VCE Economics Unit 1 Area of Study 2. Gross Domestic Product (GDP): The figure used to measure a...
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Transcript of VCE Economics Unit 1 Area of Study 2. Gross Domestic Product (GDP): The figure used to measure a...
Gross Domestic Product (GDP): The figure used to measure a countries’ economy
Gross=TotalDomestic=LocalProduct=Item that is made or created
GDP Per Capita: This figure is arrived at dividing the GDP of a country by its population. It helps to give a better idea of the standard of living in a country.
What are advantages of growth in the Australian Economy?
What are disadvantages of growth in the Australian Economy?
The Business Cycle
Expansion: This is when the level of national production is rising between one year and the next
Peak: This is when national production has reached its highest level
Boom: This is when the level of economic activity is too high and economy is overheating, resulting in inflation
Contraction: This is when the level of national production is falling between one year and the next
The Business Cycle
Trough: This is when the national production has fallen to its lowest level in the economic cycle
Recession: This is when the level of national production falls and there is a negative rate of economic growth measured over two or more consecutive quarters
Depression: This is a big recession and occurs when the level of national production has fallen dramatically over a period of time
The Business Cycle
Questions:
Check your understanding pg. 64 #3
Applied Economic Exercises pg. 93 #2
Aggregate Supply-Side Factors: These factors alter the resources available for production, along with business costs and profits, and the economy’s long-term productive capacity or potential level of GDP.
Aggregate Demand-Side Factors: These factors alter the levels of national spending on GDP and the extent to which the economy’s productive capacity
What affects GDP?
2. Increase our labour resources
a. Immigrationb. Having more kidsc. Increase retirement aged. Increase spending on Education
Aggregate Supply Factors
2. Increase our labour resourcese. Labour Productivity: The efficiency of workers measured by the value of GDP per hour worked
Aggregate Supply Factors
3. Government investment in infrastructure
a. Economic Infrastructure: Construction of railways, roads, dams, NBN
b. Social Infrastructure: education, healthcare
Aggregate Supply Factors
4. Government Policy or Reforms
a. Labour market reformb. Promoting competitionc. Lower Tax Ratesd. Trade liberalism
Aggregate Supply Factors
Aggregate Supply Factors
Questions:
Check your understanding pg. 69 #1,2
Applied Economic Exercises pg. 94 #3
Aggregate Demand Factors
Inflation: The rise in price of goods and services over a period of time. A healthy amount is around 2%.
Unemployment: The amount of people, usually a percentage, who are out of work and actively seeking work. A healthy amount is around 5%.
Interest Rates: The percentage of money charged for its use.
Three Terms to Know:
Aggregate Demand Factors
GDP= C + I + G + (X-M)
C= Consumer Spending: Household spending that is designed to help satisfy our needs and wants
I= Private Investment Spending: Spending by businesses on machinery and building used to help make other goods and services
G= Government Spending: Government outlays that are designed to help meet the needs and wants of the community
X= Exports: The amount spent by people overseas on Australian-made goods
M= Imports: The amount spent by Australians on foreign-made goods and services
Aggregate Demand FactorsConsumer Spending can be affected by:
a. Disposable Income- Money that is available for spending after things like
tax
b. Consumer Confidence- Optimism about future household income and
employment future
c. Interest Rates- Higher rates encourage saving, lower rates encourage
spending
d. Rate of population growth- Immigration can lift consumption
e. Budgetary policies – Decisions such as cutting income tax
Aggregate Demand FactorsPrivate Investment Spending
a. Business Confidence- The willingness of
business to invest in new plant and
equipment
b. Interest Rates
c. Company tax rates- Money paid to the
government by firms on income
Aggregate Demand Factors
Government Spending
a. Unemployment- As unemployment rises, so does (G)overnment
spending
b. Inflation- Governments will tailor their spending to help combat
inflationary pressures
c. Population Growth- As the population grows, so will
government spending
d. Political- Election promises or political pressures may cause
government spending to increase or decrease
Aggregate Demand Factors
Exports
a. The exchange rate- If the Australian Dollar is worth more,
foreign buyers will be able to purchase less Australian goods
b. Overseas economic conditions- Recessions or booms in other
countries will increase the demand for Australian goods
c. Natural disasters/Severe weather events- Disasters in
Australia or overseas will affect the demand for our products
Aggregate Demand FactorsImports
a. The exchange rate- A rise in $AUD will make foreign goods more attractive.
b. Local economic conditions- A local boom makes foreign goods more
attainable.
c. Consumer Confidence locally- Higher confidence in the economy will lead to
more purchases of overseas goods.
d. Inflation Rate- A higher inflation rate in Australia will make foreign goods
more attractive