Exam Prep Words, Economic and Business Environment and Towards Independance

Economy

All activities undertaken for the purpose of production, distribution and consumption of goods and services in a region or country

Production

The creation of goods and services

Consumption

The purchasing of goods and services to satisfy the needs and wants

Interdependance

A joint dependance between participants in an economy; that is, the reliance of consumers, workers, businesses and governments on each other

Saving

Regularly putting aside some money for future use

Investment

The use of money to purchase equipment or premises for the establishment of a new business or the expansion of an existing business

Exports

Goods and services sold by local businesses to overseas consumers

Imports

Goods and services purchased by local consumers from overseas businesses

Recession

A relatively mild contraction in the level of economic activity resulting in reduced spending, rising unemployment and a slow rate of economic growth

Business cycle

The cyclical fluctuations in the general level of economic activity

Depression

A severe contraction in the level of economic activity resulting in many business failings, high and sustained levels of unemployment and sometimes falling prices

Inflation

A general rise in prices across all sectors of the economy, causing money to lose its value

Fiscal policy

The use of the federal governments budget to achieve economic objectives

Monetary policy

The reserve bank using interest rates to achieve economic objectives

Markets

Where the exchange of goods, services or resources between buyers and sellers occurs

Law of demand

States that the quantity of a good or service demanded varies inversely to price
Price increase = demand decrease
Price decrease = demand increase

Law of supply

States that the quantity of a good or service supplied varies directly with the price
Price increase = quantity supplied increase
Price decrease = quantity supplied decrease

Market equilibrium

The point at which the demand and supply curves intersect and where buyers and sellers agree on a price

Price mechanism

The interaction of the forces of demand and supply that determines the price of a good or service

Labour market

The buying and selling of labour

Interest

The price that must be paid in order to use someone else's money

Transnational corporation

A large corporation that has branches in more than one country

Global sourcing

Seeking out the cheapest materials and supplies across national borders as if there were only one larger market

Globalisation

The process that sees people, goods, money and ideas moving around the world faster and more cheaply than before

Innovation

The process of creating a new or significantly improved product, service or process (way of doing something)

corporate social responsibility

When businesses consider the interests of stakeholders, society and the environment when making economic and business decisions

Barter

The swapping or exchanging of one good for another

Apprentice

A person who has agreed to work for a skilled person for a particular period of time and often for lower wages in order to gain knowledge and skills about a particular job - for example, an apprentice plumber

Birth certificate

An official copy of your birth registration held by the NSW Registry of Births, Deaths and Marriages, including information such as name and place of birth

Rental bond

Money that is lodged with the Rental Bond Board. It is used to cover any damages or cleaning costs if the rented premises are left in an unsatisfactory condition. (Usually four weeks rent)

Budget

A list of income and likely expenditures

Centrelink

The main federal government welfare agency. It provides financial assistance as well as counsellors and social workers to those in need

Community services

Services largely funded from within the community to provide something that is disireable but not profit making

Condition report

Details the exact condition of a property when the new tenants move in

Cooling off period

A period of time after a sale contract has been signed, during which the buyer can cancel the contract without receiving a penalty

Debit card

Plastic card that allows you to buy goods by electronically transferring money out of your account into the stores account. It can also be used to obtain cash.

Deductions

Items that can be used to reduce your assessable income, thus reducing the amount of tax you pay
Include; expenses incurred gaining assessable income

Establishment costs

One-off costs for setting up a new place to live or a business

Exclusions

Then things that an insurance policy will not specifically cover

Insurance

The payment of an amount of money that covers a person or property in the event of loss, damage or accident so that the person does not suffer a severe financial setback

Fixed expenses

Expenses that are the same amount every time - for example, monthly rent, or a minimum charge of $40 per month for a mobile phone

Inclusions

The things that an insurance policy covers

Insured

The person who is covered by the insurance policy

Insurer

The company that is providing the insurance

Kitty

A central fund of money that has been contributed by a group of people (e.g. flatmates)

Landlord

The person who owns the premises being rented

Lease

A legal contract between between a tenant and a landlord that allows the tenant to use the landlords property in return for rental payments. Once the lease is signed, it is a legally binding document.

Medicare card

A card issued by the government to individuals or families which they can use to access free health care by a doctor and access free health care at a public hospital.

Medicare levy

An additional tax of 2% of income used to fund the Medicare system

Mortgage

A loan from a financial institution such as a bank where something is held as security in case the loan is not repaid, e.g a house

Ongoing costs

Those costs that keep on recurring such as rent, mortgage and electricity bills

Payday loan

A high-cost, short term and small amount loan. The borrower agrees to pay back the loan when they receive their next pay.

Premium

The amount of money to be paid to receive insurance cover. (Annual or monthly)

Progressive tax system

In a progressive tax system, as a persons income increases the percentage that is paid in tax also increases

Refuge

A place of shelter which keeps a person safe and protects them from danger - for example, a youth refuge

Residential tenancy agreement

The standard agreement between tenants and a landlord when a house or flat is being rented

Tenant

The person or persons who rents a property from a landlord

Reservation fee

Usually one weeks rent that will reserve the premises for a person while their application for tenancy is being considered

Superannuation

Money set aside during your working life for retirement; commonly called 'super'
employer contributes part (9.5%) of wage or salary into account

Warranty

A promise to repair any defects that are in a product

Variable expenses

Expenses that change over time, and do not occur on a regular basis. For example, a person may go to a music concert this month to hear their favourite singer and buy a computer game next month.

Tax file number

A unique personal reference number the Australian Taxation Office gives a person so they can identify them and enforce Australia's taxation laws

Sharing economy

Also known as collaborative consumption involves people sharing their possessions for payment

Utility company

An organisation supplying the community with a service such as water, gas or electricity

What are the five sectors in the five sector circular flow economy?

Consumers, businesses, financial institutions, the government and the overseas sector.

What is the financial sector?

The financial sector refers to financial institutions such as banks that act as intermediaries between the savers and borrowers in an economy.

List # leakages in the circular flow of income?

1. Savings
2. Taxation
3. Imports

List # injections in the circular flow of income?

1. Investment
2. Government expenditure
3. Exports

What is the government sector?

The government sector refers to the local, state and federal governments and has two roles; Taxation (the government collects taxes from individuals and businesses when they earn an income or profit) and Government expenditure (when governments spend money raised through taxation on things such as infrastructure, welfare payments, education and health).

What is the overseas sector?

The imports and exports of a country.

What letter is income?

Y

What letter is consumption?

C

What letter is savings?

S

What letter is taxation?

T

What letter is imports?

M

What letter is investment?

I

What letter is government expenditure?

G

What letter is exports?

X

What does the circular flow of income measure?

Changes in the level of economic activity within an economy.

Injections > Leakages

economic growth and the economy will expand

Leakages > Injections

Economy will experience economic decline

What is the government's role in managing and balancing the nation's economy?

They alter monetary flows and influence decisions within sectors.

Who regulates the financial sector?

Australian Securities and Investments Commission (ASIC), an independent Commonwealth Government Body which operates under the Corporations Act 2001 and the National Consumer Credit Protection Act 2009.

What are ASICS 3 main roles?

1. monitoring the financial services industry
2. monitoring the provision of financial services such as investment advice
3. providing consumer protection in financial services, including shares, managed funds, superannuation, insurance, credit and deposit-taking.

Why do businesses borrow money?

Buying new equipment, moving to a bigger premise, in general for investment

How are the financial and business sector interdependant?

Financial institutions collect deposits from savers and then have sums available for businesses to invest in growth.

Name 3 phases of the business cycle.

Boom, recession and depression.

What is the business cycle affected by?

Changes in total spending; consumer spending (consumption), business spending (investment), government spending and exports

What are the 6 key features of a contraction?

1. falling levels of production
2. decreasing consumer spending
3. rate of inflation may fall
4. wage rates generally fall
5. interest rates eventually fall
6. level of unemployment rises

What are the 6 key features of an expansion?

1. rising levels of production
2. increasing consumer spending
3. rate of inflation may rise
4. wage rates generally rise
5. interest rates eventually rise
6. level of unemployment falls

How can a recession after a contraction be prevented?

Reserve Bank of Australia (RBA) could lower interest rates to encourage more spending.

Boom

A boom refers to a period of increased commercial activity within a business, market, industry, or economy.

What are the 6 key features of a boom?

1. income and production at the highest level
2. full employment of labour and all other resources
3. wages and salaries are relatively high
4. businesses operating at full capacity (increase in demand means an increase in price, not production)
5. interest rates higher, loanable funds in relatively short supply
6. rate of inflation rises sharply

What factors will shift the entire demand curve?

Any other factor except for price.
E.g change to consumer income, tastes and preferences, population size, substitute products, complementary products, consumers anticipating price changes

What factors will shift the entire supply curve?

Any other factor expect for price.
E.g change in efficiency, production cost, climate, no. of suppliers

What happens when an increase in demand shifts the curve to the right?

1. increase in price
2. increase in quantity

What happens when a decrease in demand shifts the curve to the left?

1. decrease in price
2. decrease in quantity

What are the 6 reasons for an increase in demand?

1. A rise in consumer income
2. Changes in consumer tastes and preferences
3. An increase in population size
4. A substitute good becomes more expensive
5. A complementary good becomes cheaper
6. Prices are expected to rise in future

What are the 6 reasons for a decrease in demand?

1. Fall in consumer income
2. Changes in consumer tastes and preferences
3. A decreased in population size
4. A substitute good becomes cheaper
5. A complementary good becomes more expensive
6. Prices are expected to fall in future

What are the 4 reasons for an increase in supply?

1. increased efficiency
2. A fall in cost of production
3. Improved climatic conditions
4. An increase in number of suppliers