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2.Economic principles (
2.Economic principles
Content
economic environment (2)
Definition of economics
Economists Role: (3)
Business Cycle
Stages (4)
Peak to contraction
Contraction to trough:
Trough to expansion:
Expansion to peak
Duration
Interaction between supply and demand (3)
Demand inversely related to price
Supply positively related to price
Equilibrium price
Impact of change in demand
Impact of sales tax on equilibrium price
The firm and market structures (4)
Differentiation (4)
Entry/Exit ease
No. firms & sizes
Elasticity of demand curves
Competition methods
Structures (4)
Perfect Competition
Monopolistic competition
Oligopoly
Monopoly
Economic Indicators (3)
What are they? (3)
categories (3)
Partial
Broad/comprehensive (3)
Forward looking (4)
:speedboat:
Major Ec. Indicators in Oz (2)
Monthly (8)
Quarterly (7)
Publishers include (4)
Uses (4)
assessment
of (2)...
performance of different sectors of the economy
(e.g. as an element in gauging the risk and profit outlook for companies operating in specific sectors).
current economic conditions
starting point for
forecasting
... (2)
in government economic policy
(assessing how the government’s economic advisers may be interpreting economic conditions and what changes, if any, to current policy settings they might be recommending on the basis of that assessment)
A.future economic and financial conditions
Limitations (4)
Timeliness
Reliability
Accuracy
Data volatility ‘noise’
Australian national accounts (3)
Keynesian system
Questions answered
How much produced?
[Production]
Who got the money?
[Income]
What's the money spent on?
[Expenditure]
Measuring gross domestic product
Interpreting the national accounts
Expenditure aggregates
Income aggregates
Household savings ratio
Government savings
Implicit price deflator
Limitations of the national accounts
lack of timeliness
magnitude of revisions
Measurement of inflation (5)
Adverse consequences of inflation (6)
arbitrary redistributions of income
inefficient allocation of resources & risk premium
discourage saving
reduce international competitiveness
may adversely affect long-term economic growth
persistent inflation may have adverse social
consequences
What is deflation?
Composition and compilation of the CPI
Analysing movements in the CPI
Alternative measures of inflation
Implicit price deflators
Other price indices
Australia's balance of payments (3)
represents the transactions a country has made with the rest of the world. Its structure and the factors which impact on it are outlined below...
Structure (2)
Current Account (3)
Balance of merchandise trade
Net services
Net income and unrequited transfers
capital account (2)
foreign investment in Australia
Australian investment abroad
Affecting factors
international competitiveness
Major influences
relative prices or international competitiveness
relative income growth
responsiveness of demand and supply
Domestic demand growth
Relative level of foreign and domestic interest rates
Relationship between current account deficit and level of
foreign debt
Learning Outcomes (5)
explain supply/demand analysis to determine the impact of changing market forces on the supply,
demand or price of a product
compare the usefulness and limitations of economic indicators for financial markets
explain the various measures of wage and price inflation
assess the current stance of monetary and fiscal policy in Australia
assess the market and economic impact of a change in monetary policy.
Key Concepts (5)
Business cycle (4)
Gross domestic product (GDP) (3)
Measuring inflation
Measuring deflation
Consumer price index (CPI)
Subject Learning outcomes (2)
2.Explain the impact of current issues and key economic and financial indicators on the Australian and global financial markets.
3.Analyse the impact of government and monetary policy on the Australian financial markets.
Read 'req reading'
Read 'further resources'
Test Q's
