introduction to eco issues Flashcards
measures of economic performance / indicators :
- EG
- Unemployment
- Inflation
- Environmental
- External stability
- Inequality
four economic functions of the government
- stabilising economic activity
- resource allocation
- redistribution of income
- market regulation
macroeconomic policies
- fiscal policy
- monetary policy
- price and income policy
microeconomic policy
- product markets
- factor markets
- competition policy
economic growth definition
A quantitative measure of an increase in real GDP ( output ) over time.
Economic Development:
A qualitative concept of wellbeing ( e.g; access to health and education )
Sustainable Economic Growth
Governments aim for sustainable economic growth rather than growth at any cost to ensure economic growth raises quality of life
Internal Balance Focus:
full employment
price stability
full employment
The economic objective to achieve an unemployment rate near the non-accelerating inflation rate of unemployment ( NAIRU ).
- no cyclical UE, only structural
- UE gen at 4-5%
price stability
price stability is the economic objective to minimise inflationary pressures
- target band of 2-3%
external stability
To have an economic situation in which external sector ( CA, foreign debt + foreign ownership ) is sustainable and does not constrain domestic policy making
- historically CAD below -6.0% –> now 3.4%
environmental sustainability
Economic activity is only acceptable if it does not damage the environment and does not compromise intergenerational equity
intergenerational equity
Leaving the environment for next generation in as good condition as the present
equitable distribution of income
Govt. seeks to promote greater equality in distribution of income to bridge gap between rich and poor via progressive tax system and transfer payments
measurement of income distribution
gini coefficient
lorenz curve
macroeconomic policies
Concerned with stabilising economic activity on the DEMAND side ( AD )
- Intended to find sustainable balance between various objectives
- Short term + medium term economic management
aggregate demand definition
Total expenditure for final G+S in the economy over a period.
AD formula
- AD = C + I + G + ( X - M )
- AD = Y = Output
loosening monetary policy
expansionary effect
decreasing interest rates –> stimulates AD
tightening monetary policy
Raising interest rates –> dampens AD
contractionary effect
neutral monetary policy
No change to the official interest rate
Microeconomic Policies:
- Concerns with areas of economy which mostly impacts supply ( Aggregate Supply )
- Designed to improve efficiency of targeted sectors
- Rationale to increase Aus’s productive capacity in long term
Operate on supply side to boost AS
allocative efficiency
Occurs when resources ( capital, labour ) are distributed so that the net benefit to consumers of output is maximised.
Technical Efficiency:
Occurs when productive output is increased from a set of volume of resources.
