AD and AS Definitions Flashcards
Remember all definitions! (19 cards)
Real GDP
The total value of all goods and services produced in Australia over a period of time, adjusted for inflation. The government’s goal is 3-4% growth in real GDP pa.
Inflation
A general rise in prices over time. The government’s goal for low inflation/price stability is 2-3%.
Consumer Confidence
A measure of how pessimistic or optimistic households feel about their future financial situation. A commonly used indicator is the Westpac-Melbourne Institute Index of Consumer Sentiment.
Business Confidence
A measure of how optimistic or pessimistic producers feel about future business conditions and their earnings. A commonly used indicator is the NAB Business Confidence Index.
Household savings ratio
The proportion of consumers’ disposable income that is not spent.
Credit Growth
The increase in loans taken out by households and businesses in a period of time. Increased credit growth usually results in an increase in AD.
Cash Rate Target
The interest rate set by the RBA for the short-term (overnight) money market. The RBA changes the cash rate target as a key component of its monetary policy.
Monetary Policy
A macroeconomic (aggregate demand) tool implemented by the Reserve Bank of Australia, in which cash rates are changed to influence the cost, availability and demand for credit.
Budgetary Policy
A macroeconomic (aggregate demand) tool involving the manipulation of government expenditure and receipts. The Federal budget is released in May each year.
Real Unit Labour Costs (RULCs)
The average cost of labour (adjusted for inflation) for each unit of output produced i.e. wages divided by productivity
Productivity
The total quantity of output gained from a set quantity of input. this is a measure of efficiency.
Exchange rate
The value of Australia’s currency measured in terms of another currency, or group of currencies. The Australian dollar is commonly measured in terms of the USD and the Trade Weighted Index.
Terms of Trade
The ratio of a country’s export prices to its import prices. A favourable movement in Australia’s terms of trade means that our exports can buy more imports.
Net Foreign Debt
The value of Australia’s borrowing from overseas, less Australia’s lending to overseas.
Current Account Deficit (CAD)
Where the value of Australia’s total current payments/debits for goods, services, primary incomes and secondary incomes exceeds the credits/receipts for one year.
Equity in Income Distribution*
Data not needed
A situation where all individuals in society have a dignified standard of living, access to basic goods and services and no one lives in absolute poverty.
Unemployment rate
The number of people looking for work in Australia, measured as a proportion of the labour force.
Participation Rate
The proportion of Australia’s working age population that are willing and able to work (employed + unemployed)
Labour Force Underutilisation Rate
The proportion of the labour force whose skills and/or time are not being fully utilised (the unemployed and the underemployed)
