Economics Test Preparation: Core Concepts and Macroeconomics

Comprehensive vocabulary flashcards covering fundamental economics topics including scarcity, markets, inflation, unemployment, international trade, taxation, and macroeconomic performance.

Goods

Tangible, physical items that can be touched, seen, and owned, such as clothing, computers, groceries, and furniture.

Services

Intangible actions, skills, or labor performed for a consumer, such as medical treatments, haircuts, teaching, and legal advice.

Markets

Any physical, local, or virtual space or system where buyers and sellers meet to exchange goods, services, or resources without requiring central government control.

Consumers

Individuals, households, or businesses that purchase and use goods and services to satisfy basic survival needs and discretionary wants, creating demand across the economy.

Producers

Businesses, manufacturers, farmers, or service providers that combine productive inputs to generate utility, supply goods and services, and contribute to GDP.

Relative Scarcity

The fundamental economic problem where human needs and wants are virtually unlimited, while the resources available to satisfy them are finite.

Factors of Production

The four categories of economic resources: Natural Resources (Land), Labour Resources, Capital Resources, and Enterprise / Technology.

Opportunity Cost

The value of the next best alternative that must be foregone or sacrificed whenever an economic choice is made.

Economic Growth

The real increase in the production volume or value of goods and services produced by an economy over a specific period, measured by Gross Domestic Product (GDP).

Target Rate of Economic Growth

An annual GDP growth rate between $3\%$ and $4\%$ per year, which accounts for population growth, product replacement, and improvements without becoming unsustainable.

Recession

A significant, widespread, and prolonged downturn in economic activity, technically defined as two consecutive quarters of falling real GDP alongside rising unemployment.

Goldilocks Economy

An ideal, balanced economic state that is 'just right'—neither overheating with high inflation nor sluggish with high unemployment or recession.

Inflation

A general, sustained increase in the overall level of prices for goods and services across an economy over time, which reduces the purchasing power of money.

Consumer Price Index (CPI)

A price index tracking percentage changes in the cost of a theoretical weighted 'basket' of everyday consumer goods and services, compiled in Australia by the Australian Bureau of Statistics (ABS).

The Regimen

The specific selection of goods and services across eleven routine household expenditure categories monitored to calculate the Consumer Price Index (CPI).

Demand-Side Inflation

Inflation resulting from aggregate demand for goods and services rising faster than the productive supply capacity of the economy.

Supply-Side (Cost) Inflation

Inflation caused by increases in the costs of production—such as rising wages, higher interest rates, taxes, utilities, or raw material shocks—which are passed onto consumers.

Australian Inflation Target

An official inflation rate goal of $2\%$ to $3\%$ over the course of a business cycle of $5$ to $7\text{ years}$.

Unemployed (Statistical Definition)

The official classification of a person who is without work (did not work even $1\text{ hour}$ for pay or profit), is available for work, and has actively sought work within the previous $4\text{ weeks}$.

Frictional Unemployment

Short-term unemployment (often lasting under a month) occurring when workers are between jobs, switching careers, or entering the labor market for the first time.

Structural Unemployment

Long-term unemployment (often $12\text{ months}$ or more) caused by a mismatch between workers' skills or locations and the requirements of available jobs, often due to technology or outsourcing.

Cyclical Unemployment

Medium-term unemployment ($1$ to $12\text{ months}$) caused by a general macroeconomic downturn or recession that lowers consumer spending and business output.

Seasonal Unemployment

Predictable, temporary joblessness that terminates when a specific time of year, season, or weather-dependent work cycle returns.

Hidden Unemployment

Individuals who desire employment but are excluded from official unemployment statistics because they have stopped actively seeking work (discouraged workers).

G7 (Group of Seven)

An informal bloc founded in $1975$ of seven major advanced industrialized democracies (the US, the UK, France, Italy, Japan, Canada, and Germany, plus the EU) coordinating economic and security policies.

G20 (Group of Twenty)

A premier economic platform of $19$ individual countries, the European Union, and the African Union, representing approximately $80\%$ of global GDP and $75\%$ of global trade.

Australia-China Trade Relationship

A complementary economic partnership where Australia exports large-scale primary energy and minerals (such as iron ore and coal) and services, reaching $326\text{ billion}$ in two-way trade in $2025$.

Human Development Index (HDI)

A United Nations composite statistical index comparing national wellbeing by combining positive indicators (life expectancy, schooling, per capita income) and negative indicators.

Non-Material Living Standards

Qualitative determinants of human wellbeing independent of financial wealth, including health, environment quality, crime rates, work-life balance, and democratic freedoms.

Macroeconomics

The branch of economics focused on aggregate demand, national spending, total output, employment, and the overall management of the economy via demand-side policies.

Budget Deficit

A government budgetary outcome in which total receipts are less than total government expenditures.

Budget Surplus

A government budgetary outcome in which total receipts exceed total government expenditures.

Direct Taxes

Taxes levied straight on the income or profits of individuals and corporations, such as personal income tax, company tax, capital gains tax, and the Medicare levy.

Capital Gains Tax (CGT)

A direct tax levied on the real profits realized from selling capital assets, such as shares or land, acquired after $1985$.

Medicare Levy

A direct tax levied at a standard rate of $2\%$ on personal taxable income in Australia to fund public family healthcare.

Fringe Benefits Tax (FBT)

A direct tax of $47\%$ paid by employers on the taxable value of non-salary perks provided to employees, such as company cars or housing.

Petroleum Resource Rent Tax (PRRT)

A direct tax levied at $40\%$ on profits derived from petroleum extraction and production operations.