Global Economy
The process by which trade, investment, finance, technology, and labour markets are increasingly interconnected across national borders.
Globalisation
a record of all economic transactions between residents of Australia and the rest of the world over a given period of time, usually a year.
Balance of Payments
When an initial increase in spending leads to a larger overall increase in national income.
Multiplier
Derived demand
The demand for labour is derived from the demand for goods and services
Aggregate Demand
C+I+G+X-M
A measure of the distribution of income within a population, ranging from 0 (perfect equality) to 1 (perfect inequality).
GINI Coefficient
The principle that a country should specialise in producing the goods or services it can produce at the lowest relative opportunity cost, leading to gains from trade.
Comparative Advantage
Real economic growth rate
Real GDP cy - Real GDP py/Real GDP py x 100
The total market value of goods and services produced by the residents of a country, regardless of where production takes place.
Gross National Income
The calculation of the Balance of Payments
CA + KAFA = 0
importance of government intervention in managing demand.
Keynesian Economic theory
Rate of inflation
CPI cy − CPI py/ CPI py × 100
Provides long-term loans and aid to support development and poverty reduction.
World Bank
A floating exchange rate that fluctuates due to changes in demand and supply but is influenced by central bank intervention.
Dirty float
The inflation that occurs where an increase in aggregate demand leads to rising demand without rising output
Demand pull inflation
Graph that shows the trade-off between inflation and unemployment.
Phillips Curve
Participation rate
Working Age Population/Labour Force × 100
The theory that in the long run, exchange rates adjust so that identical goods cost the same across countries once currency values are accounted for.
Purchasing Power Parity
Savings-Investment Gap, Trade Dependence, Foreign Investment Reliance
Structural factors contributing to CAD
3 conditions for external stability
Stability of the currency
Sustainability of CA
Serviceability of foreign liabilities
Common resources are overused without regulation
Tragedy of the commons
Calculate the unemployment rate:
Unemployed = 700,000
Labour Force = 15,000,000
Population 15+ = 30 000 000
4.67%
Method of protection: A government policy or program designed to encourage domestic businesses to increase the sale of goods and services to overseas markets, often through measures such as tax concessions, grants, subsidies, or marketing assistance.
Export Incentives
economic growth (%) > (Productivity Growth (%) + Increase in labour force (%))
Okun's law
The Australian Government announces a $5 billion increase in infrastructure spending. The marginal propensity to consume (MPC) is 0.8.
Calculate the total increase in aggregate demand resulting from the initial government spending injection.
$25 billion