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Economics Exam
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Economics Exam
Untitled Flashcards
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1
Question
Resource Allocation
Answer
Allocative efficiency Productive efficiency Dynamic efficiency Intertemporal efficiency
2
Question
Demand factors microeconomics
Answer
Disposable income Interest rates Consumer confidence Population demographic Preferences and tastes Price of substitues Price of complements
3
Question
Supply factors microeconomics
Answer
Productivity Technological change Number of suppliers Climatic conditions Cost of production
4
Question
Price Elasticity of Demand
Answer
Need or want Little or many substitutes Small or large percentage of income How fast decision need to be made
5
Question
Price Elasticity of Supply
Answer
How easy to store How durable it is How quickly it can be made
6
Question
Market failure causes and solution
Answer
Asymmetric information - Government regulations Negative externalities - Indirect Taxation - Government Advertising Positive externalities - Subsidies Common access goods - Government regulation
7
Question
Free and Perfectly competitive market
Answer
Conditions: Firms have little market power Firms have ease of entry or exit Products are homogenous Assumptions: Resources are mobile Behaviour is rational Perfect knowledge Consumer sovereignty exists
8
Question
One contemporary example of government intervention in markets that leads to a decrease in efficiency of resource allocation
Answer
Minimum wage
Untitled Flashcards
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1
Question
Opportunity cost
Answer
Benefits forgoneby a decision to not direct resources into the next best alternative
2
Question
Allocative efficiency
Answer
Resources are used in ways that maxises society satisfaction and opportunity costs are minimised
3
Question
Productive efficiency
Answer
Using the lowest cost production methods and minimising wastage of resources
4
Question
Dynamic efficiency
Answer
Resources are reallocated quicjly to increase choice and meet the changing neds of consumers
5
Question
Intertemporal efficiency
Answer
The optimal balance between current consumption and spending and future consumption and saving for financial investment
6
Question
Production Possibility Frontier (PPF)
Answer
Outside = unobtainable On the line = efficient Inside = inefficient
7
Question
Income effect
Answer
Change in demand for a good or service, induced by a change in price of a product due to change in purchasing power
8
Question
Substitution effect
Answer
Decrease in demand for a product as its price rises because consumers are switching to relatively cheaper alternatives
9
Question
Market failure
Answer
When the price system allocates resources inefficiently, reducing the overall satisfaction of societys wants, wellbeing and living standards
10
Question
Minimum wage
Answer
To protect living standards of low-income employees to ensure they have access to basic goods and services
Untitled Flashcards
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1
Question
Sectors in flow model
Answer
Household sector Business Sector Financial Sector Government Sector Overseas Sector
2
Question
Four flows
Answer
Household to Business Business to Household Aggregate Demand Aggregate Supply
3
Question
Aggregate Demand Components
Answer
C+I+G1+G2 + (X-M) Private consumption Investment Government consumption Government investment Exports Imports
4
Question
Factors of AD
Answer
DICCER Disposable income Interest rates Consumer confidence Business confidence Exchange rate Rate of economic growth overseas
5
Question
Effects for movement in AD
Answer
Purchasing power effect Interest rate effect Import substitution effect
6
Question
Components AS
Answer
ACE Access to resources Cost of production Efficiency of resource use
7
Question
Factors of AS
Answer
PECCTQ Productivity Exchange rate Cost of production Climatic conditions Technological change Quantity and Quality of the factors of production
8
Question
3 Macroeconomic goals
Answer
Strong and Sustainable Economic growth Low and stable inflation Full employment
9
Question
Variations of CPI
Answer
Headline rate of inflation Underlying rate of inflation
10
Question
Economic growth too low
Answer
More cyclical unemployment Weaker government finance and reduced ability to provide adequate services
11
Question
Economic growth too high
Answer
Environmental degradation Higher inflation rates as capacity constraints exist (consumers bidding up prices)
12
Question
Types of natural unemployment
Answer
Structural Seasonal Frictional Hardcore
13
Question
If unemployment too high
Answer
Loss of incomes Loss of GDP Loss of Tax revenue Greater income inequality
14
Question
If unemployment too low
Answer
Loss of purchasing power Damage to international competitiveness Greater income inequality
15
Question
If inflation is too high
Answer
The erosion of purchasing power Development of price wage spiral Distortion of spending and investment decisions Lower returns on investment Loss of international competitiveness
16
Question
If inflation is too low
Answer
Increase unemployment (delayed current consumption)
Untitled Flashcards
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1
Question
Purchasing power effect
Answer
Higher prices will reduce purchasing power of savings and incomes
2
Question
Interest rate effect
Answer
Higher prices will increase interest rates, making borrowing money more expensive
3
Question
Import substitution effect
Answer
Domestic prices increasing encourages Australians to purchase cheaper imports of goods and services
4
Question
GDP
Answer
Calculated the sum of the average Production Income Expenditure
5
Question
Underemployment
Answer
People who have a job but work less hours than they prefer or work in positions where their skills are not being utilised properly
6
Question
Hidden unemployment
Answer
Unemployed people who stop actively seeking for work do no appear as an unemployment statistic
7
Question
Unemployment rate
Answer
Unemployed/Labour force
8
Question
Participation rate
Answer
Labour force/working age population
9
Question
Underutilisation rate
Answer
Unemployed + Underemployed/Labour force
Untitled Flashcards
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1
Question
The 3 Big economic questions
Answer
What (and how much) goods and services to produce, How to produce these goods and services and for whom to produce the goods and services for
2
Question
What answers all 3 questions
Answer
The Australian economy via the nature of demand and supply, alongside government decision making
3
Question
Australian economy
Answer
Primarily driven by market forces Some government intervention is needed
4
Question
What (and how much) to produce
Answer
Market decides through demand of consumers and ability of producers to meet this demand Government intervenes to manipulate the market to prevent certain goods and services from being produced and encourage certain goods and services to be produced through financial incentives such as subsidies.
5
Question
How to produce
Answer
Market will decide with producers being heavily influenced by relative prices and the various factors of production Government intervenes via implementing various laws and regulations that influence relative cost of factors of production
6
Question
Whom to produce
Answer
Determined by who can afford to buy what is produced which is determined by markets as incomes are determined mostly by a persons economic contribution to the production processes Government intervenes due to its goal to achieve a more equitable distribution of income
Untitled Flashcards
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1
Question
Inflation
Answer
3.8% Continued interruptions to global supply chains as the global economy continues to emerge from the COVID-19 period increase disposable income due to stage 3 tax cuts
2
Question
Economic growth
Answer
1% Appreciating AUD since early 2024 contractionary monetary stance with target cash rate of 4.35% (high interest rates) Weaker consumer confidence
3
Question
Unemployment rate
Answer
4.2%
4
Question
Commodity prices
Answer
Decreasing
5
Question
Terms of trade
Answer
decreasing
6
Question
Current account
Answer
deficit increasing
7
Question
Business cycle
Answer
Contractionary phase