Year 11 Economics

Currently idk thereis a crap ton of words also includes some non-syllabus terms but whatevever

Monetary Policy

Changes to short term interest rates

Fiscal Policy

Using annual budget to affect the level of economic activity, resource allocation, and income distribution

Policy Mix

Monetary and Fiscal policies available to government to control aggregate demand

Free Market

"Laissez Faire" approach, favoring free markets and minimal government intervention. Favours free markets and minimal government intervention

Social Overhead Capital (Infrastructure)

Public goods that could be provided by private sector (as rival and excludable) but only provided when profit can be made

Public Trading Enterprise (PTE)

Excludable services provided to whole community in markets of natural monopolies where households would pay higher prices if operated in private sector

Lowest Quintile (people of lower socioeconomicclass)

Poor people

Poverty

An enforced lack of socially perceived necessities

Lorenz Curve

Graphical representation of inequality, the proportion of national income earned (total wealth) of a given percentage of the population

Gini Coefficient

Proportion of the area taken up by the Lorenz curve in relation to the overall area under the line of equalityNumerical representation of inequality,

Between 0 and 1, where 0 refers to no inequality and 1 refers to total inequality (must be clarified in answer)

Private Costs

Price that does not include all externalities regarding socialcost of production

Social Costs

Costs that include all externalities (external diseconomies)

Externalities Cost

Vertical distance between private costs and social costs

Regulation

Regulation of monopolies and deregulation of markets

Privatization

Selling state-owned monopolies and PTEs

Corporatization

Analyzing the private sector to improve efficiency

Commercialization

Making PTEs more efficient for profit

Budget Outcome

Short term of fiscal policy, budget management, tax and spending

Measure of the extent which governments underlying cash balance is adding to or using up national saving

Fiscal Position/Outcome

Medium term of fiscal policy, stabilise business cycle, debt reduction

Change in budget figure/stance over years

Fiscal Consolidation

Long term of fiscal policy, future dangers and implications for population

Policy aimed at reducing government budget deficits and overall debt accumulation in the long term

Progressive Tax

Varying tax rates depending on income, done by dividing income into tax brackets

Proportional Tax

Fixed tax rate (same percentage) applied to taxable income,eg. old corporate tax

Regressive Tax

The same dollar amount of tax paid by incomes regardless oflevel of income, tax rate decreases as income increases

Equity

Fairness of tax system, burden based on ability to pay

Vertical Equity

Higher earner pay greation portion of tax as they have greater ability to pay (greater income)

Horizontal Equity

Equal earners pay equal levels of tax

Evasion

Illegal activity of not paying tax liability owed to government

Avoidance

Legal efforts to use loopholes or rules in the tax code to lower tax liability to play less tax

eg. Agri-businesses

Average Rate of Tax

Percentage of taxable income paid in tax due to the relevant tax schedule (effective tax rate)

Marginal Rate of Tax

Change in tax payable as one more dollar of taxable incomeis earned

Marginal Tax Rate

The tax rate (%) paid on the last dollar of one's income

Output Gap

Difference between potential output and real output (GDP)

Potential Output

Long term expected growth due to increases in population, productivity and labour participation

Expansionary

Larger deficit or smaller surpluses, increasing economic activity. Desired during negative output gaps

Contractionary

Smaller deficit of greater surpluses, reducing economic activity. Desired during positive output gaps

Neutral

No change to budget outcome

Structural Component

Discretionary structural decisions made in budget or plannedspending (budget related)

Cyclical Component

Outcome change due to economic conditions experienced during the year, resulting operation of automatic stabilisers

Dictated by cyclic business cycle, eg. progressive income tax, unemployment benefits (business cycle related)

Autonomic Stabilisers

Counter cyclical measures that spring into operationdepending on rescission of boom situation in economy

Negative Gearing

Take away costs from taxable income on property losses

Positive Output Gap

Occurs when GDP is temporarily above long term productivepotential of economy

Negative Output Gap

Occurs when GDP is temporarily below long term productivepotential of economy

Downswing

Stabiliser of unemployment, benefits increase withgovernment spending in AD as labour is a derived demand

Consumption in AD also increases if Government spendingincreases

Upswing

Stabiliser of increase tax revenue decreases disposable income

Consumption in AD lower is tax is increased

Net Zero Debt

Assets are equal to debt (funds equal to bonds)

Net Debt

Assets taken away from debt (debt – assets)

Gross Debt

Total debt

Crowding Out

Offer higher bond interest rates to attract required funds,reducing private investments

Goods and Services

Things that are exchanged in an economy

Price Ceiling

Maximum price below normal equilibrium

Government deems market failure at equilibrium price, decreased price causes shortage

Specialisation of skills

Instead of performing all tasks and production on your own, certain people specialise in specific goods and services

Goods

A physically tangible object used to satisfy economic wants, eg. food, shoes, cars, etc.

Services

A physically intangible action performed to satisfy economic wants, eg. haircut, education, dental care, etc.

Wants

Non-essential goods and services that make ones life easier or more pleasurable

Basic Want / Needs

Basic goods and services essential for survival

Utility

Satisfaction or pleasure from meeting needs or wants, used to measure usefulness of a good or service

Individual Wants

The desired goods and services for one person

Collective Wants

The desired goods and services for a group of people or community, usually provided by the government

Recurring Wants

Goods and services that must be bought again to satisfy wants

Substitute Goods

Products that can be consumed as alternatives to each other

Luxury Wants

Non-essential goods and services desired by consumers

Basic Want / Needs

Essential goods and services desired by consumers

Complementary Wants

Goods and services that become a want after satisfying a specific want, eg. after you buy a car, you will want to buy petrol

Equitable Distribution

Equal distribution where goods and services in the economy are fairly distributed

Inequitable Distribution

Unequal distribution where goods and services in the economy are distributed to more of a specific group than others

Opportunity Cost

The alternative want that is given up as a result of fulfilling a different want, eg. can either buy $5 lollies or buy $5 chips because you only have $5

Fiat Currency

A currency is only worth something if people believe in it, eg. Government makes us believe money has value

Macroeconomics

The economy as a whole and impact as a whole of changes to all things that affect demand, affects the demand for goods and services

Microeconomics

Study of the single sectors of the economy and impact of changes on specific industries, affects the supply of goods and services

Allocative Efficiency

Allocating resources to best meet the needs of society (maximise utility of society by minimising opportunity cost of available resources)

Technical Efficiency

Producing on PPF, making goods and services at the lowest average cost

Economic Activity

Things done within the economy to satisfy needs and wants

Economic Growth

Increases in output of an economy over time, measured by real GDP

PPF

Graphical representation between any two combination of goods that can be produced with finite amount of resources

Unemployed Resources

Resources that are are not being utilised efficiently, thus causing output (of goods and services) to fall

Consumer Sovereignty

Pattern of consumer spending pattern determines business production pattern

Consumers choose what is produced and how much is produced as well as how they are allocated

Consumers

Choose what is produced and how much is produced

Consumer Goods and Services

Produced for the immediate satisfaction for consumers (individuals + community)

Capital Goods

Goods that are not for immediate consumption as they are to be used for the production of other goods

Productive Capacity

Maximum output of an economy

Factors of Production

Resources used in the production of goods and services, Capital, Enterprise, Labour, Land (natural resources)

Standard of Living

Quality of the an individual's or society's life

Income

What is earned by households from the four factors of production as well as wages, rent, profit, welfare and interest/dividends.

Gross Domestic Product (GDP)

Total income of a country based on their production of goods and exchange, value of all goods and services produced by a country in a given period of time

Barter

Non-cash exchange of goods and services

Business Cycle

Graphical representation of relationship between output and time as well as the fluctuations in economic activity

Nominal Growth

Total growth in numbers, including inflation, measures real GDP changes

Recession

Two consecutive quarters (3 months) of negative economic growth (decreasing GDP)

Depression

Continuous negative economic growth

Business Cycle

Graphical representation of fluctuations in economic activity between peaks and troughs

Economic Boom

Significant amount of economic growth, every factor of EIEIO goes up

Depression

Longer term period of low economic activity

Structural Change

The shift of an economy's structure from primary to secondary to tertiary, etc,

Circular flow of Income

Income flows around constantly between the sectors of an economy

Injections

Money flowing into the economy or circular flow of income, increases aggregate income, increasing economic activity

Leakages

Money flowing out the economy or circular flow of income, decreases aggregate income, decreasing economic activity

Marginal Propensity to consume (MPC)

Likelihood for households to consume from being given one more dollar,

Change in one dollar of income leads to change in dollars spent on consumption

(Δconsumption / Δincome)

Marginal propensity savings (MPS)

Likelihood for households to save from being given one more dollar

(Δsavings / Δincome)

Average propensity to consume (APC)

(Total C) / (Total Y), Total proportion of total income spent on consumption

Savings (S)

Income that is not spent. Money lent to financial sector in return for interest payments