commerce

example of leakages

savings, taxation, imports

Examples of injections

Investment, government expenditure, exports

Government intervention in recession

increase government spending, reduce taxes, reduce cash rates

What causes inflation

Boom in economy, regulate consumer demand

How is inflation measured

Consumer price index

Opportunity cost

Giving up for the benefit of the next alternative when making a choice.

What slope is the Supply curve

Always an upwards slope

demand curve

always downwards sloping

Economic problem

satisfying unlimited wants and needs with limited resources.

Wants

desire to possess something.

Needs

Of necessity.

Resources

a service or useful asset to produce goods and services

Scarcity

being in short supply

Leakages

Money leaving the economy.

Injections

Money entering the economy.

Boom

Period of high economic growth.

Expansion

Increasing economic growth.

Contraction

Declining economic growth.

Recession

Two consecutive quarters of negative economic growth (6 months). Bit more milder compared to depression.

Depression

Severe contraction in the level of economic activity.

Gross domestic product (GDP)

Total value of final goods and services produced in a country over a period of time. Measures economic growth in a country.

How can the nature of the economy be represented

5 sector model of the economy.

Household sector

Made up of consumers that hold economic resources such as land, labour, capital, and enterprise.

Firms sector

small business. Sell resources in exchange for income.

Financial sector

Banks, credit unions. They receive savings from households and firms.

Government sector

Taxation - taxes collected when they earn an income or profit. Government expenditure - money raised from tax to fund public goods and services.

Overseas sector

Australia's trade with other countries. Imports, exports.

Inflation

Sustained increase in the general level of price over a period of time.

Demand-pull inflation

Too much demand, not enough supply. Increase in consumer confidence, increase in business investment, increase in income, increase in export.

Cost-push inflation

Increase cost of production, increase cost to consumers. Increase in income paid to employees, increase in interest rates, increase in cost of raw materials, increase in unexpected costs.

Consumer Price Index (CPI)

7%.

Price mechanism

Refers to the forces of demand and supply in determining the price and quantity of a good or service.

Demand

Quantity of a good or service consumers are willing to purchase at a particular price given the point in time.

Supply

Quantity of good or service that business offers for sale at a given price.

Market equilibrium

Point where demand and supply curve intersect. Point where buyers and sellers agree on a price and quantity.

Markets

Anywhere a buyer and seller exchange goods and services. Can be virtual or physical.

Types of businesses

Onlines, On demand, Small-medium enterprise, Large business, Global, Transnational corporation/offshore, Government, Not for profit.

Entrepreneur

Person who sets out to build a successful business in a new field.

Innovation

Process of creating a new or significantly improved product, service, or process.

Corporate social responsibility

Businesses consider the interest of stakeholders, society, and environment while making economic and business decisions (referred to as the Triple bottom line).

Fiscal policy

Macroeconomic policy where the government uses its budget to influence economic conditions. It involves altering the level of government expenditure and government receipts.

Budget

Planned expenditure and revenue for the next financial year.

Gini coefficient

Measure of income inequality within a population.

Unemployment

Those who do not have a paid job but are actively looking for work.

Cyclical unemployment

When the level of spending in the economy falls leading to reduced production and in turn results in reduced need for labor.

Structural unemployment

Occurs as a result of changes in the way goods and services are produced, i.e. change in production methods leading to a mismatch of skills.

Seasonal unemployment

Results from the termination of jobs at the same time each year due to the regular change in seasons.

Frictional unemployment

When people are unemployed between finishing one job and starting another.

Monetary policy

The RBA sets the cash rate, commercial banks set interest rates.

Interest rates

Rates at which individuals and businesses borrow or invest money.

Fixed interest rate

The rate of interest is set for the entire length of the loan.

Variable interest rate

The interest rate of the loan moves up and down over the course of the loan.

Government intervention during recession

Increased government spending, reducing cash rates and taxes

Macroeconomics

branch of economics concerned with large-scale or general economic factors

Australia’s GDP

1.6 trillion

Lower steel demand

Decreased demand for steel products.

Broad policy measures

Government actions and initiatives aimed at stimulating the economy.

Economic uncertainty

A state of doubt and unpredictability regarding the economy.

Prioritize saving over discretionary spending

Choosing to save money rather than spending on non-essential items.

Consumption growth

The increase in consumer spending.

Education, tourism services, and consumer goods

Specific sectors of Australia's exports that may be affected.

Economic growth in Australia's major trading partners in East Asia

The growth of economies in East Asia that are significant trading partners for Australia.

Upturn in wealth

An increase in overall wealth and financial resources.

Stable job market

A labor market with consistent employment opportunities.

Real disposable income growth

The increase in income adjusted for inflation and taxes.

Household consumption weakness

A decline or slowdown in consumer spending.

Elevated interest rates

Higher than normal interest rates.

Inflation

The rate at which the general level of prices for goods and services is rising.

Productivity growth

The increase in output per unit of input.

Rent inflation

The rate at which rental prices increase.

Goods prices

The prices of products and items.

Supply chain

The state of the flow of goods and services from suppliers to consumers.

Monetary policy

The actions and decisions made by a central bank to regulate the money supply and interest rates.

Target range

The desired range within which inflation should be maintained.

Aggregate demand

Total demand for goods and services in an economy

4 main indicators to assess the economy

Standard of living, economic growth, income distribution, environmental sustainability.

Education as a long term investment

Education population means prosperity and economic growth of a nation, to increase workers

What are the 4 types of trade barriers

Tariffs, quotas, subsidies, embargoes

Tariff

taxes placed on imports

Quotas

Government imposed trade restriction limiting the amount of goods entering a country

Subsidies

Incentives given to local producers to lower costs of production

Embargoes

Trading ban

FTA

Signed to remove trade barriers, called trade liberalisation

Microeconomics

Examining smaller units that make up the whole economy

2 Examples of microeconomics

Trade, Education

Budget surplus

planned revenue>planned expenditure=positive balance

Budget deficit

Planned revenue < planned expenditure=negative balance

4 types of markets

Retail, Labour, Financial, Stock.

How to measure inflation

CPI: Price (year 2)-price (year 1) / price (year1) x 100