Inflation
What is inflation?
Increase in prices of goods and services
Name one category of unemployment
Seasonal, structural, cyclical
What does GDP stand for?
Gross Domestic Product
What are wages?
Wages are payments workers receive for their labour
What happens to the purchasing power of money when inflation increases?
Purchasing power decreases if income does not keep pace with inflation. The same amount of money buys fewer goods and services.
Why is the unemployment rate an important indicator of economic health?
It indicates how successfully an economy is providing jobs for people seeking work. High unemployment can suggest weak economic activity, while low unemployment generally indicates stronger demand for workers.
What does GDP measure?
"Gross Domestic Product" measures goods and services
How can increasing wages improve living standards?
Higher wages can give workers more money to spend on housing, food, education, healthcare and other needs. They may also increase saving and financial security.
A loaf of bread costs $3.00 one year and $3.30 the next year. Calculate the percentage increase.
10% increase.
A country has a labour force of 1,000 people, of whom 50 are unemployed. Calculate the unemployment rate.
5%
Name two countries with the highest GDP
China, USA
Why might economists be concerned if wages are not increasing at the same rate as the cost of living?
If the cost of living increases faster than wages, workers lose purchasing power. This means their income does not stretch as far, making it harder to afford necessities such as food, housing and electricity.
Australia's inflation rate increases from 2% to 6%. Explain how households are affected.
The cost of living increases as goods and services become more expensive. Households may need to reduce spending on non-essential items to afford necessities such as food, fuel and electricity.
Evaluate how investing in infrastructure could reduce unemployment
Infrastructure projects create jobs in construction and related industries. Workers earn wages and spend money, supporting other businesses.
What does increasing GDP generally suggest?
It generally indicates that economic output is increasing. This may reflect higher consumer spending, business investment or government expenditure. Remember, though, GDP growth alone does not establish whether living standards have improved for everyone.
What is an advantage of the government encouraging businesses to increase wages?
Higher wages give workers more disposable income, allowing them to purchase more goods and services. This can increase consumer spending and support economic growth.
Explain how increasing interest rates might reduce inflation
Higher interest rates make borrowing more expensive, encouraging households and businesses to reduce spending
A factory closes, resulting in workers losing their jobs. Explain the effects on the economy.
Unemployed workers have less income to spend at local businesses, reducing sales. Local businesses may experience falling profits and could reduce their own staffing levels.
Why does GDP growth not necessarily improve everyone's living standards?
GDP measures economic output, not how income is distributed or the quality of life experienced by individuals.
What is a disadvantage of the government encouraging businesses to increase wages?
Higher wages increase business operating costs. Some businesses may respond by increasing prices, reducing staff numbers or employing fewer workers.