AOS 1 - Economic growth, Long-term economic prosperity and Environmental sustainability

Question 1

Aggregate demand

Answer 1

Total expenditure on the goods/services produced in the economy over a period of time

Question 2

Components of aggregate demand

Answer 2

AD=C+I+G+X-M
C= consumption expenditure 
I= private investment expenditure 
G= government expenditure 
X= exports
M= imports

Question 3

Aggregate supply

Answer 3

The total volume of goods/services that producers are prepared to supply to the market

Question 4

Trade-offs

Answer 4

Foregoing the opportunity to gain something of value with our time and/or money once we use it on some other activity

Question 5

Real GDP

Answer 5

The statistical measure of production without the influence of inflation or deflation of price. (Yr 1 price ✖️Yr 2 quantity)

Question 6

Real GDP per capita

Answer 6

Is a material living standard measurement that shows the GDP per person. (GDP ➗Population)

Question 7

Material living standards

Answer 7

The aggregate welfare of the population measured in terms of monetary access to goods/services

Question 8

Non-material living standards

Answer 8

The aggregate welfare of the population measured by aspects of quality of life that cannot be measured by monetary factors

Question 9

The economic benefits of economic growth

Answer 9

Growth in living standards, employment opportunities and economic development

Question 10

Limitation of using GDP per capita to measure living standards

Answer 10

• excludes non-marketed and home based goods/services
• excludes quality of goods/services
• excludes the environment
• based on estimates

Question 11

AD/AS factors

Answer 11

Consumer confidence= AD
Business confidence= AD
Interest rates = AD/AS
Economic growth overseas= AD
Disposable income= AD
Exchange rates= AD/AS
The terms of trade= AD
Productivity= AS

Question 12

The Labour force

Answer 12

All people aged 15+ who are willing and able to work, it includes the employed and unemployed

Question 13

The Labour force participation rate

Answer 13

Is the ratio of the labour force relative to the size of the working age population

Question 14

The ageing population

Answer 14

The median age is increasing meaning that more of the population are too old to work and the labour force participation rate is decreasing

Question 15

Budgetary policy

Answer 15

An injection or extraction of money into the economy to manipulate economic growth

Question 16

Monetary policy

Answer 16

The manipulation of key financial variables primarily interest rates by the RBA in order to achieve economic goals

Question 17

Aggregate supply polices

Answer 17

Any government initiative that is designed to reduce the costs of production and/or improve supply conditions for businesses

Question 18

Economic prosperity

Answer 18

Primary focuses on the national improvement of incomes, this then enables Australians to accumulate wealth and afford a more prosperous lifestyle

Question 19

Environmental sustainability

Answer 19

The perseveration of our natural environment into the future by ensuring that current practises don’t contribute to environmental harm and depletion of our natural resources

Question 20

Sustainable development

Answer 20

The development of a nation at a pace that doesn’t erode the ability for future generations to enjoy the same quality of life

Question 21

Climate change

Answer 21

Unstable changes to the earths climate as a result of excessive use of carbon and other green house gas emissions to produce goods/services

Question 22

Deterioration of common access resources

Answer 22

Natural resources like fisheries, forests and clean air, which are likely to be exploited and degraded overtime unless the government intervenes to safeguard them for long term use

Question 23

Depletion of natural resources

Answer 23

The consumption of resources faster than they can be replenished. If this isn’t minimise it will lead to unsustainable development

Question 24

Economic growth vs Environmental sustainability

Answer 24

Given that economic growth requires the use of resources there is an unavoidable trade-off. The more governments/businesses pursue economic growth the more the environment suffers and vice versa. However, new methods such as renewable energy are allowing economic growth to be compatible with environmental sustainability

Question 25

Alternative measures of living standards

Answer 25

Genuine progress indicator (GPI): takes into consideration the social costs associated with expenditure of goods/services Measures of Australia's progress (MAP): focuses on the overall changes in the domains of society, economic, environment and governance Human development index (HDI): measures living standards (gross national income), health (life expectancy) and education (average years of schooling + minimum expected schooling) scaled from 0.00 to 1.00

Question 26

Market based approaches

Answer 26

Governments provide financial incentives to businesses and consumers to encourage methods that consider the impact on the environment. These incentives can be positive such as subsidies and rebates or negative such as taxes and fines

Question 27

Regulations and Legislation

Answer 27

The environmental protection and biodiversity conservation act (EPBC) protects flora, fauna, ecological communities and heritage places. This act ensures that prior to any development the environmental impact is assessed

Question 28

Emissions Trading Scheme

Answer 28

Involves a government determining a limit of carbon emissions it will tolerate in the economy. Businesses must have a permit to release carbon emissions into the atmosphere and these permits can be sold to other businesses

Question 29

Carbon Tax

Answer 29

Requires businesses to pay a set amount of tax for carbon released into the atmosphere when producing goods/services

Question 30

Direct actions

Answer 30

Involve governments investing directly in projects which are designed to achieve environmental outcomes

Question 31

National Landcare Programme (NLP)

Answer 31

Promotes biodiversity conservation, environmental rehabilitation, sustainable agriculture and tackling feral animals/weeds

Question 32

Leakage

Answer 32

Occurs when some of the income earned is redirected away from expenditure in the form of savings, taxes and imports

Question 33

Injections

Answer 33

Occur when some of the income earned is directed back to expenditure in the form of private investment, government spending and exports

Question 34

Economic growth

Answer 34

An increase in the amount or level of national production that has occurred over a period of time. Most commonly measured by change in real GDP

Question 35

Environmental impact studies

Answer 35

Studies that seek to weigh up the costs and benefits of any proposal in terms of the impact on the environment

Question 36

The economic costs of economic growth

Answer 36

Inflation: excessive demand for the nations resources (labour/raw materials) leads to higher prices Wealth effect: ^shares and property prices leads to less saving and more spending and excessive demand on resources Financial instability: ^borrowing and debt Net foreign debt: ^debt to other countries