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Economics 3,4 > Unit 4 AOS 2 - AS policies > Flashcards

Unit 4 AOS 2 - AS policies Flashcards

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1
Q

What are capacity constraints

A

= factors that prevent an economy from producing inc g/s i.e skill shortages + infrastructure bottlenecks

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2
Q

What is production

A

= process of converting resources + inputs into g/s

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3
Q

What is productivity

A

= volume of output that is produced from a given number of inputs

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4
Q

What is productive capacity

A

= point @ which production is occurring @ the max lvl possible in economy

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5
Q

What is aggregate supply

A

= represents total volume of g/s produced by all suppliers over a period of time

-> influenced by ability + willingness of p’er 2 produce

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6
Q

What are AS policies

A

= include a wide range of gov.t strategies that seek 2 grow the productive capacity / potential of economy, especially in L.T, by inc willingness + ability of suppliers 2 produce

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7
Q

What is the aim of AS policies

A

= inc L.S by inc supply conditions + helping 2 simultaneously achieve the goals of SSEG, FE, LI

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8
Q

What is an issue surrounding AS policies

A

= inefficient performance in a number of sectors due 2 protectionism shielding them from competition

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9
Q

What is productive efficiency

A

= achieved when max output from given input

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10
Q

What is intertemporal efficiency

A

= how well resources are allocated over different time periods so that the L.S of future generations are x sacrificed in the pursuit of the current gen L.S

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11
Q

What is allocative efficiency

A

= most efficient allocation of resources occurs when L.S + welfare are max + it is x possible 2 further inc L.S by changing the way resources are allocated

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12
Q

What is the relationship b/n AS + efficient allocation of resources

Prod / Tech

A
  • Prod/ Tech -> results in inc in productive capacity / AS as there will be an inc in outputs from given lvl of inputs shifting AS right
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13
Q

What is the relationship b/n AS + efficient allocation of resources

Dynamic

A
  • should -> inc in productive capacity + help generate / maintain as inc + AS via inc in innovation, creativity
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14
Q

What is the relationship b/n AS + efficient allocation of resources

Inter-temporal

A
  • in S.T could dec productive capacity of eco h/r in L.T could boost prod capacity
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15
Q

What is the relationship b/n AS + efficient allocation of resources

Allocative

A
  • any improvement 2 prod capacity / AS that has potential 2 inc MLS as measured by GDP per capita will t/f help achieve allocative efficiency
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16
Q

How does AS policies improve SSEG

A

-> SSEG limited 2 speed @ which prod capacity can inc
-> dec pressure on prices = expansion in AD which will inc GDP + dec inflationary
-> environmental policies ensure sustainability

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17
Q

How does AS policies improve Low Inflation

A

-> boosting prod + dec costs of prod = dec cost inflationary pressures
-> inc prod capacity, shifting the AS curve 2 the right, dec cost inflationary pressure

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18
Q

How does AS policies improve Full Employment

A

-> AS policies focused on edu. + training = workers with appropriate skills address structural unemployment
-> +ve supply side inc bus confidence + a greater willingness 4 bus 2 invest = growth + jobs

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19
Q

How does AS policies improve International competitiveness

A

-> inc efficiency, dec prod costs t/f keeps lid on inflation

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20
Q

How does AS policies improve ML

A

-> inc volume 2 access g/s available @ lower prices
-> dec in unemployment = inc disposable income

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21
Q

How does AS policies improve NMLS

A

-> via a greater efficiency in production helping 2 dec skins on resources
-> improved working conditions

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22
Q

What is infrastructure

A

= refers 2 key physical or organisational structures with in an economy that provide the “building blocks” around which economic activity can take place

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23
Q

Drawbacks of infrastructure

A
  • long lead times
  • some infrastructure projects = low profits in S.T = unattractive 4 private sector
  • Relative prices don’t work in infrastructure markets 4 urban + rural water, power, road, rail, transport + gas
  • +ve externalities = financial rewards x received by individual investors -> underproduction, market failure + capacity restrictions = gov.t intervention required
24
Q

How do AS policies operate

A

-> An inc volume in infrastructure combined with better quality will -> inc in productivity, efficiency, dec production costs + productive capacity - improving p’er ability 2 inc the volume of production of g/s over a given period of time

25
Q

How investment in infrastructure achieves low inflation

A
  • improved efficiency = dec per unit production costs = dec cost inflationary pressures
  • dec costs due 2 fuel, maintenance + time with infrastructure on roads, rail and other types of transport infrastructure
  • removal of capacity constraints / infrastructure bottlenecks dec prod costs
  • improved transport = mobility of workers = high participation rate + availability of required skills
26
Q

How investment in infrastructure achieves SSEG

A

-> Boosting productivity; efficiency; long term productive capacity
-> removal of capacity constraints / bottlenecks
-> All inc AS = inc output (GDP) = strong growth

27
Q

How investment in infrastructure achieves Full Employment

A

-> inc lvls of output (GDP) means bus are likely 2 require more workers = dec in unemployment
-> keeping prod costs lower = inc in international comp = bus expanding into new markets + employing more staff = dec unemployment

28
Q

How investment in infrastructure achieves LS

A
  • Inc p. power via dec inflation
  • boost 2 real incomes b/c inc growth
  • dec unemployment = improved happiness + feelings of self worth
  • investment in infrastructure can dec market failure + the underproduction of public goods
29
Q

What is a quota

A

= restriction on volume of imports

30
Q

What is a tarrif

A

= a tax on imports

31
Q

What is a subsidy

A

= financial assistance

32
Q

What is the aim of protectionism

A

= 2 protect local p’er against competition in order 2 protect local production, jobs + income

33
Q

What is trade liberalisation

A

= includes any gov.t policy initiative designed 2 promote free trade / dec restrictions 2 free trade

34
Q

What are the benefits of trade liberalisations

A
  • Promotes tech./ efficiency
    = dec trade barriers force 2 use resources in inc productive manner
  • Promotes dynamic efficiency
    = dec trade barriers incite inc innovation + creativity 2 capitalise
  • Promotes allocative efficiency
    = dec trade barriers promote reallocation 2 areas with legitimate c’er demand where Aus bus comparative advantage
35
Q

What are the consequences of trade liberalisation

A
  • S.T = -ve impact b/c inc unemployment b/c bus forced 2 restructure
  • L.T = h/r jobs will be created b/c inc growth in economy
36
Q

Effects of trade liberalisation on International Competitiveness

A

-> inc comp = inc prod + dec cost of prod as bus forced 2 restructure = inc prod capacity + AS = inc volume of prod @ dec prices = inc international comp

37
Q

Effects of trade liberalisation on CAD

A

-> inc competition -> inc prod + dec cost of prod = inc prod capacity + AS = inc volume of prod @ dec prices = inc I.C = inc value of credits in BoMT + NS = inc CAS/ dec CAD

38
Q

Effects of trade liberalisation on SSEG

A

-> inc competition -> inc prod + dec cost of prod = inc prod capacity + AS = inc volume of prod @ dec prices = expansion in AD = inc lvls of eco activity + dec cost inflationary pressures

39
Q

Effects of trade liberalisation on Low Inflation

A

-> inc competition -> inc prod + dec cost of prod = inc prod capacity + AS = inc volume of prod @ dec prices = dec cost inflationary pressures in the economy placing dec pressures on inflation

40
Q

Effects of trade liberalisation on F.E

A

S.T = inc structural unemployment b/c some bus can x compete -> redundancies

L.T = inc AS -> dec inflation -> inc p. power -> inc confidence -> inc consumption + I.C -> in X + dec M -> inc AD t/f inc DD4L 2 meet demand = dec cyclical unemployment

41
Q

Effects of trade liberalisation on L.S

A

S.T = can fall 4 those who become unemployed -> dec access = dec MLS + inc financial stress = dec NMLS

L.T = can inc as inc opportunities + dec prices with inc income -> inc access = inc MLS + dec financial stress = inc NMLS

42
Q

What is immigration policy

A

= strategic supply side approach 2 managing the number of migrants coming 2 Aus from overseas. The fed gov.t current immigration program tries 2 attract young, English speaking + suitably skilled ppl who are likely 2 make a valuable + ongoing economic contribution 2 the labour force + the Aus economy

43
Q

Negative impacts of an aging population

A

1) inc savings rate
2) dec eco. growth
3) inc welfare previous
4) inc spending on aged care facilities + hospitals
5) dec participation rate
6) Aus’ aged > 65 projected 2 double by 2024-25
7) dec tax revenue from inc tax 4 fed budget
8) Results = larger deficit
9) Reduction in expenditure on essential services / inc in personal income tax rates or both

44
Q

Immigrations impact on Aggregate Supply

A
  • inc supply of labour t/f dec pressure on wage growth rates -> inc employment + output
  • Alleviates capacity constraints + helps 2 maintain labour productivity lvl
  • Further enhance productivity via intake of of young skilled professionals 2 replace the aging population + retirees
45
Q

What is the impact of immigration policies on SSEG

A

-> inc productivity capacity by improving productivity, inc supply of labour + removing capacity constraints of skills shortages = eco. growth as suppliers are inc willing + able 2 supply in the economy @ dec prices -> expansion in demand

46
Q

What is the impact of immigration policies on LI

A

-> whilst can cause demand inflationary pressures, focus on skilled migration -> inc productivity growth t/f dec pressure on wages -> inc labour supply + dec skill shortages -> inc prod capacity t/f dec cost inflationary pressures on inflation

47
Q

What is the impact of immigration policies on FE

A

-> removal of capacity constraints + inc in supply of labour eases inc pressure on wages + costs = help p’er maintain output @ relatively dec prices = inc demand t/f employment opportunities as p’ers require inc labour 2 facilitate inc in output

48
Q

Strengths of immigration policy

A
  • can be targeted @ specific sectors where skill shortages exist
  • impact by = short
  • +ve impact on budget outcome with workers earning an income + paying personal income tax
  • connections fostered with other countries in area of inc globalisation + advantage 4 Aus economy - communication in foreign lang, understandability of cultural differences
49
Q

Weaknesses of immigration policy

A
  • can be manipulated 2 become a politically sensitive topic
  • taking skilled labour from another country undermining ability 2 achieve domestic eco goals
  • can contribute 2 pop density in cities that do x have the infrastructure 2 cater 4 the inc number of residents, contributing 2 capacity constraints of infrastructure bottlenecks further holding back the prod capacity of the economy.
50
Q

What is environmental policy

A

= seeks 2 minimise environmental harm often associated with growth such as the depletion of non-renewable natural resources / common access resources

51
Q

What is market based environmental government policies

A

= aims 2 alter relative prices + t/f create financial incentives 2 minimise CO2 emissions + disincentives 4 bus who continue 2 pollute

52
Q

What is the emissions trading scheme

A

= market based AS environmental policy that aims 2 change how g/s are produced by putting price on CO2 emissions through creating a market 4 tradeable pollution permits
-> Bus would be issued with certain amount of permits based on size + each permit can be exchanged 4 1 tonne of CO2 into atmosphere
-> Bus that x use permits can save 4 future or sell 2 other bus @ market price

53
Q

Short term impacts of environmental policy

A
  • inc cost inflation due 2 inc cost of prod t/f dec p power + access 2 g/s 4 households t/f dec MLS
  • inc prod costs -> more bus 2 produce offshore where climate policies = inc lenient t/f inc unemployment + dec incomes
  • due 2 potential inc in unemployment -> dec happiness + physical / mental health with inc stress t/f dec NMLS
54
Q

Long term impacts of environmental policy

A
  • MLS inc b/c policies encourage inc innovation which eventually dec costs which offset inc price from carbon dec
  • creating price signals + incentives, bus who successfully dec emissions become inc profitable -> inc expansion with inc employment + incomes
  • should improve air quality + health/wellbeing of pop + prevent -ve impacts of climate change t/f inc NMLS
55
Q

Strength of AS policies

A

1) Simultaneous achievement of eco goals
2) Can help solve structural problems AD policies can x fix
3) Flexibility 2 target + discriminate; focus on particular industries
4) Market-based + interventionist supply side politics tend 2 have lrg impact on inc efficiency
5) Work in a complimentary way with AD policies -> inc lvls of growth

56
Q

Weaknesses of AS policies

A

1) inc implementation + time lags dec their usefulness in S.T
2) Stabilisation role limited b/c AS policies more L.T than med term
3) Political constraints as +ve impact x always immediate
4) Conflicts b/n economics goal
5) By itself, inc in prod capacity as a result of AS policies is x enough, unless matched by an inc in spending (AD)
6) Financial constraints limit some AS policies - some policies involve heavy budget outlays

Economics 3,4 (6 decks)

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