ECONOMICS

• living standards


  measure the quality of life and may indicate society's happiness
• material living standards


  depend on real quantity of goods and services consumed by each individual
• non-material living standards


  depend on the quality of daily life for all people
• factors affecting material living standards:
• factors affecting material living standards

  GDP. When GDP rises, average incomes and purchasing power does too, thereby increasing material living standards
• factors affecting non-material standards

  happiness, physical and mental health, crime rates, environment quality, leisure time, literacy rates
• conflicting relationships


  occur when there is a trade-off, and progress in one area of wellbeing undermines the other
• compatible relationships


  exist where progress in one area of wellbeing helps to promote the other area
• economic activity


  the actions of individuals, firms, and governments that help to generate the production of goods and services, employment, and incomes
• effects of EA on material living standards

  • it affects the quantity and quality of goods and services produced produced and available, to help satisfy needs and wants
  • It influences employment opportunities, the no. of jobs and unemployment rate
  • It determines the average incomes, purchasing power and consumption levels
• effects of EA on non-material living standards

  extra production can degrade our common access resources
• measuring gross domestic product

  determined by the changes of real value of production from one year to the next
• lagging indicators

  level of activity occurring a while ago
• coincident indicators


  move closely with actual changes in the level of economic activity
• leading indicators


  predict where the economy may be heading in the near future
• increased EA on material living standards

  • Higher production = increased jobs and incomes, boosting consumption
  • If too strong = prices rise, reducing purchasing power
• aggregate demand


  refers to the total expenditure on final Australian made goods and services (C+I+G+X-M)
• aggregate demand components 


  private consumption, private investment, government consumption, government investment, net exports
• factors affecting level of AD

  household or consumer confidence, business confidence, disposable income, population growth, interest rates, budgetary policy, economic activity overseas, the exchange rate
• effects of strong AD

  stronger AD conditions→stronger AD→increased inflation→increased production→lower unemployment→higher incomes

  Weaker AD conditions→ weaker A+AD→decreased inflation→decreased production→higher unemployment→lower income
• aggregate supply


  the total volume of goods and services that all producers in the country can make available over a period of time
• factors affecting level of AS

  quantity and quality of factors of production, costs of production, technological change, productivity growth, exchange rates, climatic conditions, gov regulations, disruptions to international supply chains
• economic growth 


  any increase in the amount or level of national production that has occurred over time
• sustainable growth

  • rates cannot be so high as to:
  • Cause inflation to exceed the target of 2-3%
  • Result in significant external pressures
  • Lead to an overuse of the nations natural resources
• economically sustainable development


  is economic growth that meets the needs of the present with compromising the ability of future generations to meet their own needs
• GDP


  the final market value of all goods and services produced in Australia over a given period of time
• nominal GDP


  calculates the total value added during each stage of the production process. inclduing the impact of inflation
• real GDP


  involves using prices from previous period and applying them to the current period production
• quarterly vs. annual vs. annualised GDP

  • Quarterly = (GDP current - GDP previous)/GDP previous x 100
  • Annual = (GDP current year - GDP previous year)/GDP previous x 100
  • Annualised = quarterly growth x 4
• full employment


  level of unemployment when the economy grows sustainably without cyclical unemployment and economic = maximised
• natural rate of unemployment

  some is beneficial for resource allocation (spare capacity)
• employment


  mutual agreement where labour is exchanged for income
• unemployment


  over 15, without work, actively seeking employment
• transitory unemployment benefits


  temporary unemployment can enhance economic efficiency by allowing workforce mobility and career advencement
• gig economy

  helps reduce structural unemployment by allowing easier access to labour markets
• phillips curve


  illustrates the short term trade off between inflation and unemployment
• labour force composition


  both employed and unemployed who are willing and able to work
• unemployment rate


  the % of the labour force that is unemplyed
• participation rate


  the % of the working age population that is part of the labour force
• cyclical unemployment


  caused by weaker AD factors that slow spending