Essay, Research Paper: Economic Growth

Economics

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Economic growth refers to the rate of increase in the total production of goods
and services within an economy. Economic growth increases the productivity
capacity of an economy, thereby allowing more wants to be satisfied. A growing
economy increases employment opportunities, stimulates business enterprise and
innovation. A sustained economic growth is fundamental to any nation wishing to
raise its standard of living and provide a greater well being for all. Gross
domestic product (GDP) is the monetary value of all final goods and services
produced in Australia over a specific period of time, usually a year. It is the
total value of production within the economy. The total value of production is
the total value of the final goods or services less the cost of intermediate
goods purchased. GDP at market prices (nominal GDP) measures the value of total
production at the present price level. That is, GDP at market prices measures
both the total physical volume of goods and services produced and the prices at
which these goods and services are sold. GDP at market prices has considerable
usefulness when measuring the growth rates and relative importance of different
industries or sectors within the economy. The method for measuring GDP at market
prices is implied by the following formula; [(current year quantity) x (Current
year price)]. However GDP at constant prices is the most common method of
measuring economic growth. GDP at constant prices excludes the effect of price
variations and allows for the measurement or comparison of real or actual
production levels. Because of this, GDP at constant prices is usually referred
to as real GDP. Real GDP is measured by the following formula; [(current year
quantity) x (based year price)]. A more reliable measure of economic growth is
real GDP per capita; this measurement takes into account both the total
production of the nation and the total population. Real GDP per capita measures
the real income per head of the population. This can be measured by the
following formula; Per capita nominal GDP = Nominal GDP / Population, Per capita
real GDP = Real GDP / Population. Seven factors determine economic growth.
Natural resources such as land, mineral deposits, waterways; climatic conditions
provide an essential foundation to economic growth. Combined with the other
resources of capital, labour and enterprises, natural resources can be developed
and organised to increase the productive capacity if the nation. Consequently
the quality and size of the labour force is a major determinant of economic
growth. Education and vocational training are essential the growth potential of
Australia. The promotion of education and job training schemes increase the
knowledge, skills and flexibility of the workforce that contributes to
potentially higher levels of productivity and efficiency. Wether from natural
increase or immigration population growth can cause a higher level of economic
growth. An increasing population requires increased public spending on housing,
education and other social needs while businesses expectations of increased
demand induces higher levels of private investments. Research, innovation and
technological developements are essential to any economy wishing to increase
their long-term productive capacity. Improved technology lifts overall
efficiency and raises the productive base to the economy. An important
prerequisite for economic growth is capital accumulation. Private investment
spending on plant, machinery and equipment ensures the future production of
goods and services. The greater the degree of capital accumulation the greater
the potential for increased production. High levels of inflation cause market
interest rates to rise and this upward movement ca aversively affect business
confidence and levels of investment. Periods of inflation generally disadvantage
companies by increasing costs and squeezing business profits. The political
stability of the nation is a vital factor in determining economic growth and the
standard of living. Countries experiencing civil disturbance and political
instability are unable to effectively sustain efficient production. As a result
these countries are disadvantaged through their inability ti attract foreign
investment and export markets. Subsequently the overseas sector is a key factor
in determining economic growth within Australia. Exports sales form a
substantial part of Australia’s GDP and foreign capital inflow continues to be
essential to Australia’s total investment and the financing of imports. The
inflow of funds to promote production is not the only stimulus to growth in
Australia. Merchandise trade provides a greater variety and volume of goods and
services, allowing Australia to benefit in terms of improved living standards.
Trade also enables domestic industry to specialise and raise production through
economies of scales. The overseas sector also provides up to date foreign
technology and enterprises to Australia through direct foreign investment. The
importance of a higher economic growth rate is essential to improve the basic
living of the population and provide a greater variety of choices. Basic
benefits of a higher economic growth rate may include better health care and a
better infrastructure.

Bibliography
Dornbush R, and Fisher S, 1994,Macroeconomics, 6th eddition, Mcgrew-Hill Inc,
New York Mankiw N Get al, 1998, Principals of Economics, the Dryden Press Mc
Targgart D, Finley C and Parkin M,1993, Macroeconomics, Edition Wesley Publisher
Ltd Mc Targgart D, Finley C and Parkin M, 1996, Macroeconomics, Edition Wesley
Publisher Ltd Miller R L,1998, Ecnomics today, 6th edition, Harper & Row
Publishers, New York Howlett M, 1994, Economics, Bernard Publishers, South
Australia BIBLIOGRAPHY Dornbush R, and Fisher S, 1994,Macroeconomics, 6th
eddition, Mcgrew-Hill Inc, New York Mankiw N Get al, 1998, Principals of
Economics, the Dryden Press Mc Targgart D, Finley C and Parkin M,1993,
Macroeconomics, Edition Wesley Publisher Ltd Mc Targgart D, Finley C and Parkin
M, 1996, Macroeconomics, Edition Wesley Publisher Ltd Miller R L,1998, Ecnomics
today, 6th edition, Harper & Row Publishers, New York Howlett M, 1994,
Economics, Bernard Publishers, South Australia
Bibliography
Dornbush R, and Fisher S, 1994,Macroeconomics, 6th eddition, Mcgrew-Hill Inc,
New York Mankiw N Get al, 1998, Principals of Economics, the Dryden Press Mc
Targgart D, Finley C and Parkin M,1993, Macroeconomics, Edition Wesley Publisher
Ltd Mc Targgart D, Finley C and Parkin M, 1996, Macroeconomics, Edition Wesley
Publisher Ltd Miller R L,1998, Ecnomics today, 6th edition, Harper & Row
Publishers, New York Howlett M, 1994, Economics, Bernard Publishers, South
Australia BIBLIOGRAPHY Dornbush R, and Fisher S, 1994,Macroeconomics, 6th
eddition, Mcgrew-Hill Inc, New York Mankiw N Get al, 1998, Principals of
Economics, the Dryden Press Mc Targgart D, Finley C and Parkin M,1993,
Macroeconomics, Edition Wesley Publisher Ltd Mc Targgart D, Finley C and Parkin
M, 1996, Macroeconomics, Edition Wesley Publisher Ltd Miller R L,1998, Ecnomics
today, 6th edition, Harper & Row Publishers, New York Howlett M, 1994,
Economics, Bernard Publishers, South Australia BIBLIOGRAPHY Dornbush R, and
Fisher S, 1994,Macroeconomics, 6th eddition, Mcgrew-Hill Inc, New York Mankiw N
Get al, 1998, Principals of Economics, the Dryden Press Mc Targgart D, Finley C
and Parkin M,1993, Macroeconomics, Edition Wesley Publisher Ltd Mc Targgart D,
Finley C and Parkin M, 1996, Macroeconomics, Edition Wesley Publisher Ltd Miller
R L,1998, Ecnomics today, 6th edition, Harper & Row Publishers, New York
Howlett M, 1994, Economics, Bernard Publishers, South Australia

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