1. U1 AOS1 Econmics

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26 Terms

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Microeconomics

The study of individuals, households and firms' behaviour in decision-making and allocation of resources.

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Macroeconomics

The study of the behaviour and performance of an economy as a whole, focusing on total changes such as unemployment and inflation.

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Positive

Fact-based economic statements that can be tested and validated, such as 'Government provided health-care increases public expenditure.'

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Normative

Subjective economic statements based on opinions or value judgments, such as 'The government should provide basic healthcare to all citizens.'

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Relative Scarcity

The condition where resources are limited compared to the demands placed upon them by wants and needs.

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Opportunity Cost

The value of the next best alternative that must be forgone when a decision is made to use resources in a certain way.

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Production Possibility Frontier (PPF)

A model that illustrates different combinations of two goods that can be produced with a given set of resources.

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Allocative Efficiency

A situation in which resources are allocated in a way that maximizes the total benefit to society.

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Productive Efficiency

A situation where an economy is producing at the lowest possible cost.

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Economic Agents

Individuals and organizations that make economic decisions and interact in the economy.

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Incentives

Benefits or rewards used to encourage particular economic behaviour.

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Disincentives

Costs or penalties used to discourage specific economic decisions.

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Cost–Benefit Analysis

A process for comparing the expected costs and benefits of a particular action or project to determine the best option.

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Trade-offs

Choices made by economic agents that involve sacrificing one good or service for another.

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Market Economy

An economic system where the production and prices of goods and services are determined by supply and demand.

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Planned Economy

An economic system where the government makes all decisions regarding production and distribution of goods and services.

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Mixed Economy

An economic system that combines elements of both market and planned economies.

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Traditional Economic System

An economic system based on customs, traditions, and beliefs, typically in small communities.

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Material Living Standards

The ability of households to access goods and services.

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Non-material Living Standards

Factors that influence wellbeing beyond just material access, such as air quality and job satisfaction.

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unemployment rate

4-4.5%

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GDP rate


3-3.5%

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inflation rate

2-3%

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Budgetary policies


Government measures that alter revenues and expenditures to stimulate or slow economic growth.

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monetary policies

Actions taken by the RBA to alter the cash (interest) rate to stabilize the business cycle.

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