Supply Chains, Injections and Leakages and Fiscal and Monetary Policy

a supply chain is are the links or activities required to move a product from a supplier to consumer.

when injections are greater than leakages, there will be economic growth. economic growth is an increase in the size of a countries output overtime. the size of an economy is measured by the total amount of production of goods and services in the economy (GDP). all the sectors of the CFI are linked together - this is known as interdependence. the australian governments target rate for economic growth is 3-3.5%. the target rate of unemployment is 4.5%. the RBA’s target rate of inflation is 2-3% per annum.

fiscal policy is the governments spending commitments and collection of taxes from households and businesses. if a gov spends more than it recieves from taxes, this is a deficit. the gov may borrow funds to make up this extra spending. when the opposite occurs, it is a surplus. the RBA uses monetary policy to influence the economy by either speeding economic growth or slowing it down. the main way the RBA does this is by setting a target for the cash rate (interest rate). the CR influences the interest rates that households, businesses and governments pay to borrow and recieve saving money.