Unit 2 (Year 11) ATAR Economics 2022

The selling of Australian goods and services to countries overseas

Australia sells Iron Ore to China

When Australia buys goods and services from other countries overseas (due to the fact that we do not have the capacity to produce it ourselves)

Australia buys cars from Japan

A country is dependent on international trade for its living standards, but still produces some of its own goods.

China Australia Free Trade Agreement (signed in 2015)

Countries can focus on specialisation, and also have access to goods and services they don't produce. Also helps to achieve economies of scale

Are rural and mineral resources (e.g Coal, Iron Ore, Oil, Gold)

Comprise of manufactured goods and other services (e.g Tourism, Education, Cars)

When the total value of exports are greater than the total value of imports

When the total value of Imports is greater than the total value of exports

Some countries have an abundant supply of natural resources and farmland that enable them to sell these overseas. This creates international specialisation as each country might have an endowment of different resources.

Some countries might have large, low cost labour forces enabling them to carry out mass manufacturing (China), whereas other countries have a comparative advantage in producing products with quality capital equipment.

Is the application of knowledge and technical skills to the development of new products and production processes.

By investing in technology, countries can add to their stock of knowledge, improving the productivity of labour and capital and therefore gaining a critical advantage over countries.

Producers will gain from exports (sell more goods at higher prices) and producer surplus increases, whereas consumers will lose out as they pay more and receive less so consumer surplus decreases.

Domestic Consumers will gain and they pay a lower price and receive more (consumer surplus increases), whereas producers will lose out as they are producing less at a decreased price (producer surplus decreases).

is the price of a country's currency in terms of another country's currency

increase in the value of AUD. Demand for exports is greater. Therefore imports are cheaper and exports are more expensive

Decrease in he value of AUD. Demand for imports is greater, so imports are more expensive, and exports are cheaper.

a record of all economic transactions between residents of one country and residents of the rest of the world during a given period

Current Account + Capital and Financial Account (will always equal to 0!!)

Records all transactions including goods, services, primary income (rent, dividends, wages) and Secondary Income (pensions, Gifts, money for foreign Aid)

Made up of net goods + net services

Primary income + Secondary Income

Records the net acquisitions and net change in the ownership of assets and liabilities.

the net acquisitions and transfers, as well as the sale or purchase of non-produced, non-financial assets

The net change in the ownership of liabilities, investments and assets. Made up of direct, portfolio and other investments as well as financial derivatives and reserve assets.

when a firm purchases more than 10% of another firm

When a firm purchases less than 10% of another firm

Money flowing OUT of the economy

Money flowing IN the economy

When Australia buys a car from Japan

Australia sells iron ore to china

Study of the economy as a whole

Refers to the values of goods and services (output) a country can produce

Refers to the total level of spending in the economy

There is too much spending in the economy, and so inflation occurs

There are too many goods in the economy, causing unemployment to increase

Shows the flows of goods, resources, services and income between parts of the economy.

Represent the reduction in money flow/ goods between households and firms

Savings (S), Taxation (T), Imports (M)

Represent the increase in money flow / goods between households and firms.

Investment (I), Government Expenditure (G), Exports (X)

Leakages = Injections

Expenditure = Output = Income

Defined as wags, rent, interest and dividends and profit from the resources they provide firms

Land, labour, capital, enterprise owned by households and provided to firms

The spending on goods and services by households

The portion of income not spent on goods and services for current consumption. This is a leakage!!

The expenditure on goods and services which are not intended for current consumption. This is an injection!!!

Total spending is less that total output, so stock of goods increases. This means that firms will cut back production, meaning unemployment will rise. Therefore households will receive less income so consumption and savings will decrease.

total spending is greater than total output, so stock levels will decrease. Firms will increase production, and therefore unemployment decreases.

Form of revenue raised from the private sector by the government. This is a Leakage!!!

is an injection!!

spending on wages, salaries and transfer payments. This is the day to day spending of the government.

Spending on capital or investment goods such as schools, hospitals and railways.

This causes income to decrease, therefore people will consume less. This means less output is produced. and the economy contracts

Income will increase, so consumption will also increase. This causes production to increase and therefore the economy expands

An economy that trades goods and services with other countries

When Australia buys goods and services from overseas (Money flowing out from the economy). This is a leakage!!!

Australia buys cars from Japan

When Australia sells goods to overseas countries (money flowing into the economy). This is an Injection!!!

Australia sells Iron Ore to China

X - M

Causes a trade surplus, which increase income of an economy, causing expenditure to increase. Output will increase and therefore the economy expands

Causes a trade deficit, where income will decrease, so consumption will decrease. This means output will decrease and therefore the economy contracts.

When an increase in an injection causes an increase in the income and consumption greater than the initial amount spent. (one man's spending is another man's income)

The total amount that firms, households and government PLAN to spend on goods and services at each level of income

C + Ip + G + NX

The final value of goods and services produced in a country. (C + Ia + G + NX)

Goods that last for less than 3 months (e.g Food)

Goods that last for longer than 3 months (e.g Fridges and furniture)

People who work for more than 1 hour a week and are paid.

People who are willing and able to work but cannot find a job

The section of the population over 18 who is employed or unemployed.

People between the ages of 15 and 66

The percentage of the population in the labour force

People who are not actively seeking paid employment

unemployed / labor force x 100

employed + unemployed

labour force / Population x 100

Unemployment rate + Underemployment rate

a measure of the spare labour capacity in an economy (more broad that unemployment)

When a person is working a casual / part time job and would like to work more

Part time / Labour force x 100

Occurs when there are changes in technology or pattern of demand in an economy. People with certain skills will find themselves unemployed because their skills do not match with the emerging industries.

People who worked in the Records industry would become structurally unemployed when the iphone was released. because their skills of making records did not match the skills required to make iphones.

Occurs when there is a downturn in the level of economic activity. There is less consumption in an economy, so firms will produce less and therefore people will become unemployed

During Covid-19 in 2020 unemployment was at 7.5%

Occurs during the period of time when a person is changing between jobs

Occurs at predictable and regular times of the year because of the seasonal nature of a job

People who work as dress up Santas at shopping centres will become frictionally unemployed during winter, as Christmas is not on

Refers to the people who are unemployed for longer than 12 months, due to a lack of skills, education or training.

Refers to the people who are permanently or long term unemployed due to difficulties such as mental health issues or physical disabilities.

is the minimum level of unemployment which can be achieved given the current characteristics of the labour market.

4% - 4.5%

The appreciable and persistent rise in the general level of prices.

A general decline in the level of prices

2% - 3%