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Economics Unit 3 AOS2 - Coggle Diagram
Economics Unit 3 AOS2
Aggregate Demand
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Govt consumption (G1) is public expenditure on g/s to help satisfy the community's immediate needs and wanst
Govt Investment (G2) incorporates govt capital or investment expenditure on equipment needed for the provision of public social and economic infrastructure.
Net Exports (X-M) represent the balance (difference) between spending on exports and spending on imports (balance of trade)
Aggregate demand factors
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Interest rates: reward for saving and cost of borrowing. Impacts consumption spending and Investment spending
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business confidence: measurement of how business feels about economy and how likely they are to invest/expand
the rate of economic growth overseas: we rely on (continued) growth of overseas economies to drive their demand for Aus exports
the exchange rates: appreciates or depreciates the value of the AUD when swapped with another currency. Impacts X and M (impacts always opposite)
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The business cycle
Shows fluctuations in economic activity over time. Economists observe that economic activity moves in a 'cycle' or pattern
CONTRACTION: decreases in econ activity (AD), inflation decreasing,
TROUGH: inflation is low or deflation exists, unemployment is high, possible recession (2x quarters)
EXPANSION: increase economic activity (AD), inflation starts to rise, unemployment decreases.
PEAK: strong econ growth, high inflation, low employment, high prices eventually will discourage spending
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Living standards
Material: Access to goods and services. Measured/impacted by: Real GDP, disposable incomes & unemployment
Non Material: Quality of life: Measures/impacted by environmental quality, physical and mental health, life expentancy, crime rates and literacy rates
The circular flow model
A model to understand key macro concepts (GDP, employment, incomes and material living standards)
shows the flow of income, resources and g/s in the economy. Actions of the 5 sectors
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Full employment
NAIRU: Non accelerating inflation rate of unemployment: to achieve the lowest rate of unemployment without causing excessive inflationary pressures
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labour force
- unemployed: aged over 15, not working but actively looking
- employed part time
- employed: aged over 15, working at least 1 hr per week
Not in the labour force
- not looking for other reasons
- retired
- permanently unable to work
types of unemployment
Cyclical = unemployment caused by downturn in business cycle. When AD decreases = less derived demand for labour
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