commerce

Macroeconomics: Aggregate demand for goods and services.

Involves looking at general influences of national spending, national output, national income, and employment.

Aggregate demand: Total value of all spending or demand on final goods and services produced by a nation over a period of time.

Budgetary Policy: Management strategy involving the governments estimates of the expected value of its receipts and outlays.

Fiscal Policy: The use of the governments budget to achieve economic objects.

Difference between the government receipts and expenditure by the government is known as budget outcome.

Deficit: Level of government receipts is less than the level of government expenditure.

Surplus: where the level of government receipts is higher than the level of government expenditure.

Balanced: Government receipts are equal to expenditure.

Every year the government develops a budget which outlines the priorities for the coming year/years ahead.

Taxation: A governments levy that can be used as part of the budget to affect the level of distribution, economic growth and level of prices.

Two forms of taxation:

1. Indicator: Levies placed on the sale of goods and services e.g. GST

2. Direct: Levies imposed directly onto the income of individuals and companies e.g. personal income tax

Direct taxes:

Personal income tax: direct tax paid by an individual who earns income in the form of wage, salaries or rent.

Superannuation tax: This tax is levied at 15% of most contributions as well as on the interest from fund investments, People aged over 60 can withdraw their super tax free

Indirect Tax:

Goods and services tax(GST): Introduced in July 2020, levied at the rate of 10% on many goods and services in the economy.

Government Budget Spending:

How the government uses the receipts it collects to provide certain goods and services for the community.

Government spending is designed to affect the income of consumers, the level of demand and economic activity in the economy, inflation, trade and living standards.

Impacts of Budget Outcome:

Surplus: Has a conrotatory effect on the economy, discouraging spending.

(Government receipts > Government spending)

Deficit: Expansionary effect on the economy, increasing spending.

(Government spending > Government receipts)

Monetary Policy and the Role of the RBA

· Monetary policy is operated by the Reserve Bank of Australia (RBA)

· They seek to manage the levels of spending in the economy.

· Monetary policy involves controlling the money in the economy and the rate at which money flows around the economy.

The RBA has three means on influencing the flow of money:

1. Changing interest rates

2. Influencing exchange rates

3. Persuasion

The Cash Rate

Increased Interest Rates Means Decreased Interest Rates Means

Increased savings Decreased savings

Decreased borrowing Increased borrowing

Decreased inflation Increased inflation