BSB113: Final Exam
Question 1:
Gross Domestic profit (GDP) has improved the stand of living and global economies all around the world, but does it have its limitations to measuring the economic well being. GDP has flaws and does not amount for the nation’s welfare and take into account the quality of life. A way in such of doing this is called an Ease of Living Index. This measures the quality of life, economic ability and sustainability.
“When our measures of development go beyond an inimical fixation towards higher production, our policy interventions will become more aligned with the aspects of life that citizens truly value, and society will be better served”(HBR,2019).
Another part of current economies that makes Gross domestic product chronologically misguided is its unbalanced spotlight on what is created. The present social orders are progressively determined by the developing assistance economy – from the shopping for food on Amazon to the taxis set up for Uber. As the nature of experience is overriding persistent creation, the idea of Gross domestic product is rapidly dropping. We face a daily reality such that web based life conveys troves of data and diversion at no cost by any stretch of the imagination, the incentive for which can’t be epitomised by oversimplified figures. Our proportion of monetary development and improvement likewise needs to adjust to these adjustments so as to give a progressively exact image of the advanced economy.
Question 2: Unemployment and Inflation
Cyclical
– also referred to as ‘demand deficient’ unemployment
– due to economic fluctuations
Structural
arises from changes in technology and structure of economy
Frictional
arises from normal labour turnover (includes seasonal unemployment)
Joblessness happens when somebody is willing and ready to work however doesn’t have a paid job. The unemployment rate is the percentage of individuals in the work force who are jobless. Thusly, estimating the joblessness rate requires distinguishing who is in the work force. A government policy to reduce unemployment is to reduce the power the trade unions have. If the trade unions have the power to bargain for wages above the market clearing level then they could cause real wage unemployment.
When the economy is operating below its optimal potential this can be cyclical unemployment. With an increasing amount of people looking for jobs, firms will offer lower wage increases. This contributes to lower inflation A government policy that stimulates this is expansionary monetary policy. This can help reduce cyclical unemployment.
On the other hand, structural suggest unemployment is occurring when the economy is performing well. “this type of unemployment should not directly influence wages or inflation and is best addressed through policies that focus on skills and the supply of labour” (RBA,2020). Structural unemployment most likely be longer lasting in the economy. This is due to it taking a number of years to develop new skills and as a result could face long term unemployment. This intern diminishes their chances at being employable in the future if it is not possible to gain a new skill. A possible way of combatting structural unemployment is education in a new industry providing jobs for education of the new skill and giving new jobs for the future.
Question 4: Fiscal Policy
“On 30 March, the Government announced the $130 billion JobKeeper Payment to help keep Australians in jobs as we deal with the significant economic impact from the Coronavirus. This brings the Government’s total support for the economy to $320 billion … representing 16.4 per cent of annual GDP.” (The Treasury, 2020).
This is an appropriate form of action taken by the Australian Government due to this unforeseen pandemic. In the short term the stimulus packages set out to give some stability to the Australian Economy and prevent unemployment from skyrocketing. The implementation of expansionary fiscal policy will deal with the market failure and if carefully timed will help the economy recover faster post pandemic.
“The build up of corporate and household debt, increasing business closures and unemployment, and increasing economic uncertainty may reduce future investment and consumption. Where the recovery is anaemic, there may be a case for maintaining expansionary fiscal policy for a sustained period to stimulate broader consumption and investment, and build confidence”(OECD, 2020).
Having a strong Fiscal Policy to ride out of the Covid Crisis is vital for Australia’s Economy to bounce back. The Australian Government has shown through the large stimulus packages that they are willing to do what it takes to get the economy moving again and the use of the fiscal policy will aid that procedure.
Question 5: International Trade
Australia is an open economy successfully integrated globally with large countries such as China, India and the USA. Trade is vital in an ever growing economy like Australia’s. It provides jobs and prosperity. Trading internationally lets Australia explore new opportunities to expand its business and grow as a country. Trade will continue to enhance and provide economic stability for Australians moving forward in the future ( DFAT.gov, 2020).This is why it is vital for the recovery post Covid-19.
“The so-called Asian Strategy for Recovery and Reconstruction after COVID-19 warns of a “prolonged health crisis and lasting economic stagnation” without international cooperation”(ABC, 2020).
The key to the worlds global economic recovery lies in the trade agreements internationally being setup. Australia wants to have a quick turn around and the way to achieve this is through reawakening the international trade in Australia and other huge economic based countries in Asia.