Economics Year 10 AEP

GDP stand for?

Gross domestic product

Meaning of GDP?

The total market value of all final good and services produced in a country during a given period of time (usually a year)

Market value meaning

the price the product was sold for

Final goods and services meaning?

G/S that is consumed by end user and does not require any further processing. ie. car not wheel.

GDP expression?

C (con. spend) + I (Investment) + G (Gov) + [X - M]

Disposable income meaning?

Income remaining after taxes

Interest rates meaning?

Cost of borrowing money (eg. mortgage payments, credit card)

If there is low interest rates/disposable income there is ….

higher consumption

Real GDP meaning?

An inflation-adjusted measure that reflect both the value and the quantality of G + S produced by an economy in a given year.

GDP growth rate meaning?

The GDP growth rate compares one quarter of a country’s GDP to the previous quarter - measures how fast an economy is growing.

Economic growth meaning?

The increasing capacity of the economy to satisfy the needs and wants of its citizens. (Higher growth - higher standards)

GDP target growth?

3-4% (1.1% current)

Limitations of GDP

Does not measure happiness, volunteer work, illegal activity, and only includes final G+S

Inflation Meaning

The prices of products growing or deflating.

Hyperinflation meaning?

rapid inflation

Stag inflation meaning

When inflation is rising despite slow econ growth and high unemployment

How to measure inflation?

Consumer Price Index (CPI) - measures change in price of a “basket” of G+S consumed by the average household.

Target rate for inflation?

2-3% (3.6 - current)

Requirements to be considered employed?

Over 15

Available to work and Actively looking for work

Unemployment meaning?

Percentage of people who are unemployed (Actively looking but don’t have job)

Target rate for unemployment

4.5-5% (current is 4.1%)

Underemployment meaning?

Occurs when employed people want more hours and are available.

Cyclical unemployment meaning?

Results from companies “letting go” workers due to a decrease in demands for G + S

Frictional unemployment meaning?

Results from people mainly in between jobs in the labour force. Also refers to people who move into and out of the labour force.

Structural unemployment meaning?

Results from a mismatch between the jobs that are available the people that are looking for work.

Seasonal unemployment meaning?

Occurs during particular time of the year because of seasonal patterns. ie. Workers in tourism, agriculture.

Hidden unemployment

Occurs when people are not officially counted as unemployed. (Not actively seeking, but if oppurtunity arises, they will work)

Relationship between GDP, inflation and unemployment.

When GDP is high, inflation is high and unemployment is low.

What are living standards?

The quality and quantality of material goods and services available to a given population.

What does Human development index measure?

A country's average achievements in three basic aspects of human development: health, knowledge and wealth

In an economic expansion…..

higher GDP, output, prices, wages, inflation and decrease in unemployment

In an economic contraction….

lower production, wages, prices, inflation, GDP and unemployment increases.

Name two impacts of unemployment

Decrease in economic growth and an economy’s production output.

consequences of low unemployment rate?

High economic growth and high inflation. Inflation caused by more jobs, which increases wage growth and consumer spending. This makes businesses raise their price.

Less efficient too - too many people

Consequences of high unemployment rate?

Decrease in consumer spending/confidence

consequences of low GDP

higher unemployment, lower economy output, decline in real income.

Consequences of too high GDP

low unemployment, high economic growth but inflation rises which is unstable.

consequences for high inflation

High economic growth, interest rates rising, although it can lead to a decrease in consumer spending - fluctuates depending on wage growth

consequences for low inflation

High unemployment and can lead into a recession. But prices will rise slowly which will make the cost of living easier.

what are economic indicators?

to see how healthy an economy is