Monty Cantsin
19th March 2004, 01:58
just so you guys know, this is a Practice essay I had to do in like 40 minutes. So I’ve typed it up and want your thoughts.
Economics essay: economic growth.
There are many different influences on economic growth, which vary from physical actions such as productivity of workers to physiological effects of consumer confidence. Now within the Australian nation at least the government has been able to control growth at a steady rate over the last decade. How has this been achieved? Well this will be the crux of essay dealing with monetary influences on growth, through the apparatus of the reserve bank of Australia (RBA), Fiscal policy the governmental body directly controlling tax and in turn government spending, Also Macroeconomics dealing with direction of trade and protectionism.
One of the main roles of the RBA is its monetary policy such as interest rates, which have a significant influence on economic growth. How do they have such an influence? Well let’s say Australia has high interest rates people putting money in banks of greater return for lending their legal tender, thus less expenditure, thus less aggregate demand which is the main factor according to neo classical economist such as john Keynes that drives a nation’s economy. High interest rates thus when a person leads to the bank receives higher returns but on the flip side of that when a bank leads to an individual such as in a home loan has to pay much higher interest payments. As you can see high interest rates dry up cash flow which is there main aim, thus they reduces economic growth say when an economy over heats. But economics is not an exact science because when there are high interest rates people invests in business, if they can afford their home loan. Now lets say interest rates are low this contrary to high interest rates increases the cash flow because returns on investment are lower therefore people spend, loan and invest in capital goods. With all works to increase aggregate demand thus increasing economic growth. How has this been mutilated through the last decade? Well the labour government of the early 1990’s using interest rates to decrease cash flow and cool the economic conditions of high growth. Now the Howard government has used interest rates to promote growth lowering them so we have more first home buyers and increased total demand of products which domestically are driving our economy with the housing sector. Lately interest rates are increase to stop the over heat of the housing sector.
Now a major influence on economic growth is taxation and government spending, Keynesian economics believes that decreased corporate tax and increased government spending benefit economic growth. This may benefit corporations and business it has many down falls, Such as increased inflationary activity because that’s what increased spending does. How government counteracts this effect, it lowers or pegs the wage levels meaning if the practice continues on people become under employed, thus leading to decreases in consumer spending with is a force that moves against aggregate demand and therefore economic growth. So the Keynesian model is like spending in the hard times for the future, governments suppress workers so that companies can continue to trade, thus diminishing the power of governments and workers. Historically this has been used by Australian governments but over the past decade subsides only remain (but being removed soon) in the textile clothing and footwear industry (TCF) and the automobile industry.
Direction of trade has been redirected more toward Asia with its growing markets increasing the demand upon Australian produces, with our productivity so high such as in the case of Australian rice grower producing 8% more efficient then Japanese growers. With this great boost in productivity through technology and farming practices you’d think we would be very competitive on the Japanese’s markets but because of external factors such as japans tariffs our growers can’t gain access to their consumers and a fair level. Our government does the same thing with TCF and the automobile industry, protecting them from over seas markets through the use of protectionist measures. An example of where the Australian government has used direction of trade during the Asian crises avoiding the fall out by redirecting trade to other nations not affected by the crises.
An increase in productively decreases the cost per unit of a product thus leading to greater profits which lead to more spending, thus increases aggregate demand but also increasing inflationary expectations which is counter productive to total demand if left unchallenged. This is a microeconomic effect is achieved by increased in work ethic or increased technology. the government achieves this through tax incentives for research and development (R&D), thus maintaining economic growth.
Technology improves economic growth through a shift between stm’s and etm’s. This increases the value of a product adding to the gross national product.(GDP). The government achieves this by R&D tax incentives.
Overall the government has been able to maintain the economic growth of 2-3% which Keynes said levels out employment and even reached 4% growth which (according to Keynes) increase employment. This continued standardized economic growth. Has been achieved over the last decade by effective use of monetary policy in reducing cash flow but at other times to jump start the housing sector, Fiscal policy that promotes R&D and at the same time lowers corporate tax, possible problems with external factors being avoided by redirection of trade, decreased protection further intergrading world markets with our own, increasing productivity with better technologies and work practices.
Comments?
Economics essay: economic growth.
There are many different influences on economic growth, which vary from physical actions such as productivity of workers to physiological effects of consumer confidence. Now within the Australian nation at least the government has been able to control growth at a steady rate over the last decade. How has this been achieved? Well this will be the crux of essay dealing with monetary influences on growth, through the apparatus of the reserve bank of Australia (RBA), Fiscal policy the governmental body directly controlling tax and in turn government spending, Also Macroeconomics dealing with direction of trade and protectionism.
One of the main roles of the RBA is its monetary policy such as interest rates, which have a significant influence on economic growth. How do they have such an influence? Well let’s say Australia has high interest rates people putting money in banks of greater return for lending their legal tender, thus less expenditure, thus less aggregate demand which is the main factor according to neo classical economist such as john Keynes that drives a nation’s economy. High interest rates thus when a person leads to the bank receives higher returns but on the flip side of that when a bank leads to an individual such as in a home loan has to pay much higher interest payments. As you can see high interest rates dry up cash flow which is there main aim, thus they reduces economic growth say when an economy over heats. But economics is not an exact science because when there are high interest rates people invests in business, if they can afford their home loan. Now lets say interest rates are low this contrary to high interest rates increases the cash flow because returns on investment are lower therefore people spend, loan and invest in capital goods. With all works to increase aggregate demand thus increasing economic growth. How has this been mutilated through the last decade? Well the labour government of the early 1990’s using interest rates to decrease cash flow and cool the economic conditions of high growth. Now the Howard government has used interest rates to promote growth lowering them so we have more first home buyers and increased total demand of products which domestically are driving our economy with the housing sector. Lately interest rates are increase to stop the over heat of the housing sector.
Now a major influence on economic growth is taxation and government spending, Keynesian economics believes that decreased corporate tax and increased government spending benefit economic growth. This may benefit corporations and business it has many down falls, Such as increased inflationary activity because that’s what increased spending does. How government counteracts this effect, it lowers or pegs the wage levels meaning if the practice continues on people become under employed, thus leading to decreases in consumer spending with is a force that moves against aggregate demand and therefore economic growth. So the Keynesian model is like spending in the hard times for the future, governments suppress workers so that companies can continue to trade, thus diminishing the power of governments and workers. Historically this has been used by Australian governments but over the past decade subsides only remain (but being removed soon) in the textile clothing and footwear industry (TCF) and the automobile industry.
Direction of trade has been redirected more toward Asia with its growing markets increasing the demand upon Australian produces, with our productivity so high such as in the case of Australian rice grower producing 8% more efficient then Japanese growers. With this great boost in productivity through technology and farming practices you’d think we would be very competitive on the Japanese’s markets but because of external factors such as japans tariffs our growers can’t gain access to their consumers and a fair level. Our government does the same thing with TCF and the automobile industry, protecting them from over seas markets through the use of protectionist measures. An example of where the Australian government has used direction of trade during the Asian crises avoiding the fall out by redirecting trade to other nations not affected by the crises.
An increase in productively decreases the cost per unit of a product thus leading to greater profits which lead to more spending, thus increases aggregate demand but also increasing inflationary expectations which is counter productive to total demand if left unchallenged. This is a microeconomic effect is achieved by increased in work ethic or increased technology. the government achieves this through tax incentives for research and development (R&D), thus maintaining economic growth.
Technology improves economic growth through a shift between stm’s and etm’s. This increases the value of a product adding to the gross national product.(GDP). The government achieves this by R&D tax incentives.
Overall the government has been able to maintain the economic growth of 2-3% which Keynes said levels out employment and even reached 4% growth which (according to Keynes) increase employment. This continued standardized economic growth. Has been achieved over the last decade by effective use of monetary policy in reducing cash flow but at other times to jump start the housing sector, Fiscal policy that promotes R&D and at the same time lowers corporate tax, possible problems with external factors being avoided by redirection of trade, decreased protection further intergrading world markets with our own, increasing productivity with better technologies and work practices.
Comments?