Unit 1 Topic 1 Flashcards
What is economics
Is the study of how best to use the worlds scarce resource to satissfy needs and wants
What is relative scarcity
All resources are limited but wants are unlimited
What is the production possibility frontier
The Production Possibilities Frontier (PPF) is a graph that shows all the different combinations of output of two goods that can be produced using available resources and technology. The PPF captures the concepts of scarcity, choice, and tradeoffs.
What is opportunity cost
The value of the next best alternative forgone when a decision is made
What is the circular flow of income
A model that depicts how money moves through the economy between businesses, households, and the government.
What happens if leakages are greater than injections
the economy contracts
What happens if injections are greater than leakages
The economy expands
What are the four economic systems of decision making
Traditional Economy
Capitalist Economy
Mixed Market Economy
Socialist Market economy
Socialist Command
What is GDP
The value of all finished goods / services produced in a period of time
What is the economic cycle
s the circular movement of an economy as it moves from expansion to contraction and back again.
What is Monetary Policy
The actions and decisions of the RBA in influencing economic activity via interest rates
What is fiscal Policy
The actions and decisions of the government in influencing the level of economic activity
What is a budget surplus
When taxation is greater than government spending -> Contractionary effect
What is a budget deficit
When government spending is greater than taxation
What are characteristics of bust / trough
Low level of Aggregate demand
Low output
High Unemployment
Low Prices
What are characteristics of an upswing
increase in production/output * decrease in unemployment * increase in wages * increase in consumer spending.
What is a characteristic of a boom / peak
high Aggregate demand
High output
Low unemployment
High prices
What are the Factors of Production?
land, labor, capital, enterprise
What is the Economic Problem?
The economic problem is the issue of scarcity, where limited resources must be allocated to satisfy unlimited human wants, leading to choices and opportunity costs.
What is Aggregate Demand?
Aggregate demand is the amount of total spending on domestic goods and services in an economy
The factor “enterprise” is different to “labor” as enterprise
earns profit and interest whereas labour receives a wage
Economists use economic models so that
Real world complexities can be reduced to simplified and explainable relationships
If planned investment is greater than planned saving then
level of income will tend to rise
What is aggregate supply
the total amount of goods (including services) supplied by businesses within a country at a given price level.
