| Term | Definition |
| High levels of economic activity | - Government may run a SURPLUS budget
- Government will spend LESS to avoid stimulating the economy |
| Lows levels of economic activity | - Government may run a DEFICIT budget
- Will spend more in the budget that it received in taxation revenue to stimulate the economy |
| Interest Rates and the effects of changes | - Changes of interest rates can affect the living standards
- Demand for goods and services can be curbed
- Consumers and business may devote money on loans rather than spending
(OPPOSITE occurs when interest rates LOWER) |
| GDP (Gross Domestic Product) | Measure the performance of an economy
- Measures a total value of goods and services over a period of time
- if GDP is increasing, then the economy is growing |
| Importance of Economic Growth/GDP | - more goods and services produced
- more employment
- earning more money, means there's more to spend,. More spending means improved living standards |
| Limitations as a measure | - GDP fails to measure a worthwhile life in Australia
- Producing more products can have undesirable environmental/social consequences |
| Business Cycle (DEF) | Refers to the recurring fluctuations in economic activity over time |
| Phases of the Business Cycle | - Boom (peak)
- Downswing/recession (contraction)
- Trough
- Upswing (expansion) |
| Characteristics of economic 'BOOM' | - Above avg rate of economic growth
- low unemployment
- consumer + business confidence |
| Characteristics of economic ' DOWNSWING/RECESSION' | - Fall in economic growth
- Lower level of income
- less inflation
- unemployment issues |
| Inflation (DEF) | Occurs when there is an increase in the level of prices paid for goods and services over a certain period of time |
| Current Rates of inflation in Australia | 5.4%
(should be between 2-3%) |
| Causes of Inflation | - Consumer confidence
- Business confidence
(May expand and employ more)
- Low interest rates
(Encourages consumers to borrow more)
- Lower taxes/increased government spending
(Leads to increased demand and expenditure) |
| Impacts on the economy (inflation) | - Uncertainty (difficult to determine costs of products)
- Non-productive decisions (Divert resources away from investment)
- International competitiveness (When inflation is greater than overseas - exports are at a disadvantage)
- Purchasing power |
| Employed | Occupations in which people work for other and get paid in return |
| Unemployed | Someone without a paid job, but is available to work |
| Workforce/Labour Force (def) | Total number of people employed, plus, the number of people seeking employment |
| Cash Rate in Australia | 4.35% |
| Unemployment Rate | 3.7% |
| Causes of unemployment | - Weak GDP
- Decreased spending
- Increased overseas competition |
| Frictional Unemployment | Freedom to choose occupation means that anyone can be in the process of switching jobs .
Can cause weeks of unemployment |
| Cyclical Unemployment | Consumer may buy less -> causing investors to fear future losses
Businesses may reduce output and employ less as a result |
| Technological Unemployment | - Machines used instead of labour |
| Structural Unemployment | - Lack of employment opportunities
- Shortage of jobs in the economy |
| Seasonal Unemployment | - Some jobs only available in certain parts of the year
- Such as working at festivals |
| Hard-core Unemployment | Unemployment causes by: Age, gender, handicaps, personal characteristics, etc |
| Productivity (def) | measures what can be produced from a given amount of resources |
| Labour Productivity (def) | Measures the amount of goods and services that a worker can produce in a given amount of time |
| Ways to increase labour productivity | management practice
training
workplace culture
performance feedback |
| Capital Productivity (def) | measures the amount of goods and services that can be produced using a fixed amount of capital |
| Ways to improve capital productivity | technology
improving processes |
| Material living standards | refers to access of physical goods and services
- measured by the quality of goods and services available each year |
| Non material living standards | intangible
- measured by assessing overall wellbeing
things like: freedom of speech, free elections, etc |
| Full employment | relates to the RBA promoing an environment that supports full employment
- occurs when there are enough jobs for people who are available/want to work
- Even at full employment, some people still face unemployment from frictional or hard-core reasons |
| FTICAFD - Price | too low = consumers become suspicious of quality
too high = product an be viewed as not worth the price |
| FTICAFD - availability of credit | influences decisions to spend
- spending too much credit leads to debt and is common cause of bankruptcy |
| FTICAFD - age and gender | different needs and wants for different ages
- marketers may specifically target men or women for products |
| Trade liberalisation (def) | involves opening up markets for free trade so countries can trade without restrictions
- promotes efficiency |
| Deregulation (def) | Removal of government regulations in a certain area of the economy |
| Labour market reform (def) | Reducing of eliminating government power in an industry to promote better competition in that industry |
