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Economics units 3&4 > UNIT 3 AOS 2 (T) - part 1 > Flashcards

UNIT 3 AOS 2 (T) - part 1 Flashcards

1
Q

Define Aggregate demand

A

the total expenditure, consumption and investment on g/s produced in the economy and overtime will equal production

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2
Q

Aggregate Supply def

A

Aggregate supply is the total volume of good and services available for sale in an economy in a given period.

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3
Q

economic activity def

A

any activity of individuals, firms, or governments that generate production, income, employment and expenditure

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4
Q

Circular flow model - Name the 4 flows

A
  • flow 1: Home -> Business | factors of production
  • Flow2: Business -> home |** Income**
  • Flow 3: Home -> business | total spending of production (AD - EXPENDITURE)
  • Flow 4: bus -> home | production of final G+S (real gdp)
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5
Q

Aggregate demand equation

A

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

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6
Q

domino for good change in tech

A

= GOOD change in tech
= ↓COP
= ↑ profitbiility
= ↑ willingness to produce g/s (shift suply left)
= ↑ aggreagte supply

= ↑econmic activity
= ↓ cost inflation (goal 1) (supply right ↓ prices)
= ↑ production (goal 2)
(= ↑ real GDP)
= ↑economic growth

= ↑ derive demand for labour
= ↓ unemployment (goal 3)

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7
Q

domino for an aging population (up to AS)

A

= more people retired
= par%%% decrease
= labour resource become scarse (tighter labour market)
=↑ price of labour

= ↑COP
= ↓ profitbiility
= ↓ willingness to produce g/s (shift suply left)
= ↓ aggreagte supply

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8
Q

Living standards def

A

the aggregate welfare of people made up of both material and non-material living standards

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9
Q

define: business cycle

A
  • movement in economic activity is an aggregate - summarises the movement of economy activity overtime - has 4 phases

models “cyclical movement of econoimc activity!”

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10
Q

define

Material living standards

A
  • Material living standard is measured one’s access to goods and services
  • tangible factors
  • measured by GDP per capita and income per capita
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11
Q

define

Non-MLS

A
  • Non material living standards is one’s quality of life
  • Non-tangible factors
  • cannot be measured by monetary factors
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12
Q

Characteristics of boom/peek

A
  • Low unemployment
  • High inflation
  • ## High rate economic growth======
  • high wage growth
  • overvalued assets

excessive use of resources - may hinder IE

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13
Q

Characteristics of contraction (downturn)

A
  • rising unemployment
  • slower rate economic growth
  • slow rates of inflation

=========

  • high interest rates
  • lower consumer confidence
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14
Q

Characteristics of trough

A
  • Low inflation
  • High unemployment
  • # Low rate economy growth
  • reduce wage pressures
  • underutilisation of capacity
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15
Q

Characteristics of expansion

A
  • falling unemployment
  • rising inflation rates
  • rising growth rates

=====

  • rising consumer confidence
  • production stronger
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16
Q

Economic growth- the def

A

is the rate at which economy activity has grown over time and is most commonly determined by changes in the real value of production from one period to another.

17
Q

define consumer confidence

A

how optimistic a consumer is for the future of their finaical situation and job security

18
Q

Domino for $$aust ↓↓↓↓ (depreciating)

exchange rate

A

↓$$aud
(Aust g/s appear relatively less expensive than TPs = TP incentived to trade w/ Aust)
= ↑ EXPORTS (as appear cheaper)
= ↑ INT comp
= ↑ net exports (inc inter buyers)
= ↑aggregate demand

= ↑economic activity
= ↑ demand inflation (goal 1) d>s
= ↑production (goal 2)
(= ↑ real GDP)
= ↑ economic growth

= ↑ derived demand for labour
= ↓ unemployment (goal 3)

19
Q

human development index

AND DIFF

A
  • an alternative measure to GDP
  • ranks countries based on: Ranks GDP + life expct +education system + social walfare

Diff:
* More objective view on MLS and welfare standards

and diff with real GDP

20
Q

Leakages in circular flow model

A
  • savings
  • Taxes
  • Import spending

Import spending spending money outside of Australia (not going into our economy - NOTE it is going to AD)

21
Q

Injections in circular flow model

A
  • Investment spending
  • Government spending
  • Export spending

export spending is where people spend money into Australia (not going into our economy - NOTE it is going to AD)

22
Q

Circular flow def

A
  • detailed map of interrelationships between economic agents- how they impact economic activity
23
Q

Limitations of econoimc growth| as a measuring tool

A
  • it excludes non-marketed G&S ○ e.g., baby sitting, tutor - Fails to capture purchasing power of incomes ○ does not measure income directly ○ income does not match inflation
  • Doesn’t measure NMLS factorswellbeing could be shit but GDP can be high
  • **does not show wealth distribution
24
Q

Recent example where AD has inflationary pressures

A

↑population growth(600k net migration in past 12 months)
↑C
↑AD
↑EA
D>S
↑ demand inflationary pressures
(production)
↑ ECO growth

↑ DDL
↓ UNN

↑CASH RATES (cost of banks borrowing from RBA- from 3.6 in 2023 yearly ended April to 4.35% April yearly ended 2024)
(can do any of the two)
===================]
↑interest rates
= ↑return on savings
= ↑ savings
=================]
OR
================]
cost of credit
= ↓ability go borrow funds/more pay on future loans
=====================’
↓C
↓AD
↓EA
S>D
↓demand inflationary pressures
(production)
↓ eco growth

↓DDL
↓ UNN

↓Consumer confidence (consumer sentiment: how optimistic a consumer is about the economy and their job security - decreased by 3.9% in the past 12 months)
↓C
↓AD
↓EA
S>D
↓demand inflationary pressures
↓production
↓ eco growth

↓DDL
↑UNN

25
Q

Recent example where AS has inflationary pressures

A

↑energy prices in Australia
↑COP
↓Profitability
↓ willingness to produce g/s

↓AS
↓EA
↑cost inflation

↓production of g/s
↓ eco growth (2)

↓DDL
↑UNN (3)

26
Q

Appreciation of $$AUD effect

on AD and AS

A

ADD AT THE START:

=> Aust g/s appear more expensive relative to other trading partners g/s (assuming TP isn’t going under high levels of inflation

= trading partner incentived to trade with other trading partner

= loss of IC

[AD]
(Aust g/s appear more expensive)
↓IIC
↓X (as trading partner g/s appear cheaper - ↑ M)
↓AD
↓production
↓EG

[AS]
dec cost of M relatively cheaper
(need import components in most Aust g/s)
↓COP
↑AS
↑EG

27
Q

discretionary income vs dispoable income

A

discretionary income (income after tax and essential costs)
disposable income (income after tax)

Economics units 3&4 (9 decks)

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