Topic 1 - Economic Indicators Flashcards
(50 cards)
How is unemployment measured?
unemployment rate = unemployed/labour force x100
Employed + unemployed =
labour force
Why is employment important?
if there are too many or not enough people employed economic growth would be too slow or too quick inflation
Australian government target unemployment
typically around 5% - we take into consideration that people change jobs and some people are just unemployed
Causes of unemployment
- cyclical
- structural
- frictional
- seasonal
- underemployment
- hidden employment
Cyclical unemployment
during an economic downturn, there is less demand for goods and services meaning there are less jobs required and unemployment increases
Structural unemployment
when peoples skills don’t align with the work available due to increase in technology
Frictional unemplyment
when people are leaving one job and starting another
Seasonal unemployment
eg, fruit pickers, ski instructors. jobs that are only done in certain seasons or time of the year
Underemployment
people who have a job but would like more hours
Hidden employment
people who say they aren’t interested in work but would work if they could find work
What is inflation
an increase in the level of prices of the goods and services that households buy
How is inflation measured
the rate of change of those prices
Why is inflation important
so that businesses make profit. When businesses make more profit they can afford to produce more which requires more workers which in turn lowers the unemployment rate
Australian governments target for inflation
typically around 2-3%
Inflation below 2% means…
the economy will not grow meaning there is a higher rate of unemployment
Inflation above 3% means…
there are affordability issues and a decline in living standards
Demand pull inflation
when the demand for goods exceed the supply of goods that can be sustainably produced
Cost push inflation
when the supply of goods that can be produced decreases which can cause high prices and faster inflation due to high demand
What is macroeconomics?
the behavior of the economy as a whole
a branch of economics that studies how an overall economy behaves (eg. markets, businesses, consumers, governments)
Business cycle
a type of fluctuation found in the economic activity of a nation, peaking and troughing over time
why is macroeconomics important?
it helps us understand how the economy is performing so the government can identify what needs to happen to keep the economy performing well so living standards are higher
what does the macroeconomic policy involve?
fiscal and monetary exchange rate policy
what is microeconomics?
the choices of individuals and businesses
the decisions that individuals and businesses make to allocate resources and the interaction between prices and production in certain markets
