickly and experiences a boom, labour shortages can appear, as the unemployment rate falls below 4.0% (e.g may)

Question 106

non price facotrs affecting the supply of AUD

Answer 106

changes of Australia's eco growth changes in Australia's spending on imports. Australia's government spending on imports for defence equipment

Question 107

non price factors affecting the demand for AUD

Answer 107

overseas eco growth consumer confidence changes in the selling prices of Australian goods or services, perhaps due to decrease production costs making goods more attractive

Question 108

policies taken by governments and businesses to improve international trade

Answer 108

reduction in company tax rates investment in national infrastructure projects.