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Economics 3,4 > U3 AOS2 > Flashcards

U3 AOS2 Flashcards

1
Q

What are living standards

A

= aggregate welfare of ppl in country e.g Aus, made up of material + non material factors

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2
Q

What are material living standards

A

= refer 2 lvl of economic wellbeing of individuals + qty of tangible / physical g/s available 4 each person 2 consume

(tangible factors)

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3
Q

What are non material living standards

A

= quality aspects of a person’s daily existence (intangible factors)

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4
Q

Factors affecting MLS + acronym

A

PEACLL

1) access 2 g/s -> real gdp per capita
2) environmental quality
3) physical + mental health
4) life expectancy
5) crime rates = inc crime rate -> inc insurance premium
6) literacy rates -> inc employment opportunities

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5
Q

Factors affecting NMLS + acronym

A

PEACLL

1) access 2 g/s -> satisfaction
2) environmental quality -> -ve externalities
3) physical + mental health
4) life expectancy
5) crime rates
6) literacy rates

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6
Q

What are the conflicting relationships b/n MLS and NMLS

A
  • Environmental trade off
  • Health + social trade off
  • Material trade off
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7
Q

What is GDP and the equation for gdp

A

= final market value of all g/s produced in Aus economy over a given period of time

GDP = C+I+G+(X-M)

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8
Q

What is real GDP

A

= uses prices from previous period + applies them 2 current period volumes

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9
Q

What is gross national expenditure (GNE)

A

= total expenditure by Aus on g/s produced anywhere

GNE =C+I+G

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10
Q

What are the 4 flows of the economy

A

1) flow of available supply of resources
2) flow of demand for resources
3) flow of total expenditure of AD
4) flow of final g/s supplied

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11
Q

What are leakages

A

= part of income earned by households x immediately spent on Aus g/s, instead diverted through financial, government and or external sectors

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12
Q

What is the financial sector

A

= savings + investment -> money used in C or I

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13
Q

What is the government sector

A

= taxes + gov.t spending on infrastructure / via C once welfare transfers spent

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14
Q

What is the external sector

A

= spending on M which dec AD + spending on X that inc AD

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15
Q

What is aggregate demand

A

= total value of all expenditure on final finished g/s produced by a nation + measured over a period of time

=gdp

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16
Q

What is the AD equation

A

= (C+I)+(G1+G2)+(X-M)

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17
Q

What is private consumption expenditure

A

= total value of all expenditure on individual + collective goods incurred by resident households + xprofit institutions serving households
60% of AD

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18
Q

What is private investment expenditure

A

= expenditure with purpose of expanding productive capacity + productivity of firms

(15-20%) AD

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19
Q

What is government expenditure

A

-> includes expenditure by all lvls of gov.t

G1 = current expenditure -> g/s x in capital nature i.e health, edu, defense

G2 = capital expenditure -> g/s in capital nature i.e physical hospitals, roads, schools (infrastructure)

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20
Q

What are exports

A

= spending on exports by foreign economic agents

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21
Q

What are imports

A

= spending on imports by Australian economic agents

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22
Q

What are factors that impact AD

A

1)Inflation
2) Disposable income (gross income - income tax)
3) Interest rates
4) Consumer confidence
5) Business confidence
6) Exchange rates
7) Levels of economic growth

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23
Q

What is aggregate supply

A

= represents the total volume of g/s that all suppliers have produced + supplied over a period of time
-> influenced by willingness + ability of p’er 2 produce

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24
Q

What is production

A

= process of converting resources + inputs into g/s / total volume of g/s produced over a given time period

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25
What is productivity
= measured by the output per unit of input
26
What is productive capacity
= point @ which production (GDP) is occurring @ maximum lvl possible in an economy
27
What are the factors that affect AS
1) Inflation -> S.T = inc profit t/f inc willing + able -> L.T = inc wages + expenses t/f overall x affect on AS` 2) Qty of factors of prod 3) Qual of factors of prod 4) Cost of production 5) Tech changes e.g NBN 6) Productivity growth 7) Exchange rates -> Depreciation = inc cost of imports -> Appreciation = dec cost of imports 8) Climatic conditions
28
What is the optimal rate for strong + sustainable economic growth
= 3-3.5%
29
What is the optimal unemployment rate
= 5%
30
What is the optimal inflation rate
= 2-3% over the median term
31
What is disposable income
= total income household received for participation in the production process plus government transfer less direct tax
32
What is discretional income
= disposable income available 4 consumption following the payment of all non avoidable expenditures e.g interest rates affect discretionary income, not disposable income
33
What is the business cycle
= cyclical movement of economic activity over time -> Peaks, contractions, troughs, expansions
34
What is the nature of a peak
- strong rates of eco growth - high levels of inflation - low levels of unemployment - spending + confidence are high - production is strong + capacity is heavily utilised
35
What is the cause of a peak
- high c'er + bus confidence - high prosperity 2 spend / take on new debt - fall in household savings ratio - high levels of global economic growth - fall in leakages relative 2 injections
36
What are the issues of a peak
- if a "boom" it may be unsustainable - inflationary pressures especially if capacity constraints - asset prices can inc rapidly - inc current account deficit
37
What is the nature of a contraction
- slowing rates of economic growth - decreasing lvls of inflation - decreasing lvls of unemployment - inc underutilisation rate, in particular labour market
38
What is the cause of a contraction
- Due 2 high inflation, capacity constraints + higher interest rates, it will correct itself - inc volume of production becomes difficult - inc inflation - leakages start to rise and injections fall
39
What is the nature of a trough
- minimum point of the cycle - low lvls of production = high unemployment - low inflation - underutilisation of capacity - leakages higher than injections
40
What are the causes of a trough
- low levels of spending due 2 low c'er confidence - high levels pf household saving due 2 dec c'er confidence - low levels of investment due 2 low bus confidence - low levels of disposable income - slow rates of economic growth
41
What is the nature of an expansion
- Inc levels of production - inc job vacancies t/f dec unemployment - inflationary pressures building in the economy
42
What are the causes of an expansion
- inc c'er + bus confidence - inc consumption + investment expenditure - inc gov.t expenditure - low interest rates
43
What is economic activity
= refers 2 the expenditure, production + income that takes place in an economy when g/s are produced + sold
44
What is gross national income
= measurement of a country's income including all income earned by a country's residents, business + earnings from foreign sources
45
What is the goal of strong and sustainable growth
= the government's goal 4 strong + sustainable growth is 2 achieve the highest growth rate possible (real GDP of 3-3.5%) consistent with strong employment growth but without running into unacceptable inflationary, external and or environmental pressures
46
What is sustainable growth
= growth / economic development that meets the needs of the present without compromising the ability of future generations 2 meet their own needs so the achievement of intertemporal efficiency
47
What is nominal GDP
= $value (final market value) of g/s produced in a period of time, which depends on the volume of what was produced + the price of what was produced
48
What is real GDP
= final market value of g/s using previous period's prices t/f adjusting for inflation
49
What is the difference between nominal and real GDP
= if inflation is adjusted for
50
What is the equation for measuring quarterly GDP growth
= (GDP2-GDP1) / GDP1 X 100
51
Reasons to pursue economic growth
1) Growth in real income -> from inc production -> inc labour t/f inc incomes -> inc M + NMLS 2) Lowering the unemployment rate -> inc domestic production requiring inc labour 3) Inc ability of gov.t 2 provide essesntial services + avoid inc debt levels -> inc employment -> inc tax revenue -> overall link is the improvement 2 L.S that they bring
52
What is jobless growth
= inc output achieved via inc productivity of existing inputs so gov.t needs 2 ensure growth rate exceeds rate of growth in productivity
53
What is greater than population growth
= economic growth needs 2 exceed population growth rate, best measured by real GDP per capita
54
Consequences of a growth rate below 3%
- dec growth in real income, potentially no growth - inc / stagnant unemployment rate - cause a budget deficit t/f gov.t x offer services + inc debt
55
Consequences of a growth rate above 3.5%
- Unsustainable -> can create inflationary pressures that negatively impact real income growth -> can create external pressures -> can create environmental pressures from depletion of natural resources + degradation of environment
56
What does it mean by employed
= when someone 15 years of age and older is working more than 1hr a week in return 4 some form of remuneration
57
What does it mean by unemployed
= when someone is 15 and over without work or working less than 1hr per week, + actively seeking employment / more work
58
What is hidden employment
= unemployed x included in calculation of unemployment as they have given up looking for work
59
What is long term unemployment
= being unemployed for more than 12 months
60
What is underemployement
= individuals who have a job h/r, they would prefer to be working more hrs + t/f unemployed to an extent
61
What is full employment
= the level of unemployment that exists when the gov.t economic growth goal is achieved + where cyclical unemployment is non existent, generally accepted 2 be 4-4.5% non accelerating inflationary rate of unemployment (NAIRU)
62
How to calculate the labour force
L.F = employed + unemployed
63
How to calculate the unemployment rate
U.R = unemployment / labour force x100
64
What is the labour force underutilisation rate
= represents the proportion of the labour force that is "underutilised", the proportion of individuals x working the number of hrs they would like 2
65
How to calculate underutilisation rate
Under R= (Unemployed + underemployed) / labour force x 100
66
What is the labour force participation rate
= measures the % of the working age population who are either working / actively seeking employment
67
How to calculate the labour force participation rate
LPR = Labour Force / Working age population x 100
68
What is structural unemployment
= skills of the unemployed do x match the skills required by the economy
69
What is seasonal unemployment
= where a person is unemployed b/c their skills are only demanded during certain times of the year
70
What is frictional unemployment
= where a person is unemployed 4 the period of time while they're moving from 1 job 2 another
71
What is hardcore unemployment
= where a person is unemployed due 2 mental, physical, or other characteristics that prevent them from receiving job offers
72
What is cyclical unemployment
= unemployment that occurs when the economy is x operating @ its full capacity due 2 AD deficiencies
73
What are the consequences of unemployment
- loss of GDP - loss of tax revenue - greater income inequality - reduction in living standards
74
What is the goal of low inflation
= 2 achieve a sustained inc in general lvl of prices of b/n 2-3% on average over the medium term
75
What is inflation
= sustained inc in general / average price levels over time
76
What is disinflation
= dec rate of inflation e.g quarter ending in march 2017 inflation is 1.9% and then the quarter ending in June 2017 comes in at 1.5%
77
What is deflation
= dec in the average price lvl over time. Literally a -ve inflation figure
78
What is consumer price index (CPI)
= most reliable indicator of inflation that determines change in prices of g/s purchased by average Aus household -> collects prices of 100000+ g/s (basket) which is then weighted 2 reflect relevant importance 2 each Aus household
79
How to calculate inflation from the consumer price index
I.R = (CPI end - CPI start) / CPI start X100
80
What is CPI headline inflation
= capture price movements of all g/s contained in the CPI (normal)
81
What is CPI underlying inflation
= headline inflation that excludes volatile items i.e fruit, veg, fuel.
82
What is the RBA underlying trimmer mean
= removal of top and bottom 15% that has inc most / least
83
What is the RBA underlying weighted mean
= price change that sits in the middle of the range / 50th percentile
84
What is demand inflation
= inflation caused by changes in factors that inc / dec AD
85
What is cost inflation
= inflation caused by changes in factors that impact on AS / supply side pressures / capacity constraints

Economics 3,4 (6 decks)

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