3&4 ECO AOS 2 SAC 2

• frictional unemployment occurs when people move between jobs in the labour market, as well as when people transition into and out of the labour force
• cyclical unemployment is when unemployment exists due to low demand, essentially when businesses let workers go
• changes in disposal income, interest rates, consumer confidence, business confidence, exchange rate, economic growth overseas affect aggregate demand
• costs of production, technological change, productivity growth, exchange rates, climatic conditions, government regulations, and disruptions to international supply chains affect aggregate supply
• the business sector is where people purchase or demand resources from households, which are then converted into finished goods and services
• disinflation refers to a reduction in the rate of inflation
• aggregate supply refers to the total supply of goods and services that a nation can potentially produce. it is especially affected by the availability of a nation's resources and the efficiency in which they are used
• aggregate demand is made up of private consumption spending (c), private investment (i), government spending (g), exports (x), and imports (m)

  ad = c + i + g + (x - m)
• annualised rates refer to when you only have a quarter of inflation data and you want to make it equivalent to a year (multiply by 4)
• cost inflation is aggregate supply side inflation and refers to when businesses pass on increases in cost of production to consumers through higher prices
• disposable income is the amount of income available for households to spend on goods and services after tax
• domestic economic stability is a desirable or ideal level of economic activity where simultaneously there is low inflation, a solid and sustainable rate of gdp and low unemployment
• the recovery/ expansion phase is when inflation is increasing, economic growth is increasing, unemployment is decreasing, interest rates are increasing, closer to full capacity, shortages because of excessive demand
• the goal of full employment is the level of unemployment that exists when the government's economic growth objective is being achieved and where cyclical unemployment is non- existent. the target rate if 4.5 - 5%
• the goal of low inflation refers to the aim to achieve a stable value of the dollar in terms of its purchasing power over goods and services. target rate if 2- 3%
• if unemployment is too high, productive capacity and overall production is likely to be lower, therefore decreasing economic growth and gdp
• trade off is all of the opportunities/ options missed out on when a choice is made
• non- material living standards are the non- tangible aspects of life that impact on our overall wellbeing
• economic activity will affect our living standards as society can only satisfy growing needs and wants through increased production, higher levels of economic activity are not sustainable long term due to limited non- renewable resources
• aggregate demand is the total value of all expenditure on goods and services in an economy over a period of time. it is essentially a combination of the demand curves of all products into one
• if inflation is too high, income and savings are worth less than before, so you are unable to buy more goods and services (material living standards), causing higher stress levels because of diminished purchasing power (non- material living standards)
• if disinflation happens, people will hold off purchases expecting further price decreases causing lower aggregate demand and thus lower economic growth
• material living standards refers to the physical things we have which improve our quality of life
• headline inflation is simply the raw inflation rate created by measuring changes in consumer price index
• if economic growth is too high, unemployment is low, inflation is high because resources are being fully maximised causing businesses to not have any spare capacity, leading to shortages when demand increases and price rises. therefore, environmental pressures and unsustainable uses of resources
• the goal of strong and sustainable economic growth is the government's aim to achieve the highest possible growth rate that is consistent with strong employment growth and that avoids unacceptable inflationary, external, or environmental pressures
• employed means person aged 15 or older who worked at least 1 hour in the survey week
• unemployed means a person aged 15 or older who is actively seeking emloyment
• if unemployment is too high, productive capacity and overall production is likely to be lower therefore decreasing economic growth
• the peak/ boom phase is when inflation is high, economic growth is high, unemployment is low, interest rates are increasing, high aggregate demand capacity constraints and shortages, rba controls inflation by decreasing discretionary income
• underutilisation rates are the number of unemployed and underemployment persons divided by the labour force
• if economic growth is too low, it may cause higher unemployment as we are failing to produce goods to provide jobs for the growing population. therefore increasing stress levels amongst populations.
• the overseas sector is the amount we spend on imports (m) compared to what gain from selling exports to people overseas (x)
• if unemployment is too low, production may increase at a rate which is too fast (unsustainable), and may lead to inflationary pressures
• economic growth refers to an increase in the amount of goods and services produced over a period of time. in australia, it is measured by increase of real gdp in a year, where the target rate is 3-3.5%
• underlying inflation removes the impact of volatile price changes to gain a more accurate indication of how inflation would be impacting the average person
• economic activity is the actions of individuals, firms, and governments that help to generate the production of goods and services, employments and incomes
• the business cycle refers to the wave like ups and downs in a nation's level of production or economic activity
• structural unemployment is unemployment caused on the supply side from changing business conditions. this can be due to cost cutting and replacing labour with technology
• if unemployment is too low, it can increase aggregate demand faster than aggregate supply can maintain. this creates widespread shortages and puts upward pressure on prices. this then creates demand inflationary pressures