Chapter 4: Economics Flashcards Preview

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Flashcards in Chapter 4: Economics Deck (16)
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1
Q

Economic Activity

definition

A
  • Involves production, distribution, and buying and selling of goods and services
  • Measured with GDP
2
Q

Economic Activity affects:

Business Operation

A
  • During EX, luxurious items are produced more

- During EC, business operations focus more on producing necessities

3
Q

Economic Activity affects:

Consumer confidence

A
  • During EX, consumers are more likely to spend as they are more confident with their level of income
  • Speculate that their income will grow more
  • More likely to borrow and spend
4
Q

Economic Activity affects:

Company’s entry into the market

A
  • During EX, companies entering a market has lower risk
  • More likely to borrow and spend
  • Result in higher success as economic activity is strong and expected to continue growing
5
Q

Economic Activity effects:

Economic Activity of trading partners

A
  • If China’s economy is expanding, Australia’s economy will expand too
  • Their income is growing together with their SoL
  • Demand for more of Australia’s exports and raw materials to build infrastructure and produce more goods
6
Q

Interest Rates

definition

A
  • The cost of borrowing money

- Determined by RBA

7
Q

Interest Rates affects:

Consumers ability to purchase

A
  • When IR is low, consumers are more likely to take up loan to purchase g/s
  • Debt repayment is low
8
Q

Interest Rates affects:

Businesses willingness to invest

A
  • When IR is low, businesses are more likely to take up loan to expand business
  • Debt repayment is low
  • Does not affect much of the business’ cash flow
9
Q

Discretionary Spending

definition

A
  • Affects discretionary income

- Discretionary income is the income left after spending life’s essentials

10
Q

Discretionary Spending affected by:

Consumer’s income level

A
  • When consumer’s income level increases, they are more likely to spend
  • Confidence level is high
11
Q

Discretionary Spending affected by:

Speculation

A
  • If consumers speculate that the economy is contracting, their discretionary income would not matter as their confidence is low
  • Concern with their job security and income level
12
Q

Currency Fluctuation

definition

A

The swing in currency value due to floating exchange rate system

13
Q

Currency Fluctuation affected by:

Interest Rate

A
  • The cost of borrowing money
  • If IR increases, foreigners money deposit increases
  • DD for AUD increases, AUD app
14
Q

Currency Fluctuation affected by:

Inflation Rate

A
  • The rate at which price increases overtime
  • If inflation increases, goods will seem relatively expensive to foreigners
  • DD for goods decreases, DD for AUD decreases, AUD dep
15
Q

Currency Fluctuation affected by:

Speculation

A
  • When consumers speculate that AUD would app and want to make a profit out of it later, they would want to deposit more money into Aus bank
  • DD for AUD increases, AUD app
16
Q

Currency Fluctuation affected by:

Competitiveness level of goods

A
  • When quality of Aus goods improves, DD for Aus goods increases
  • DD for AUD increases, AUD app