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economics > 3.2 domestic macroeconomic goals > Flashcards

3.2 domestic macroeconomic goals Flashcards

(70 cards)

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1
Q

Factors that affect living standards

A

Access to goods and services, environmental quality, physical health, mental health, life expectancy, crime rates, literacy rates

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2
Q

What are material living standards

A

Measure of a households access to goods and services

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3
Q

What are non material living standards

A

Measure of a households wellbeing or quality of life

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4
Q

What are the 5 sectors of the 5 sector circular flow model

A

household, business, government, financial and external

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5
Q

What is flow 1

A

resources

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6
Q

what is flow 2

A

wages

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7
Q

what is flow 3

A

AD

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8
Q

what is flow 4

A

GDP(production)

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9
Q

AD formula

A

C + I + G + (X-M)

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10
Q

what are the 3 leakages

A

Savings, taxes, import spending

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11
Q

what are the 3 injections

A

Investment spending, government spending, export spending

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12
Q

what is the business cycle

A

Cyclical fluctuations in real GDP over time

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13
Q

what are the 4 phases of the business cycle

A

peak, contractionary, trough, expansionary

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14
Q

what is a boom

A

very high levels of economic growth that is excessive and unsustainable

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15
Q

what is a recession

A

a period of 2 or more quarters of negative economic growth

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16
Q

what are the causes of the expansionary phase

A

production is increasing
unemployment is decreasing
wages are increasing
consumer spending is increasing

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17
Q

what are the causes of the contractionary phase

A

production is decreasing
unemployment is increasing
wages are decreasing
consumer spending is decreasing

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18
Q

what is aggregate demand

A

the total spending of the economy

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19
Q

what are the 4 components of AD

A

consumption spending, investment spending, government spending and net exports

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20
Q

what are the 6 factors that influence AD

A

disposable income
interest rates
consumer confidence
business confidence
exchange rate
rates of economic growth overseas

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21
Q

what is aggregate supply

A

total volume of goods and services that all suppliers have produced and supplied, measured over a period of time

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22
Q

horizontal part of AS curve

A

under productive capacity, underutilisation of resources

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23
Q

Upwards sloping part of AS curve

A

economy is reaching full capacity, shortages begin to appear

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24
Q

vertical part of AS curve

A

economy at full capacity

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25
three things that affect productive capacity
availability of resources, cost of production, efficiency
26
9 factors of AS
quantity of factors of production quality of factors of production cost of production technological change productivity growth exchange rates climatic conditions government regulations disruptions to international supply chains
27
what are the 3 domestic macroeconomic goals
Strong and sustainable economic growth Full and inclusive employment Low and stable inflation
28
Positives of economic growth
decreased unemployment, higher real income levels, greater ability of government to provide essential services
29
negatives of high economic growth
excessive inflation, external pressure, depletion of natural resources
30
what is the goal of strong and sustainable economic growth
To achieve the highest growth rate possible, consistent with strong employment growth, but without running into unacceptable inflationary, external or environmental pressures
31
economic growth target
3-3.5%
32
how is economic growth measured
real GDP and real GDP per capita
33
how to calculate annual GDP growth
GDP latest period - GDP 12 months ago/GDP 12 months ago
34
how to calculate quarterly GDP growth
GDP latest quarter - GDP previous quarter/GDP previous quarter
35
how to calculate annualised GDP growth
quarterly growth x 4
36
limitations of using GDP as a measure of economic growth
not entirely accurate quality changes not reflected underestimation due to exclusion of non market production
37
what happens with increased inflationary pressure
upwards pressure on average price levels and decreased purchasing power
38
what happens with increased external pressure
increase net foreign debt, reduce demand for exports, burden future generations
39
what happens with increased environmental pressure
irreversible environmental degradation
40
consequences when economic growth is too low
high unemployment, lower real income levels, lower ability for government to provide services, environmental strain reduced
41
What is the goal of full and inclusive employment
lowest rate of unemployment possible without causing inflationary pressures in the economy
42
what is full employment
when the economic growth objective has been achieved, inflation rate is low and cyclical unemployment doesn't exist
43
what is inclusive employment
maximising the size of the labour force by reducing hidden, structural employment and/or marginalisation of groups
44
what does NAIRU stand for
non accelerating inflation rate of unemployment
45
what is the NAIRU
lowest rate of unemployment without causing wage growth and rising inflation 4.25%
46
Hidden unemployed
not actively looking for work despite willingness and ability
47
structural unemployment
unemployment for more than 12 months caused by structural changes in the economy, Where the skills of the unemployed do not match the skills required by the industry
48
underemployed
those working in some capacity but not at full capacity. Working but want more hours
49
Frictional unemployment
where a person is unemployed for a period of time while they are moving from one job to another
50
what are the 4 measurements for full and inclusive employment
Labour force, underemployment, unemployment and participation rate
51
labour force formula
no of employed + no of unemployed
52
participation rate formula
labour force/working age population
53
unemployment rate formula
no of unemployed/labour force
54
underutilisation rate formula
no of unemployed + no of underemployed/labour force
55
what is cyclical unemployment
when the economy is not operating at full capacity due to a deficiency in AD
56
4 consequences of not achieving full and inclusive employment
loss of GDP, loss of tax revenue, inflation. greater income inequality
57
what is low and stable inflation
Australia's official inflation target is to keep its annual consumer price inflation between 2 and 3%, on average, over time
58
what is inflation
sustained increase in the general price level
59
what is deflation
sustained decrease in the general price levels
60
what is disinflation
when the rate of inflation has decreased, but is still positive
61
what is demand-pull inflation
when the increases in AD outpace increases in AS
62
what is cost- push inflation
occurs due to supply side factors
63
what is the consumer price index(CPI)
measures quarterly changes in the retail prices of a selection of both locally and foreign made goods and services
64
what is headline inflation
captures the change in all goods and services in the CPI basket
65
what is underlying inflation
captures the changes in goods and services in the CPI basket, excluding goods with highly volatile prices
66
annual inflation rate formula
CPI latest period - CPI 12 months ago/CPI 12 months ago
67
quarterly inflation rate formula
CPI latest quarter - CPI previous quarter/CPI previous quarter
68
annualised inflation rate formula
quarterly inflation rate x 4
69
consequences when inflation is too high
erosion of purchasing power development of wage price spiral distortion of spending and investment decisions lower returns on investment loss of international competitiveness
70
consequences when inflation is too low
delayed consumption unemployment

economics (2 decks)

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