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economics, inflation, Unemployment, GDP(economic growth), material living…
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inflation
Definition: Inflation occurs when there is an increase in the general level of prices paid for goods and services over a certain period of time
The rate of inflation is measured by calculating the percentage changes in the Consumer Price Index on an annual basis
cost push: Cost push inflation is when high production costs are passed on to consumers who have to pay higher prices for final goods and services. These production costs refer to the increase in factors of production or resources. Eg. Land, labour, capital and enterprise.
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demand pull: Demand pull inflation is when high levels of economic activity leads to an increase in the general price level. It occurs when the level of demand in the economy is higher than the capacity of the economy to produce goods and services
Unemployment
not in the labour force could be people who are:
- unable to work
- not looking
- in prison
- studying
- parental duties
- retired
DEFINTION: Unemployment is when those willing, able and actively seeking work cannot find a job
DEFINITION: The unemployment rate is the proportion (percentage) of the labour force who are unemployed.
unemployment rate(%) = (Unemployed/ labour force) x100
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GDP(economic growth)
Definition: Gross Domestic Product (GDP) is a measure of the total value of all goods and services produced in Australia over a year
The Australian Bureau of Statistics (ABS) collects data on GDP and calculates the percentage change from one year to the next and adjusts for changes in price to determine the economic growth rate or real GDP growth.
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measured by the quantity of goods and services available each year as measured by gross domestic product (GDP)
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(for image, look at source 1)
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injections:
- investments(financial sector)
- Grants(government sector)
- Exports(overseas market)
leakages:
- savings (financial sector)
- taxation(Government sector)
- imports(overseas market)
its just a dollar figure and doesn`t measure what goods and services citizens have access to, or measure wealth distribution.
Many would agree that if the citizens of a country have access to more goods and services to satisfy their needs and wants, life is generally better
more holistic picture of the true living standards of 40 different countries by measuring progress based on 11 criteria
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The Reserve Bank of Australia (RBA) states that they target an inflation rate between 2-3%.
Why?
Above 3% causes negative impacts of high inflation. Below 2% causes negative impacts of insufficient economic activity.
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- Production or GDP is weak
- Consumer spending in the economy may have decreased Competition from overseas
- Low confidence in economic condition
- Businesses taking operations offshore or shutting down Labour-saving technology (technology)
- Weak economic activity from overseas trading partners (China)
- Overseas shocks e.g. Global Financial Crisis
consumers: consumers have no work so they have no income, so they wont be able to buy as many goods and services, which will result in the fall in the standard of living
Firms(businesses): reduce the revenues received by firms/producers and further decrease their ability to employ labour. The overall impact of this is a contraction/reduction in economic activity and a weaker economy.
Government: The government collects less revenue in the form of tax and has to pay more to assist unemployed people in form of social benefits / welfare programs
overseas: Australian consumers and producers will be purchasing less goods from overseas so our imports will decline.
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economic indicators:
- GDP growth (strong sustainable Growth) 3-4%
- Inflation rate ( price stability) 2-3%
- Unemployment rate ( full employment) 5%
If objectives are met, we are in an expansion, if they are not met, we are in a contraction