define economic growth

• an increase in the amount of goods and services produced per person within a specific period

what is used to measure the economic growth of countries

• GDP (Gross Domestic Product) - measure of the total value of all goods and services produced in Australia over a year

• unemployment rates

• inflation

explain the aggregate demand method

• an expression measuring the total amount of money (demand) spent on final goods and services in an economy at a given time

• Aggregate Demand = Consumer spending + private Investment spending + Gov. investment spending + Net of imports & eXports

• AD = C+I+G+Nx

explain Australia’s recent performance and compare it with other countries

• Australia has experienced uninterrupted economic growth over the past 25 year and was one of the few countries that still experienced positive economic growth. forecasted that the economy will continue to grow between 3 - 4.5% by June 2017. (As of GDP 2015) compared to other countries, Australia is doing relatively well with the 12th largest economy

explain the correlation between living standards and economic growth

• economic growth means that the overall production and income of a country are increasing, creating more job opportunities, higher wages, and increased business activities → people have more income to spend on goods and services, leading to an improvement in their living standards

• higher incomes → individuals can afford better healthcare, education, housing, and other essential needs

• leads to technological advancements and infrastructure development

explain the limitations of using GDP per capita as a measurement of living standards

• GDP per capita does not consider the environmental and social consequences of producing more goods and services + does not consider important factors for a worthwhile life (leisure time, rewarding job, good health, fair wealth distribution, pollution free environment)

GPI

• strengths - considers social, environmental, and wellbeing factors (e.g., income distribution, natural resource depletion, social costs)

• weaknesses - involves subjective judgements and assumptions which can affect its reliability and comparability across countries. faces challenges in accurately quantifying intangible factors

HDI

• strengths - considers income levels, education, and life expectancy, focusing on the overall wellbeing and development of a population

• weaknesses - does not capture all aspects of human development such as environmental sustainability and political freedoms and relies on national averages, which may mask disparities

Quality-of-life index

• strengths - considers a wide range of indicators related to living conditions (income, education, healthcare, environmental quality) and is a comprehensive evaluation of wellbeing

• weaknesses - requires selecting and weighting indictors, which can include subjectivity and influence the results. may also neglect certain cultural or societal aspects that affect an individual’s’ perception of quality of life

Happy Planet Index

• strengths - considers the wellbeing and ecological sustainability of a country, combining indicators of wellbeing, life expectancy, and ecological footprint to determine how efficiently a nation generates wellbeing in relation to its resource consumption

• weaknesses - emphasis on ecological sustainability may overlook other important economic and social aspects and relies on subjective wellbeing data, which can vary across cultures and may not capture the full range of factors that contribute to wellbeing

define unemployment

• the state of being able and actively trying to find a job, but is unable to

what is the government’s aim of percentage rate for unemployment in the country

• <5%

explain why it is important to reduce the unemployment rates in a country

• lower unemployment rates contribute to economic growth and stability through greater purchasing power, stimulating consumer spending and drives demand for goods and services. there are also less people relying on social welfare programs, where governments can redirect their resources elsewhere

how is unemployment measured in Australia

• unemployment rate - percentage of people in the labour force who are unemployed

what is Australia’s current unemployment rate and how does this compare with other countries

• 3.6%

• relatively low unemployment rate in relation to other countries, ranking 15th out of 36 countries in the OECD, 2014 unemployment statistics

explain the causes of unemployment

• structural - caused by changes in technology or shifting demographics

• cyclical - caused by economic downturns or is related to changes in business conditions that affect the demand for workers

• frictional - moving between jobs in the labour market as well as when people transition into and out of the labour force

• seasonal - specific jobs impacted by the seasonal patterns

explain the effects of unemployment on the individual and the country

• economic spending is low → government collects less revenue from tax and must pay more to direct it towards social benefits (unemployment benefits) and welfare programs (social housing), government changed budgetary stance

• reduced standard of living, loss of skills from workforce, possible psychological effects (depression), increased inflation

define inflation

• measures the increase in the general level of prices paid for goods and services over a certain period how is inflation measured

• the Australian Bureau of Statistics (ABS) measure inflation quarterly using charges within the Consumer Prices Index (CPI), which measure the price change in a typical basket of goods and services, sorted and weighted categorically, purchased by Aus. households every quarter

what is the cause (demand and supply factors) of inflation

• cost pull factors - caused by producers putting additional costs on the consumer to cover their extra expenses (consumer/business confidence, well performing trading partners, low interest rates encouraging more loans, lower taxes & increased gov. spending)

• demand pull inflation - increase in prices due to increase in demand for goods and services

what is Australia’s current inflation rate

• 7%

explain the effects of inflation has on the consumer and producer

• impacts consumers with less purchasing power, spending more on everyday items, leading to reduced money to spend on goods and services or invest

• impacts producers as they can increase prices of products leading to increased revenue, but face increased costs for materials and labor

define macroeconomics

• a branch of economics that focuses on an industry or market segment; it focuses on improving production over the medium to longer term

define budgetary policy (fiscal policy)

• the government’s management of the federal budget, adjusting expenditure and tax rates to influence the performance of the economy

define each type of budget

• budget deficit - gov. revenue < gov. expenditure

• budget surplus - gov. revenue > gov. expenditure

• balanced budget - gov. revenue = gov. expenditure explain the difference between direct taxes and indirect taxes, use

examples in your explanation

• direct taxes are tax you as an individual pay directly to the gov. and is influenced on how much money you earn (income tax), whilst indirect tax is tax imposed on producers then shifted on to the consumer through the purchasing of goods and services (GST)

explain the different types of government spending

• health

• social security & welfare

• defence

• paying interest on debt

• schools

• higher education

• aged care

• foreign affairs & aid

• government superannuation benefits

• assisting Indigenous Australians

• environmental protection

• infrastructure (e.g. National Broadband Network)

what is the impact of the budget outcome

• budget surplus - lowers spending, raises taxes

• budget deficit - encourages spending, lowers taxes

define monetary policy

• actions by the Reserve Bank of Australia (RBA) that affect the money supply and interest rates how does the Reserve Bank of Australia (RPA) control the flow of money

• by enforcing the monetary policy - controlling the official interest rate, adjusting the level of spending, or demand, depending on economic circumstances

what is the government’s aim for economic growth (%)

• 2-3%

what is the government’s aim for the unemployment rate (%)

• <5%

what is the government’s aim for inflation (%)

• 2-3%

explain how the Gini coefficient Model and The Lorenz Curve are used to explain wealth distribution

• the Gini coefficient measures the extent of inequality in a country or region, where a value of 0 represents perfect equality and a value of 1 indicates extreme inequality

• the Lorenz curve visualises the distribution of wealth by plotting the cumulative share of income or wealth held by different portions of the population, showing how the actual distribution deviates from an equal distribution. the greater the distance between the Lorenz curve and the line of perfect equality, the higher the level of wealth inequality

how does operations management improve productivity

• involves streamlining workflows, eliminating bottlenecks, and improving efficiency at every stage of production or service delivery. by improving the supply chain, businesses can reduce costs, minimize waste, and ensure timely delivery of goods or services use of technology, through effective scheduling and resource allocation

how does use of technology improve productivity

• utilising new equipment to improve their processes with advanced technology or more efficient practices to save time and cost

how does customer relationship management improve productivity

• businesses can centralise customer data, track customer interactions, and gain insights into customer preferences and needs, allowing them to personalize their approach, provide better customer service, and build stronger relationships. businesses can tailor their products or services, improve marketing strategies, and increase customer satisfaction and loyalty

how does human resource management improve productivity

• involves recruiting right talent, comprehensive training, fostering positive work environment, promoting employee engagement, recognition, and work-life balance, which boosts morale and motivation, meaning they are more likely to be committed to achieving the company's goals

price & availability - influence consumer & financial decisions

• price is associated with the quality of the product and consumers have lower and upper limits: if too low → suspicious of quality, if too high → not worth the price. may also be influenced if not mass available and expensive to create a sense of exclusivity and prestige (status symbol of wealth and power)

ethical and environmental consumerism - influence consumer & financial decisions

• provide guidance on what is right and wrong. consumers may wish to purchase products that have been produced in a way that is consistent with their beliefs of what is right (animal rights, environment, human rights)

availability of finance - influence consumer & financial decisions

• refers to how easy it is to borrow money or obtain a loan. e.g., credit card limits and possibility of difficult debt and bankruptcy through excessive usage