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Economics > Economic Growth > Flashcards

Economic Growth Flashcards

Topic 3

1
Q

Define Economic Growth

A

Economic growth is an increase in the production of economic goods and services, compared from one period to another

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2
Q

Economic Growth Formula

A

Real GDP(current) minus Real GDP(previous) divided by Real GDP(previous)

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3
Q

Define Aggregate Demand

A

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

Total value of expenditure in an economy in a given time period.

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4
Q

Define Aggregate Supply

A

Y = C + S + T

Total value of income in an economy in a given time period

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5
Q

Marginal Propensity to Consume

A

Proportion of each extra dollar of income that is spent

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6
Q

Marginal Propensity to Save

A

Proportion of each extra dollar of income that is saved

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7
Q

Multiplier Effect

A

MPS + MPC = 1
K = 1/MPS
K = 1/1-MPC

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8
Q

Aggregate Supply Limitations

A
  • Capacity Constraint
  • Skill Shortages
  • Infrastructure Bottlenecks
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9
Q

EOEC on Living Standards

A
  • Increased real GDP per capita
  • Increased household disposal income
  • Increased living standards
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10
Q

EOEC on Employment

A
  • Economic growth = mroe jobs

- Changes type of work available

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11
Q

EOEC on Inflation

A
  • Increase in price and increased wages

- Occurs when aggregate supply can’t keep up with aggregate demand

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12
Q

EOEC on External Stability

A
  • High APC = High CAD

- BOP = speed limit on economic growth

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13
Q

EOEC on Income Distribution

A

-Growth can benefit specific groups such as investors and shareholders

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14
Q

EOEC on Environment

A
  • Increased pollution
  • Increased environmental exploitation
  • Governments try to pursue ESD
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15
Q

Policies to Sustain Economic Growth

A

Macro - Fiscal + Monetary IN TANDEM

Micro - Structural factors - time lag

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16
Q

Labour Force Participation Rate

A

Labour Force divided by Working Age Population

17
Q

Unemployment Rate

A

Total of persons unemployed divided by Total labour force

18
Q

Types of Employment/Brief Description

A 
Structural - Technology/Redundancy
Cyclical - Economic
Frictional - Movement between jobs
Seasonal - Time 
Hidden - discouraged job seekers
Underemployment/Hidden - working less than they would want
Hardcore - Crime/Skill loss
19
Q

Non-accelerating inflation rate of Unemployment

A
  • Also known as natural rate of unemployment

- When economic is at full employment

20
Q

Economic Costs of Unemployment

A
  • Resource not being fully utilised
  • Lower Living standards
  • Lower wage growth
21
Q

Social Costs of Unemployment

A
  • Increased inequality
  • Tension between social classes
  • Crime
  • Unemployment in particular groups
22
Q

Policy to Reduce Unemployment

A

Macro - reduces long-term/cyclical

Micro - Tariff removal, privatisation, tax reform, deregulation, reform, national competition policy

23
Q

Inflation Rate Formula

A

CPI(current) - CPI(previous)/CPI(previous)

24
Q

Preferred method of measuring Inflation for RBA

A

Underlying Inflation –> long term, removing one-off fluctuations

25
Q

Demand-Pull inflation

A

Occurs when aggregate demand exceeds the productive capacity of the economy

26
Q

Cost-Push inflation

A

Occurs when costs of production increases due to inefficiency or increase price in resources

27
Q

Inflationary Expectations

A
  • Occurs when expectations of inflation causes inflation

- Prices expected to increase

28
Q

Define Ecologically Sustainable Development

A

ESD involves conserving and enhancing the community’s economic activity which is compatible with the long term preservation of the environment rather than merely reach maximum short term growth

29
Q

Define Market Failure

A

Market failure occurs when the price mechanism takes into account, only the private benefits and cost of production and does not take into account social costs

30
Q

Demerit Goods

A

Goods that cause negative externalities

31
Q

Features of Public Goods

A

Non-rival and Non-excludable

32
Q

STATS

A

STATS

33
Q

Trends in Economic Growth

A
  • Decline in business investment over recent years
  • Fall in household savings
  • Falling commodity prices
  • Decreased CAD
  • 2.4% (2018) to 2.3% (2017)
  • Steadily increasing level of external debt

Economics (4 decks)

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