Year 10 ECB Macroeconomics Revision Flashcards

Vocabulary-style practice flashcards covering macroeconomics concepts including GDP, economic growth, unemployment, inflation, and government policy based on the lecture notes.

Gross Domestic Product (GDP)

The total value of all goods and services produced within a country over a period of time, usually one year.

Expenditure Method

A way to measure GDP calculated by adding household spending ($C$), business investment ($I$), government spending ($G$), and exports ($X$), then subtracting imports ($M$).

Real GDP

A measure of the value of goods and services produced in an economy after the effects of inflation have been removed.

Economic Growth

The percentage increase in real GDP over a specific period of time.

Productivity

A measure of how efficiently resources (inputs) are used to produce goods and services (outputs).

Two-sector Circular Flow Model

An economic model consisting of households and businesses, showing the continuous movement of income, expenditure, resources, and goods/services between them.

Expansion Phase

A phase of the economic cycle where economic activity is increasing, real GDP is growing, and unemployment usually falls.

Peak Phase

The phase where the economy is operating close to full capacity, unemployment is very low, and inflation is typically at its highest or beginning to accelerate.

Contraction Phase

A phase where economic activity slows down, real GDP falls, unemployment rises, and inflation usually slows down.

Trough Phase

The lowest point in the economic cycle characterized by the highest unemployment, weak demand, and low inflation or deflation.

Material Living Standards

The level of access people have to physical goods and services that can be purchased with income, such as housing, food, and healthcare.

Non-material Living Standards

Aspects of wellbeing not directly related to income or consumption, focusing on quality of life factors such as safety, leisure time, and job satisfaction.

Unemployment

A situation where people who are willing and able to work, and are actively looking for a job, cannot find employment.

Full Employment

Australia's target range for the unemployment rate, generally considered to be around $4$ to $5\%$.

Structural Unemployment

Unemployment that occurs when there is a mismatch between workers' skills and the skills required by businesses, often due to industry changes or automation.

Frictional Unemployment

Short-term unemployment occurring when people are temporarily between jobs or entering the workforce for the first time.

Cyclical Unemployment

Unemployment caused by changes in the economic cycle, specifically during downturns or recessions when demand for goods and services falls.

Seasonal Unemployment

Unemployment that occurs when jobs are only available at certain times of the year due to seasonal demand patterns.

Inflation

A sustained increase in the general price level of goods and services over time.

RBA Inflation Target

The Reserve Bank of Australia's aim to keep inflation at a steady rate of $2-3\%$ per year.

Consumer Price Index (CPI)

A tool that measures the average change in prices of a market basket of commonly purchased goods and services.

Real Wage Growth

The increase in wages after adjusting for inflation, calculated as nominal wage growth minus inflation.

Household Purchasing Power

The amount of goods and services households can buy with their income; it falls when inflation is higher than wage growth.

Budget Surplus

A situation where government revenue is higher than government spending, allowing for debt reduction.

Budget Deficit

A situation where government spending is higher than government revenue, requiring the government to borrow money and increase debt.

Direct Tax

A tax paid directly to the government by households that cannot be passed on, such as income tax or the Medicare levy.

Indirect Tax

A tax added to the price of goods and services paid by households at the point of purchase, such as GST or fuel excise.

Fiscal Policy

Decisions made by the government regarding taxation and spending to influence economic growth, inflation, and unemployment.

Monetary Policy

Actions taken by the Reserve Bank of Australia to influence interest rates and the money supply to control inflation and support economic stability.

Cash Rate

The interest rate set by the Reserve Bank of Australia for overnight loans between commercial banks, which influences borrowing and savings rates in the wider economy.