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Unit 4 AOS 2 - AS policies Flashcards

1
Q

What are capacity constraints

A

= factors that prevent an economy from producing inc g/s i.e skill shortages + infrastructure bottlenecks

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2
Q

What is production

A

= process of converting resources + inputs into g/s

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3
Q

What is productivity

A

= volume of output that is produced from a given number of inputs

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4
Q

What is productive capacity

A

= point @ which production is occurring @ the max lvl possible in economy

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5
Q

What is aggregate supply

A

= represents total volume of g/s produced by all suppliers over a period of time

-> influenced by ability + willingness of p’er 2 produce

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6
Q

What are AS policies

A

= include a wide range of gov.t strategies that seek 2 grow the productive capacity / potential of economy, especially in L.T, by inc willingness + ability of suppliers 2 produce

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7
Q

What is the aim of AS policies

A

= inc L.S by inc supply conditions + helping 2 simultaneously achieve the goals of SSEG, FE, LI

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8
Q

What is an issue surrounding AS policies

A

= inefficient performance in a number of sectors due 2 protectionism shielding them from competition

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9
Q

What is productive efficiency

A

= achieved when max output from given input

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10
Q

What is intertemporal efficiency

A

= how well resources are allocated over different time periods so that the L.S of future generations are x sacrificed in the pursuit of the current gen L.S

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11
Q

What is allocative efficiency

A

= most efficient allocation of resources occurs when L.S + welfare are max + it is x possible 2 further inc L.S by changing the way resources are allocated

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12
Q

What is the relationship b/n AS + efficient allocation of resources

Prod / Tech

A
  • Prod/ Tech -> results in inc in productive capacity / AS as there will be an inc in outputs from given lvl of inputs shifting AS right
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13
Q

What is the relationship b/n AS + efficient allocation of resources

Dynamic

A
  • should -> inc in productive capacity + help generate / maintain as inc + AS via inc in innovation, creativity
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14
Q

What is the relationship b/n AS + efficient allocation of resources

Inter-temporal

A
  • in S.T could dec productive capacity of eco h/r in L.T could boost prod capacity
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15
Q

What is the relationship b/n AS + efficient allocation of resources

Allocative

A
  • any improvement 2 prod capacity / AS that has potential 2 inc MLS as measured by GDP per capita will t/f help achieve allocative efficiency
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16
Q

How does AS policies improve SSEG

A

-> SSEG limited 2 speed @ which prod capacity can inc
-> dec pressure on prices = expansion in AD which will inc GDP + dec inflationary
-> environmental policies ensure sustainability

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17
Q

How does AS policies improve Low Inflation

A

-> boosting prod + dec costs of prod = dec cost inflationary pressures
-> inc prod capacity, shifting the AS curve 2 the right, dec cost inflationary pressure

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18
Q

How does AS policies improve Full Employment

A

-> AS policies focused on edu. + training = workers with appropriate skills address structural unemployment
-> +ve supply side inc bus confidence + a greater willingness 4 bus 2 invest = growth + jobs

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19
Q

How does AS policies improve International competitiveness

A

-> inc efficiency, dec prod costs t/f keeps lid on inflation

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20
Q

How does AS policies improve ML

A

-> inc volume 2 access g/s available @ lower prices
-> dec in unemployment = inc disposable income

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21
Q

How does AS policies improve NMLS

A

-> via a greater efficiency in production helping 2 dec skins on resources
-> improved working conditions

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22
Q

What is infrastructure

A

= refers 2 key physical or organisational structures with in an economy that provide the “building blocks” around which economic activity can take place

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23
Q

Drawbacks of infrastructure

A
  • long lead times
  • some infrastructure projects = low profits in S.T = unattractive 4 private sector
  • Relative prices don’t work in infrastructure markets 4 urban + rural water, power, road, rail, transport + gas
  • +ve externalities = financial rewards x received by individual investors -> underproduction, market failure + capacity restrictions = gov.t intervention required
24
Q

How do AS policies operate

A

-> An inc volume in infrastructure combined with better quality will -> inc in productivity, efficiency, dec production costs + productive capacity - improving p’er ability 2 inc the volume of production of g/s over a given period of time

25
How investment in infrastructure achieves low inflation
- improved efficiency = dec per unit production costs = dec cost inflationary pressures - dec costs due 2 fuel, maintenance + time with infrastructure on roads, rail and other types of transport infrastructure - removal of capacity constraints / infrastructure bottlenecks dec prod costs - improved transport = mobility of workers = high participation rate + availability of required skills
26
How investment in infrastructure achieves SSEG
-> Boosting productivity; efficiency; long term productive capacity -> removal of capacity constraints / bottlenecks -> All inc AS = inc output (GDP) = strong growth
27
How investment in infrastructure achieves Full Employment
-> inc lvls of output (GDP) means bus are likely 2 require more workers = dec in unemployment -> keeping prod costs lower = inc in international comp = bus expanding into new markets + employing more staff = dec unemployment
28
How investment in infrastructure achieves LS
- Inc p. power via dec inflation - boost 2 real incomes b/c inc growth - dec unemployment = improved happiness + feelings of self worth - investment in infrastructure can dec market failure + the underproduction of public goods
29
What is a quota
= restriction on volume of imports
30
What is a tarrif
= a tax on imports
31
What is a subsidy
= financial assistance
32
What is the aim of protectionism
= 2 protect local p'er against competition in order 2 protect local production, jobs + income
33
What is trade liberalisation
= includes any gov.t policy initiative designed 2 promote free trade / dec restrictions 2 free trade
34
What are the benefits of trade liberalisations
- Promotes tech./ efficiency = dec trade barriers force 2 use resources in inc productive manner - Promotes dynamic efficiency = dec trade barriers incite inc innovation + creativity 2 capitalise - Promotes allocative efficiency = dec trade barriers promote reallocation 2 areas with legitimate c'er demand where Aus bus comparative advantage
35
What are the consequences of trade liberalisation
- S.T = -ve impact b/c inc unemployment b/c bus forced 2 restructure - L.T = h/r jobs will be created b/c inc growth in economy
36
Effects of trade liberalisation on International Competitiveness
-> inc comp = inc prod + dec cost of prod as bus forced 2 restructure = inc prod capacity + AS = inc volume of prod @ dec prices = inc international comp
37
Effects of trade liberalisation on CAD
-> inc competition -> inc prod + dec cost of prod = inc prod capacity + AS = inc volume of prod @ dec prices = inc I.C = inc value of credits in BoMT + NS = inc CAS/ dec CAD
38
Effects of trade liberalisation on SSEG
-> inc competition -> inc prod + dec cost of prod = inc prod capacity + AS = inc volume of prod @ dec prices = expansion in AD = inc lvls of eco activity + dec cost inflationary pressures
39
Effects of trade liberalisation on Low Inflation
-> inc competition -> inc prod + dec cost of prod = inc prod capacity + AS = inc volume of prod @ dec prices = dec cost inflationary pressures in the economy placing dec pressures on inflation
40
Effects of trade liberalisation on F.E
S.T = inc structural unemployment b/c some bus can x compete -> redundancies L.T = inc AS -> dec inflation -> inc p. power -> inc confidence -> inc consumption + I.C -> in X + dec M -> inc AD t/f inc DD4L 2 meet demand = dec cyclical unemployment
41
Effects of trade liberalisation on L.S
S.T = can fall 4 those who become unemployed -> dec access = dec MLS + inc financial stress = dec NMLS L.T = can inc as inc opportunities + dec prices with inc income -> inc access = inc MLS + dec financial stress = inc NMLS
42
What is immigration policy
= strategic supply side approach 2 managing the number of migrants coming 2 Aus from overseas. The fed gov.t current immigration program tries 2 attract young, English speaking + suitably skilled ppl who are likely 2 make a valuable + ongoing economic contribution 2 the labour force + the Aus economy
43
Negative impacts of an aging population
1) inc savings rate 2) dec eco. growth 3) inc welfare previous 4) inc spending on aged care facilities + hospitals 5) dec participation rate 6) Aus' aged > 65 projected 2 double by 2024-25 7) dec tax revenue from inc tax 4 fed budget 8) Results = larger deficit 9) Reduction in expenditure on essential services / inc in personal income tax rates or both
44
Immigrations impact on Aggregate Supply
- inc supply of labour t/f dec pressure on wage growth rates -> inc employment + output - Alleviates capacity constraints + helps 2 maintain labour productivity lvl - Further enhance productivity via intake of of young skilled professionals 2 replace the aging population + retirees
45
What is the impact of immigration policies on SSEG
-> inc productivity capacity by improving productivity, inc supply of labour + removing capacity constraints of skills shortages = eco. growth as suppliers are inc willing + able 2 supply in the economy @ dec prices -> expansion in demand
46
What is the impact of immigration policies on LI
-> whilst can cause demand inflationary pressures, focus on skilled migration -> inc productivity growth t/f dec pressure on wages -> inc labour supply + dec skill shortages -> inc prod capacity t/f dec cost inflationary pressures on inflation
47
What is the impact of immigration policies on FE
-> removal of capacity constraints + inc in supply of labour eases inc pressure on wages + costs = help p'er maintain output @ relatively dec prices = inc demand t/f employment opportunities as p'ers require inc labour 2 facilitate inc in output
48
Strengths of immigration policy
- can be targeted @ specific sectors where skill shortages exist - impact by = short - +ve impact on budget outcome with workers earning an income + paying personal income tax - connections fostered with other countries in area of inc globalisation + advantage 4 Aus economy - communication in foreign lang, understandability of cultural differences
49
Weaknesses of immigration policy
- can be manipulated 2 become a politically sensitive topic - taking skilled labour from another country undermining ability 2 achieve domestic eco goals - can contribute 2 pop density in cities that do x have the infrastructure 2 cater 4 the inc number of residents, contributing 2 capacity constraints of infrastructure bottlenecks further holding back the prod capacity of the economy.
50
What is environmental policy
= seeks 2 minimise environmental harm often associated with growth such as the depletion of non-renewable natural resources / common access resources
51
What is market based environmental government policies
= aims 2 alter relative prices + t/f create financial incentives 2 minimise CO2 emissions + disincentives 4 bus who continue 2 pollute
52
What is the emissions trading scheme
= market based AS environmental policy that aims 2 change how g/s are produced by putting price on CO2 emissions through creating a market 4 tradeable pollution permits -> Bus would be issued with certain amount of permits based on size + each permit can be exchanged 4 1 tonne of CO2 into atmosphere -> Bus that x use permits can save 4 future or sell 2 other bus @ market price
53
Short term impacts of environmental policy
- inc cost inflation due 2 inc cost of prod t/f dec p power + access 2 g/s 4 households t/f dec MLS - inc prod costs -> more bus 2 produce offshore where climate policies = inc lenient t/f inc unemployment + dec incomes - due 2 potential inc in unemployment -> dec happiness + physical / mental health with inc stress t/f dec NMLS
54
Long term impacts of environmental policy
- MLS inc b/c policies encourage inc innovation which eventually dec costs which offset inc price from carbon dec - creating price signals + incentives, bus who successfully dec emissions become inc profitable -> inc expansion with inc employment + incomes - should improve air quality + health/wellbeing of pop + prevent -ve impacts of climate change t/f inc NMLS
55
Strength of AS policies
1) Simultaneous achievement of eco goals 2) Can help solve structural problems AD policies can x fix 3) Flexibility 2 target + discriminate; focus on particular industries 4) Market-based + interventionist supply side politics tend 2 have lrg impact on inc efficiency 5) Work in a complimentary way with AD policies -> inc lvls of growth
56
Weaknesses of AS policies
1) inc implementation + time lags dec their usefulness in S.T 2) Stabilisation role limited b/c AS policies more L.T than med term 3) Political constraints as +ve impact x always immediate 4) Conflicts b/n economics goal 5) By itself, inc in prod capacity as a result of AS policies is x enough, unless matched by an inc in spending (AD) 6) Financial constraints limit some AS policies - some policies involve heavy budget outlays

Economics 3,4 (6 decks)

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