HASS Notes - Chapter 11.1 & 11.3-11.4 Australian Economy PDF

HASS NOTES: =========== **Chapter 11.1: The Australian Economy** **Goods**: physical items you can feel and touch, such as clothes, a skateboard, an iPad or even food **Service**: non-physical things that assist us in some way or that we experience, such as attending a concert, having a haircut o...

HASS NOTES: =========== **Chapter 11.1: The Australian Economy** **Goods**: physical items you can feel and touch, such as clothes, a skateboard, an iPad or even food **Service**: non-physical things that assist us in some way or that we experience, such as attending a concert, having a haircut or getting help from a tutor. **Why do we have to make choices about what can be produced:** because resources (used to make goods and services) are limited. Choices must be made about how best to use limited resources **Factors of Production:** - [Natural Resources:] resources that come from nature, from above or below the ground - coal extracted from the ground, fish from the ocean, or wood from trees - [Labour Resources:] are the intellectual or physical skills of a worker that are needed to make a good or provide a service. - everyday jobs such as baker, financial advisor, doctor - [Capital Resources:] are man-made resources such as machinery, buildings, roads and bridges that are used to produce and transport the goods and services we purchase - trucks, ovens, factories - [Enterprise:] decision making & risk-taking to bring together the other 3 factors of production to make something of value or to make a profit **Scarcity:** refers to resources being limited but needs & wants unlimited **Opportunity Cost:** the cost of the next best alternative use of resources **Economic Problem:** how to satisfy unlimited needs and wants with limited resources **Economics:** the study of how people create, consume and share wealth  **3 Economic Questions:** 1. *[What]* to produce 2. *[How]* to produce 3. *[Whom]* to produce **Chapter 11.3: Participants in the Australian Economy** **What kind of economy does Australia have:** Market Capitalist Economy **Producers**: provide consumers with the goods and services they need **Consumers**: spend money buying these goods and services - Some consumers earn wages by providing the resource of labour to pay for the goods and services **Free Enterprise:** an important characteristic of Australia's economy, where individuals can set up a business and make a profit - Businesses are expected to pay tax to the government and comply with regulations - Some businesses benefit the economy because the government is able to collect more tax, boosting its revenue, consumers are provided with goods and services and individual are employed and earn a wage **How are participants in the Australian economy interconnected:** - For example, setting up your own business will require capital equipment that people will be employed to making the products and you may also need to employ people to help you run your business - These people will in turn earn wages, and spend their earnings on more goods and services after they have paid tax to the government - Some of the wages earned will also be saved by financial institutions, which will then use those savings to lend to consumers **Overseas Sector:** where we are linked to international marked is another key part of the Australian economy - Australians by imported goods and services from other countries and we also export them overseas - This trade with other nations directly affects our economic welfare **Exchange Rate:** the value of one country's currency when swapped with another country's currency - If the Australian dollar rises in value against other currencies, it means Australian exports will be more expensive and imports cheaper and if it falls in value it will be the opposite way around **Globalisation:** means that all countries of the world are linked and should be seen as one worldwide or global economy **Australia is linked to the global economy because of:** - *[Trade with other nations -]* we import goods and services made overseas into Australia and export them to other countries - *[Foreign Direct Investment -]* foreign funds used to establish new or existing businesses in Australia - *[International Market for Labour --]* Australians work overseas and people from other countries come to work in Australia - *[Technology --]* allowing us to quickly and efficiently communicate with potential customers all over the world - *[Migration --]* settles come to live in Australia **Chapter 11.4: Australia's Place in Asia & The Global Economy** - Australia's economy is relatively small by global standards, representing 2% of the world's production but international trade is important to us - Australia is both an exporter and importer of goods and services and Australia exports around one fifth of its production **Exports:** goods and services produced locally and sold overseas - E.g. beef, wheat, pharmaceuticals, wine & beer, education and travel services **Imports:** goods and services produced overseas and sold to Australia, and we import the equivalent of around one fifth of its production - E.g. cars, computers, telecommunications equipment and personal travel services - Australia has an abundance of natural resources such as coal, iron, copper, gold, natural gas, uranium and renewable energy sources -- **commodities** - High demand by Asian countries, mainly China for the manufacture of consumer goods sold around the world **Trade with other nations is important because:** - Australia ears money by exporting our goods and services - International trade provides employment for both Australians and people overseas - Australia can buy products it does not produces itself from other countries - Australia can sell products that other countries need **In exchange of goods and services between Australia and the rest of the world:** other countries invest directly in Australia by setting up business or expanding their existing business operations in Australia **Australia's major trading partners:** The United Kingdom was Australia's major trading partner in 1900, receiving nearly 60% of all Australian exports because Australia was once a British colony and has strong historical ties with Britain - Dramatic shift led to the UK now only receiving 2.4% of our exports while China receives almost a third of our total exports of goods and services **Primary Products:** product that are produced from raw materials and are not manufactured **What Australia imports and exports** (called '**composition'** of trade)**:** - Nearly 78% of our exported goods in 2013-14 were in primary products and 16% were manufactured goods - E.g. agriculture, fishing, mining and forestry - Nearly 72% of all the goods we imported in 2013- 14 were manufactured products just over 24% of imports were primary products **Other Notes:** **Affect of COVID on Australian Economy:** - Australian GDP was affected by the outbreaks of covid, resulting in 2 large falls in GDP during restrictions across Australia and strong rebounds in growth followed as the population emerged from lockdowns. - Businesses were affected as they experienced lower demand for their products and services **Inflation:** when the general level of prices paid for goods and services over a certain period of time increases **Globalisation:** the process that involves all the countries of the world being linked together, resulting in an exchange of views, ideas, products and culture **Specialisation:** the focus on the production of a particular good or service in order to produce it more effi­ciently **Concept of Opportunity Cost with a real-world example involving a business decision:** **Interdependence:** the way in which participants in the economy, such as producers and consumers, rely on each other to produce and consume goods and services **How have technological advancements influenced Australia's trade with other countries:** Technological advancements have made Australia's trade faster, more efficient, and more secure. By streamlining logistics and expanding digital market access, technology has allowed Australian businesses to connect with global markets more easily. These innovations have also improved production and trade transparency, helping Australia stay competitive and build stronger international partnerships. **Interdependence between Australia and other global economies:** - Australia depends on other countries for manufactured goods, while many nations rely on Australia for raw materials like iron ore and coal. - *[Australia\'s trade relationship with China]* - Australia exports iron ore to fuel China\'s industrial growth, while China provides Australia with affordable manufactured goods. This relationship demonstrates how both economies benefit from relying on each other, though it also means they are affected by each other's economic shifts. **Two key participants in the Australian economy:** 1. Households contribute to the economy by providing labour to businesses and buying goods and services, which drives demand and stimulates economic growth. They earn income from wages and salaries, which they use to consume goods and services, supporting businesses and economic activity. 2. Businesses produce goods and services and create jobs, contributing to economic growth and innovation. They rely on households for labor and serve as suppliers of goods and services, fostering economic development by investing in new projects, expanding production, and driving exports. **The importance of trade for Australia's economy, in relation to Asia:** - Trade is vital for Australia's economy, especially with Asia, as it boosts GDP by providing access to large export markets like China and Japan - Relationship allows for diversification of exports, reducing reliance on any single market and mitigating risks. Additionally, trade facilitates the import of essential goods, attracts foreign investment, and fosters cultural exchange. **Circular Flow Model:** **Households:** provide labour to firms in exchange for income, which they use to purchase goods and services **Firms:** hire labor from households, paying wages and salaries in exchange for work and produce the goods and services that consumers then buy from them **Government Sector:** collects taxes from households and firms, which provides revenue needed to fund public goods and services - This spending injects money back into the economy, creating demand for goods and services. **Financial Sector:** the part of the economy that manages the flow of funds between savers and borrowers. - facilitates savings and investments by providing services like loans, mortgages, and investment products, enabling households to save and firms to access capital for growth - helps allocate resources, risk management, and ensures liquidity in the economy **Overseas Sector:** is the international component where Australia exports goods and services, produced by businesses in Australia to other countries and Australia imports goods and services produced by businesses in other countries **Why is trade with countries like China and Japan important for Australia's economy:** Trade with countries like China and Japan is important for Australia's economy for several reasons. Firstly, these countries are major markets for Australian exports, particularly in sectors such as agriculture, mining, and education. China is Australia\'s largest trading partner, providing significant demand for resources like iron ore and coal, which are essential for its industrial growth. Similarly, Japan is a key market for Australian agricultural products and energy resources. Secondly, engaging in trade with these nations helps diversify Australia's export markets, reducing reliance on any single economy and mitigating risks associated with economic fluctuations. Additionally, trade fosters foreign investment, creating jobs and promoting technological advancement within Australia. Overall, trade with China and Japan is crucial for sustaining Australia's economic growth and stability.