Definitions Flashcards
What is Economics?
The study of how best to use the worlds scarce resource to satisfy needs and wants.
What is Relative Scarcity?
Resources are always limited and wants are unlimited.
What are Needs vs. Wants?
A need is something a human must have in order to survive and wants are things a person would like to have unnecessary for survival.
What is Opportunity Cost?
The value of the next best alternative forgone when a decision is made.
What are the Factors of Production?
All the nations resources.
Land: All natural resources that are still in their raw state.
Labour: Physical and mental efforts of people in the economy.
Capital Resources: Human-made assets that are used in production.
Enterprise: Decision makers who organise all factors of production.
Competitive Wants
Goods or services that can be interchanged easily because they perform similar functions.
Complementary Wants
Goods/Services that are used together to fulfil a desired activity.
What is The Economy?
The way in which a nation organises its resources and how different sectors interact to produce goods, services and income.
Economic Systems
The way in which a nation decides how to use its resources and who answers the economic questions.
Fiscal Policy
The actions or the decisions of the government to ensure the economy is growing at a sustainable pace.
Monetary Policy
The actions and decisions of the Reserve Bank of Australia (RBA) in influencing economic activity via interest rates.
Expansionary Monetary Policy
Lowering the cash rate which will lower interest rates encouraging borrowing and spending.
Contractionary Monetary Policy
Increasing the cash rate which will increase the interest rates discouraging borrowing and spending.
Socialist Command Economy
Government controls all resources and how they are used.
Socialist Market Economy
Government controls most resources with a small private sector.
Market Economy
Businesses and consumers decide what, how, and how much is produced.
Traditional Economy
Individuals decide what/how/how much is produced.
Contractionary Fiscals Policy/Budget Surplus
When taxation is greater than Gov. spending.
Expansionary Fiscals Policy/Budget Deficit
When Gov. spending is greater than taxation.
