Economics and Human Development

Flashcards of Economics and Human Development lecture notes

Invisible Hand

The idea that individuals pursuing their own self-interest can unintentionally benefit society.

Invisible Hand

The self-regulating nature of the marketplace.

Laissez-Faire

Free market with little or no government intervention.

Market Failure

When markets fail to allocate resources efficiently or fairly.

Externalities

Pollution or Education

Public Goods

Non-excludable goods such as lighthouses or defense.

Monopoly

One firm dominates the economy.

Business Cycle

The natural rise and fall of economic growth over time.

Recession

GDP falls for 2 consecutive quarters or 6 months.

Depression

Long-term deep decline in economic activity.

Circular Flow of Income

Shows how money and resources flow in an economy.

Leakage

Savings

Injection

Investment

Paradox of Thrift

People save more during a recession which reduces spending.

Monetary Policy

Controlled by Reserve Bank of Australia which adjusts interest rates to influence spending and saving.

Fiscal Policy

Controlled by Government which adjusts tax and spending.

Balanced Budget

Revenue equals spending

Surplus

Revenue is greater than Spending.

Deficit

Spending is greater than Revenue.

Multiplier Effect

An initial increase in spending creates a larger increase in national income.