UNIT 3 AOS 2 DP 11-19 Flashcards
(20 cards)
What is the labour force?
People aged 15+ who are either employed or actively seeking work.
What is the labour force participation rate?
The percentage of the working-age population that is in the labour force.
How is the unemployment rate calculated?
(Number of unemployed ÷ Labour force) × 100.
What is the labour force under-utilisation rate?
Unemployed + underemployed as a percentage of the labour force.
What is cyclical unemployment?
Job loss due to a downturn in the business cycle (low demand).
What is structural unemployment?
Unemployment due to changes in the economy or technology that make skills obsolete.
What are consequences of high unemployment?
Lower GDP, reduced tax revenue, higher welfare costs, reduced living standards.
What happens if unemployment is too low?
Labour shortages, higher inflation due to wage pressure.
What is the goal of low and stable inflation?
To keep the general price level rising slowly (2–3% per year, on average).
Define: inflation, disinflation, and deflation.
Inflation: Prices rising.
Disinflation: Slower rate of inflation.
Deflation: Prices falling.
How is inflation measured in Australia?
Using the Consumer Price Index (CPI).
What’s the difference between headline and underlying inflation?
Headline includes all prices; underlying removes volatile items for a clearer trend.
What causes demand-pull inflation?
Excessive aggregate demand (AD > AS).
What causes cost-push inflation?
Rising production costs (e.g., wages, raw materials).
What are consequences of high inflation?
Reduced purchasing power, wage-price spiral, distorted spending/investment, lower global competitiveness.
What are consequences of low inflation (or deflation)?
Delayed spending, higher real debt, increased unemployment, lower investment returns.
Name one AD factor affecting economic goals recently.
Rising interest rates have reduced consumer spending → lower AD → slower growth.
Name one AS factor affecting economic goals recently.
Global supply chain disruptions increased production costs → reduced AS → inflation.
How can low business confidence affect economic growth?
Reduces investment → lowers AD → slower GDP growth.
What goal is most threatened by strong wage growth and low unemployment?
Price stability, due to rising inflationary pressures.
