Year 9 Economics The Australian Economy The Australian

Year 9 Economics

The Australian Economy The Australian economy can be defined as: all activities undertaken for the purpose of producing, distributing and consuming the goods and services we require to satisfy our needs and wants.

As human beings we all have needs and wants. We satisfy our needs and wants by acquiring goods and services. We are the consumers. The people who make the items are the producers. Consumer demand for goods and services increases More employees earn higher incomes which they spend. Businesses employ more employees Businesses increase production of goods and services

Markets A market is basically a place where we buy and sell items. It is a place where producers and consumers come together to exchange goods and services.

How do you participate in the market? What do you do to interact with the economy and the marketplace? Do you have a bank account? Do you work? Do you get pocket money? Do you spend money at the shops? Do you trade over the internet? These are all ways that you interact with the economy.

How are prices set? The market forces known as supply and demand determine the final price attached to items for sale. Demand is the amount of a good or service that customers will buy. Supply is the amount of the good or service available for purchase.

SO… if demand is higher than supply, prices go up and vice-versa. For example – the price of bananas went up after the storm in QLD because there was few available. Now give your own example!

The Economic Problem As individuals and as a society, our needs and wants will always be greater than the money we have to satisfy the needs and wants. In other words we will always want more than we can afford! This is the fundamental problem facing any economy, no matter how wealthy it is.

Scarcity This problem is called scarcity. We have unlimited wants, but limited resources to obtain those wants. Question? If you could buy one thing…and there was no limit on what it was and money was not an obstacle…what would you purchase?

We can’t just get this item though because we don’t have enough money, or ready access to it. This is a problem because our system works on us always wanting something more and working out ways to get more things as they become important to us.

The main aim of an economic system is to satisfy as many needs and wants as possible. However we can’t have everything, so we must make some important choices along the way.

Opportunity Cost… An important concept to know about when we consider our place in the economy is ‘opportunity cost’. Opportunity cost refers to the things that you have to give up in order to get what you want. For example if you have enough money to buy a PS 3 or a bike (but not enough to buy both) and you decide to buy the PS 3 then the opportunity cost for the PS 3 is the bike.

Wealth or welfare All economic decisions are based around either: A) Survival B) Improving standards of living.

Standard of Living Citizens rely on a countries economy for their overall standard of living. For example: Australia has a strong economy and generally its citizens enjoy a high standard of living. People in Bali are less well off because their country has a weaker economy. However…

A persons individual economic status/situation will also have an impact on their standard of living. For Example: Families with high incomes that live in comfortable homes, drive cars and go on holidays, have a high standard of living Families with low incomes that are poorly fed, clothed and housed have a low standard of living.

A country’s standard of living is closely tied to the quantity of goods and services produced in the economy

Economic Growth and Development… Economic growth is when an economy produces more goods and services than it did in the previous year. The way we measure economic growth is by measuring a nation’s gross domestic product. GDP – This is most commonly measured as the total value(in dollars) of all goods and services produced in a country in a year. Copy the definition of GDP into your booklet.

Economic Growth and Development… So a country experiences economic growth if its GDP grows faster than its population. If a country does not have any economic growth for longer than 6 months, it is said to be in recession. If a recession is very bad and there is a deep and prolonged slump in business activity the country could be in a depression.

GDP and the Great Depression… What happens when GDP shrinks while population grows? If this happens for a long time countries can end up in a depression. One of the most widespread and damaging depressions was The Great Depression began in October 1929, when values of stocks and shares in the United States fell sharply. This fall continued for 9 years and spread to many other countries including Australia. People lost their homes and jobs and poverty was widespread.

Photos of the Great Depression…

Photos of the Great Depression…

Photos of the Great Depression…

Photos of the Great Depression…

Managing the Economy… It is the responsibility of the elected government in Australia to manage the country’s budget. The government may plan to have a balanced budget - where they spend the same amount of money as they make. Or they may have a surplus budget where they spend less than they make and end up with money left over. Or they may need to spend more money than they receive and end up with a deficit budget.

Government Income…where does it come from? Governments in Australia receive their income from taxes and other charges. The federal government gets money through income tax (a percentage of each Australian worker’s earnings is paid to the government). Australia also has a goods and services tax (GST) which adds a small amount of money to lots of things that we buy. State governments and local governments also raise money through taxes, road tolls, property rates etc.

Government Spending… Governments use the money they get to provide community services like schools, roads, hospitals, police and defence forces. So when a government decides to build a new road it creates jobs for many people, who spend their money and create more jobs and so on. Therefore it stimulates the growth of an economy. A government may choose to spend more money than it has to in order to help the economy grow.

The Reserve Bank The government and the Reserve Bank keep a close watch on what the economy is doing. They then prepare their budget in the way they think will most help Australians. The Reserve Bank is not a bank that accepts deposits from individuals.

The Role of the Reserve Bank… The reserve bank operates independently of the government and it changes interest rates (higher or lower) in order to encourage or discourage spending. Low interest rates encourage people to spend and high interest rates encourage them to save. Additionally, it manages Australia's gold and foreign exchange reserves.