Studied by 0 peopleDefine the term 'economics' as it relates to a country.
Economics is the study of how a country chooses to use its limited resources to satisfy its citizens' needs and wants.
What is the economic objective?
The economic objective is to improve people's standard of living.
Explain the term 'standard of living'. In your answer include how it is determined.
Standard of living refers to the wealth, comfort material goods and necessities available to a person. It is determined by a person's income, education employment opportunities, access to goods and services and life expectancy.
What is the economic problem?
The economic problem is scarcity which is the condition that results from society not having enough resources to produce all the things that people need and want.
What is a resource?
A resource is a source or supply from which a benefit is gained.
Explain the term factors of production.
Factors of production are the resources that are combined to produce goods and services. They are natural resources, labour, capital, entrepreneurship.
Explain each of the factors of production.
Natural resources are the raw materials supplied from the land, sea or air. Eg water, oil, gas, fish, timber, honey
Labour is all the human skills, as well as the physical and mental effort, used to produce goods and services. Ego Nurses, engineers, truck drivers, musicians
Capital is the human-made or manufactured objects that help in producing other products. eg. buildings, equipment, machinery and technology
Entrepreneurship refers to the abilities and vision of people called entrepreneurs who take the financial risk to develop an idea for a product.
How do the factors of production contribute to economic growth?
Economic growth occurs when more and cheaper goods are created through EFFICIENT use of the factors of production.
What 3 indicators help determine the growth of an economy?
Gross Domestic Product, Consumer Price Index (Inflation), Employment Rate
What is Gross Domestic Product?
GDP is the total value of goods and services produced in the country over a period of time
What values are used to calculate GDP?
Value of consumption, investment, government spending and net exports
Explain gross domestic product per capita.
GDP is the total value of goods and services produced in the country over a period of time. GDP per capita is the total GDP divided by population to give GDP per person.
What is Consumer Price Index? What is it used to calculate?
CPI is a measure of the quarterly (3 months) change in prices of a
'basket' of consumer goods and services. It is used to calculate inflation.
How do you slow down economic growth?
· Reduce customer spending
· Increase interest rates to decrease the supply of money,
· Decrease government spending
What are the economic objectives of the government?
Economic growth, decrease unemployment, keep prices stable
What is inflation?
Inflation is the sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power of money. Ie. $20 today does not purchase as much as it did 5 years ago.
What is a recession?
A period where there is a decrease in the production of goods and services, leading to a decrease in gross domestic product (GDP) and employment. Defined as two consecutive quarters of negative economic growth, as measured by changes in GDP.
Explain supply and demand.
Supply is how much of a product, service or resource is available. Demand is how many people want a product or service and how much they are willing to pay for it. When there is a short supply of a product and demand is high, the price of the product tends to be higher. If demand is low and supply is high, prices tend to be lower.
Explain how Covid has had an impact on the economy.
Universities – with borders closed, international students could not attend the universities therefore revenue was substantially less and those people who normally provided accommodation to those students also suffered losses.
Tourism – Airlines suffered revenue and job losses due to lack of domestic and international flights as a result of border closures. Tourist destinations relying on tourists also suffered losses – revenue and job losses.
Wine and Agriculture – as restaurants were closed the demand for produce was significantly reduced. Wine was not needed in bars and restaurants due to lockdowns. Products were prevented from being exported to China as the country was in lockdown. Therefore, dairy, seafood, wool and beef industries suffered.
Explain the implications of a high unemployment rate.
The desired unemployment rate is 3-5%. A high unemployment rate means that consumers will not have the money to spend on goods and services and they will use up their savings and possibly go into debt. Decreases demand for products and less will be produced. Standard of living will decrease.
How do you improve economic growth?
Economic growth can be improved by consumer spending and business investment.
· stimulus packages are used to return money to consumers and boost spending
· Infrastructure spending is designed to create construction jobs and increase productivity by enabling businesses to operate more efficiently
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