Economics Revision Guide PDF

**[Economics- Revision Name: ]** 1. Define the following terms and explain how they measure economic performance. GDP: Gross domestic product, to measure GDP each quarter, the Australian Bureau of Statistics (ABS)  Unemployment rate: To be considered unemployed, a person must currently not h...

**[Economics- Revision Name: ]** 1. Define the following terms and explain how they measure economic performance. GDP: Gross domestic product, to measure GDP each quarter, the Australian Bureau of Statistics (ABS)  Unemployment rate: To be considered unemployed, a person must currently not have a job, be willing to work and be actively seeking work. The unemployment rate tells us the proportion of the labour force that is currently unemployed. The unemployment rate will always exist in any market economy. Inflation rate: the inflation rate measures the rate at which the general level of prices in a particular economy has risen over a year. The target inflation rate for Australia is 2-3% each year. A very low inflation would be bad for the economy because it would be very difficult for workers to obtain wage increases. 2. Distinguish between material and non- material living standards. Include examples in your answer. Material living standards include tangible goods and services, like cars, health coverage, etc., while non-material living standards are harder to measure, since they\'re made up of intangible things like environment, freedom of speech, free elections, crime rates, and time off work. 3. Explain why economic growth leads to higher material living standards. Economic growth implies an increase in employment, as businesses expand their operations and require more labour. With more people employed, there is generally more income and higher levels of spending, which can lead to a higher standard of living as people are able to consume a wider variety of goods and services. 4. Explain why economic growth also leads to higher non- material living standards. Increased economic growth can lead to higher non-material living standards through increased access to education, healthcare, and technology. It can also lead to improved skills and health outcomes and increase the productivity and overall quality of life. 5. List three reasons for differences in wealth and income distribution. A. Inequality in opportunities and access to education and skill B. Differences in age demographics C. Differences in geographic location These factors can all contribute to variation in wealth and income distribution, depending on the circumstances of the individuals or communities in question. 6. Explain **why** the Australian government redistributes income. The Australian government redistributes income to address inequality, promote social justice, and ensure that all Australians have access to basic services and opportunities. Income redistribution can be achieved through progressive taxation, social welfare programs, and investment in education and job training. 7. Explain **how** the Australian government redistributes income. Include examples. The Australian government redistributes income primarily through progressive taxation, social welfare programs, and investment in community services. 8. What is a 'progressive tax'? Include two examples. ***A progressive tax is a tax system in which higher-income individuals pay more tax, while lower-income individuals pay less. An example of this is the graduated income tax system in Australia, which has different tax brackets with higher rates for those earning more. Another example is the highly progressive tax system in Sweden, where high-income earners pay much more in taxes than lower-income earners.*** 9. List three examples of the government providing goods and services to the Australian population. Free childcare services, Free employment services to support unemployed individuals, Free legal services for low-income people. 10. Why does the government provide some goods and services to the population? ***The government provides goods and services to the population to ensure that all Australians have access to the necessities of life, such as education and healthcare, regardless of their socioeconomic status.*** 11. ***Distinguish between microeconomic and macroeconomic policies.*** ***Microeconomic policies focus on the behaviour and decisions of individual people, businesses, and industries. They are typically targeted at improving market competition, promoting efficiency, and enhancing the quality of goods and services produced.*** ***Macroeconomic policies, on the other hand, focus on the overall performance of the entire economy. These policies focus on improving economic growth, reducing unemployment, and stabilizing the price level of goods and services.*** 12. List three specific examples of microeconomic management strategies that the Government uses and explain their influence on the wider economy (people, businesses...). Subsidies: The government can provide subsidies to businesses or industries to encourage certain types of economic behaviour. For example, the government might provide financial support to businesses that produce renewable energy sources to encourage them to invest in green technology Regulation and Competition Policy: The government can also regulate certain industries or introduce competition policy to prevent monopolies and ensure that consumers have access to a range of goods and services at competitive prices Trade Policies: The government can use tariffs and import quotas to restrict foreign competition and protect domestic industries, or negotiate trade agreements with other countries to increase market access. 13. What is the purpose of Australia's 'skilled migration policy'? Australia\'s skilled migration policy attracts skilled workers from overseas to fill labour market needs, boosting the economy. It supports the country\'s immigration program and prioritizes skilled workers who are assets to the economy and society. 14. ***Explain the term 'fiscal policy'*** Fiscal policy refers to the government\'s use of taxes, government spending and transfer payments to influence the economy. It is an important tool for policymakers to use to stabilize the economy, promote economic growth, reduce unemployment and inflation, and improve economic performance. 15. ***Explain why budget deficits are 'expansionary' and grow the economy.*** ***Budget deficits are considered \'expansionary\' in economic terms because they increase government spending and decrease taxes, which leads to increased demand and consumption. This increased demand leads to higher output and economic growth.*** 16. ***Explain why budget surpluses are reducing economic growth.*** Budget surpluses reduce economic growth because they imply that the government is taking more income from taxpayers and businesses than necessary, which in turn depresses the economy. Government spending also tends to stimulate consumer spending, which can boost economic growth. 17. ***Explain the term 'cash rate' and its influence on consumers.*** ***The cash rate, also known as the policy rate, is the interest rate the Reserve Bank of Australia sets on overnight loans between financial institutions. The cash rate dictates the cost of borrowing and lending between banks and has a ripple effect throughout the financial system, including consumer spending and borrowing decisions. The Reserve Bank of Australia can adjust the cash rate to control or stimulate the economy*** 18. ***Explain the impacts of the following on people, businesses and the economy as a whole:*** a. ***An increase in the cash rate*** ***making borrowing more expensive, which can lead to decreased spending and investment. This, in turn, can decrease economic growth. For businesses, it can lead to decreased profits and decreased investment in the economy. Some people may struggle to pay their loan repayments as borrowing becomes more expensive. The higher cash rate can also lead to higher interest rates for home loans, car loans, business loans and other financing options.*** b. ***A reduction of the cash rate*** ***A decrease in the cash rate can lead to increased spending and investment, as it makes borrowing more affordable. This can increase economic growth and reduce unemployment. Increased borrowing can lead to higher consumer spending, which can boost the economy and increase business profits. However, a decrease in the cash rate can also lead to increased inflation, which can decrease the purchasing power of the currency and lead to higher prices for consumers.***