Flashcards in semester one exam Deck (55):
what is GDP
Gross Domestic product is the value of all goods and services produced in a country over a specific period of time.
importance of economic growth
•Economic growth is important because if more goods and services are being produced it means that more people are being employed.
• People are then able to spend their wages on a wider variety of goods and services that may improve their living standard.
what is economic growth
Economic growth is defined as real growth in the value of goods and services produced by an economy over a period of time.
limitations of GDP as a measure.(4)
- GDP doesn't include non-market production
- GDP doesn't provide information about the distribution of product
- GDP doesn't consider the impact of production on the environment
- GDP involves some "guesstimates" of production
income and employment
Enables us to earn an income so we can purchase the goods and services we need and want.
how do you classify as unemployment
-15 years of older
-available to start work
-taking active steps to fund work.
4 types of unemployment.
what is cyclical unemployment
Relates to the cyclical trends in growth and production that occur within the business cycle. When business cycles are at their peak, cyclical unemployment will be low
explain structural unemployment
Unemployment resulting from industrial reorganisation, typically due to technological change, rather than fluctuations in supply or demand.
explain seasonal unemployment
Seasonal unemployment occurs when people are unemployed at certain times of the year, because they work in industries where they are not needed all year round.Eg. Fruit pickers
Is the unemployment which exists in any economy due to people being in the process of moving from one job to another.Eg. When students move from education to the workforce full time
and when women move back into the workforce after having children.
effects of unemployment
Reduced standard of living
Loss of skills from the workforce
Possible psychological effects
decreased national production
change in gov budget position
what is a recession
7 years in a deficit budget.
occurs when there is an increase in the general level of prices paid for goods and services over a certain period of time.
Reasons for inflation
-consumers and businesses feeling confident about their income and employment in the future
-trading partners performing well and demanding our exported goods and services
-relatively low interest rates encouraging consumers and business to borrow more in order to spend
-lower taxes and increased government spending may also lead to increased demand and therefore expenditure.
seven concepts of geography
-place, space, environment, interconnection, sustainability,and change
the level of government receipts is equal to the level of government expenditure.
the level of government receipt is greater than the level of government expenditure
effects of inflation
-causes local producers to lose out to overseas competitors.
-undermines economic growth
-changes the allocation of resources
-affects income distribution
-higher income earners - people with jobs whose incomes increase at the same rate or faster than inflation.
-Borrowers - rising prices means it may be better to borrow with a fixed interest rate and make the purchase now
-importers - the price of imported goods may be cheaper than the price of goods produced in Australia
-Low to middle income earners- people on incomes that do not increase as fast as inflation Eg. part-time workers or pensioners.
-bank savers - money sitting in the bank may not buy as much as it previously did due to prices rising.
- exporters- as exported goods become more expensive demand from overseas consumers will fall.
Australias inflation rate goals
The Australian government has set a target for inflation of 2 to 3 per cent over the course of a business cycle of 5-7 years. During this time it is expected that the economy will go through certain stages such as a peak or boom, an economic downturn, a trough and an expansionary phase.
How is inflation measured.
The consumer price index (CPI) measures inflation. The CPI comprises a regimen/basket where items that represent a high proportion of expenditure by Metropolitan households are weighted and a comparison of price changes are made against the items in the base year.
what is the GPI
the genuine progress indicator measures the overall progress of an economy in achieving improved living standards. In simple terms, it calculates GDP but then makes both negative and positive adjustments to the values to reflect the good or bad effects on society’s welfare of some types of activity and spending.
deductions by the GPI (5)
-environmental damage due to pollution
-depletion of non renewable resources, such as coal and petrol
-decreased leisure time due to increased hours of work or travel time
-inequality in the distribution of income
-increased crime rates
items that add to the GDP
-ongoing services provided by public infrastructure
-contributions made by socially productive use of time, such as volunteer work and house work
what are quantitive measures
measures of economic performance, they measure the dollar value or the percentage value change in an item.
what are qualitative measures
Qualitative measures determine or measure the quality of our life and the economy. three of these qualitative measures (or indices) are:
• the Genuine Progress Indicator (GPI)
• Measuring Australia’s Progress (MAP)
• the Human Development Index (HDI).
measuring australia's progress (MAP)
a collection of measures published periodically by the ABS. It is used to determine whether on not life in this country was getting better and if so if the improvements could be sustained.
The Human development index (HPI)
is a measure that compares the wellbeing of people in different countries. It reflects and takes into account both positive indicators (such as long life expectancy at birth, educational attainment and average level of income per head per year) and negative ones (such as infant mortality and prevalence of using child labour), combining these into a single statistical index number.
what are living standards
refers to how well off a nation or country is overall.two types
what are material living standards
Material living standards relate to the level of economic wellbeing, influenced by the annual levels of Gross Domestic Product (GDP) per capita, incomes, and consumption of goods and services.
what are non material living standards.
Non-material living standards are value-based elements of human wellbeing that influence the part of our living standards that is not connected to material possessions.include our level of personal happiness and self-fulfilment, the crime and death rates, the absence of pollution and political freedom. hard to measure precisely
why does the government directly intervene in the market (3)
- to stabilise the economy
- to reallocate resources
- to distribute income
four factors that influence major consumer and financial decisions. (PESG)
-physiological influences- perception, motives, attitudes, personalities
-economic influences- willingness and ability to spend.
-sociocultural influences- Family and roles, peer groups, social class and culture and subculture.
-government influences-laws and regulations.
factors that influence a consumers decision to buy (PAMACE 6)
-availability of credit
-age and gender of consumer
-ethical and environmental considerations
how can living standards be reduced long term
-no longer earning an income
-used savings to assist them in maintaining spending habits in short term
-the length of time they are unemployed increases , their savings evaporate and spending on g/s decreases.
supply side - effects
-an increase in wages paid to employees.
-an increase in interest rates
-an increase in government taxes, oil prices and prices for utilities (such as electricity, gas and water services).
-an increase in the cost of raw materials
-Australia’s trading partners experiencing a period of inflation
what factors influence non material living standards
level of personal happiness and self-fulfilment, the crime and death rates, the absence of pollution and political freedom.
what factors influence material living standards
annual levels of Gross Domestic Product (GDP) per capita, incomes, and consumption of goods and services.
what is the budgetary fiscal policy
involves altering the level of government spending and government receipts which will result in one of three budgets
what is the monetary policy
interest rates can help to achieve the government’s goals of low inflation, strong and sustainable economic growth and full employment, ultimately improving Australia’s living standards
how can a business improve their productivity
operations and productivity
Investment in technology applications
up skilling workers
what is meant be macroeconomic policies
The branch of economics that involves the level of expenditure
what is meant be microeconomic policies
Examining the operation of the smaller fragments making up the whole economy.
what is the labor market
Market where wage levels and working conditions such as hours of work, leave, and terms of dismissal are determined.
what is meant by deregulation
Deregulation is the removal of unnecessary government controls, restrictions and supervision in various areas of the economy
explain the role of the ncp
the national competition policy is designed to strengthen the level of competition and efficiency in markets
how does the government receive revenue? (7)
Medicare levy, personal income tax, capital gains tax, with holding tax, superannuation fund tax, fringe benefits tax, company tax.
List the Australian government expenditure(7)
Health, defence, education, social services, Net payments to other governments, public debts, transport.
explain the difference between indirect and direct taxes
direct taxes are levies imposed directly onto the incomes of individuals or companies. indirect taxes are placed on apon the sale of a good or service and added onto the price of an item
non tax revenue is the third type of government receipts which includes asset sales, interests, the repayment of hecs fees for uni students and profits from government business enterprises such as Australia Post
explain three types of direct taxes
medicare Levy - the direct text to provide medical insurance to help cover the basic cost of family health care
Company tax- the direct tax that is flat or proportional and is Levied directly on business profit
fringe benefits tax-The tax paid by firms on the value of "perks" provided to employees such as company car or house