Economics test 1 Flashcards
(39 cards)
What is macroeconomics?
The part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity
What is micro economics?
The part of economics concerned with single factors and the effects of individual decisions.
What does the business cycle measure?
Measures the change in economic growth within a specific economy (national/state) overtime.
what is a boom?
a period when the general level of economic activity is above average. The economy almost or has full employment, feelings of confidence in the economy, Little excess capacity, Inflationary pressure.
what is trough?
Troughs in which there are two quarters of negative, Growth are called recession, Levels of AE are below levels required for full employment, Low levels of consumption expenditure, lack of confidence in economy
what is a downswing?
Decreasing levels of AE that are below levels required for full employment, decreasing levels of consumption expenditure, Decreasing levels of investment in capital equipment, Declining confidence in the economy
what is an upswing?
A trough cannot last forever, at some point government Policies (monetary and fiscal policy) together with Unplanned investment will cause the level of AE to Increase and growing demand
what is GDP?
Gross domestic product. The measure of the total value of goods and services produced in Australia over a year.
why do we measure GDP?
The percentage change in the GDP tells us whether or not the economy is growing.
What is a recession?
This is when economic growth falls for two or more quarters (6 months or more) in a row.
What is a depression?
A depression is more severe than a recession and is classed as an extreme recession lasting two years or more
What are the consequences when there are two or more quarters of negative growth in GDP?
There is a decline in the number of goods and services being produced, a decline in number of people being employed and overall a decline in their standard of living
What percentage change in GDP is considered suitable by economists?
Economists hope to see economic growth exceed 2%
what is inflation?
Inflation is a steady upward movement in the general level of prices decreasing purchasing power over a period of time
What terms are given to the official measure of inflation in Australia?
Consumer price index (CPI) and inflation rate.
What is consumer price index?
The CPI can be thought of as an imaginary ʻbasketʼ of over 100,000 selected goods and services bought by a typical capital city household. The CPI is a measure of the changes in the price of this basket of goods
and services.
How often are prices collected for CPI?
Quarterly surveys
How many groups is CPI divided into?
11
Why are items listed on the CPI weighted?
To reflect the importance of each class in relation to total household
What is inflation rate?
The measure of economic growth short term
What are the two types of inflation?
Demand pull and cost push inflation
What is demand pull inflation?
When demand increases at a rate faster than the capacity of goods and services. This increases competition for goods and services drives up their prices.
What is an example of demand pull inflation?
An increase in government spending can increase aggregate demand, thus raising prices
What is cost push inflation?
When prices are pushed up by rising costs to producers who compete with each other or increasingly scarce resource
