Unit 2 AOS 1 Flashcards
(15 cards)
Define aggregate demand and its components
Total expenditure on goods and services in the economy over time
Consumption+investment ex+G(1)ov consumption ex+G(2)ov capital ex+(exports-imports)
Define aggregate supply and its components
Total volume of goods and services that producers are prepared to supply to the market
L+L+K
What are factors of AD (when high)
Consumer confidence- c^ m^ Business confidence- i^ m^ Interest rates- c> I> m> Overseas growth- x^ i^ Disposable income- c^ Exchange rates- x> Terms of trade- c^ i^ (x-m)>
How does rising interest rates affect AD and economic goals
When interest rates are high, consumptions, investments and imports will decrease, while people will most likely save their money.
Unemployment will rise considering less g+s are bought
Inflation will remain low because no reason to rise
Eco growth will be lower
What are factors of AS (when high)
Raw materials - land^ Price of raw materials- land > capital > Oil- land^ Price oil Labour costs Climate change Interest rates Exchange rates Electricity prices
What is inflation
Sustained increase in the general or average price level
Define monetary policy
aims to have sustainable economic growth
determined by the reserve bank
free from government control
- as rates increase, Eco growth slows and vice versa
What is a cash rate
The interest rate set by the reserve bank Aus
What is the role of the reserve bank
Conducts a nations budgetary policy
Central bank of Australia
Issues currency
Seeks to foster financial system stability
Promotes safety and efficiency of payments
Not a commercial bank
Relates to interest rates
What is the basket of goods
Measures inflation
Split into major groups to represent different people for accurate reading
Describe budgetary policy
When gov decides where and how to spend money, can affect negatively or positively
What is a deficit, surplus and balance?
A deficit is when expenditure exceeds income, when they’re spending more than they have.
A surplus is when income exceeds expenditure
A balace is when income equals expenditure
What are materials living standards
Refer to the material (physical) g&s we can buy.
Measured by an increase in real GDP per capita.
As material living standards increase so does economic growth because there’s more economic activity
What is an index and can they decrease?
A numerical way of showing change, can decrease and often does but there is a general assumption that overtime there will be a general growth in what’s being measured
What are non material living standards
Factors that effect a persons quality of life, it can’t be measured by a monetary value
