Essay on Australian Economic Issues

Economic growth is an increase in the capacity of an economy to produce goods and services from one period of time to another. In simple terms, it refers to an increase in aggregate productivity.

This policy involves increasing government spending and cutting taxes, in order to spur economic output. But if the government decides they need to do the opposite the government may adopt concretionary fiscal policy. This involves a reduction in government spending and an increase in taxes when faced with an overheating economy. But these actions, may have other effects in the economy. For instance, and expansionary fiscal policy may lead to the crowding out of investment.

My findings mostly fit with the idea of the Keynesian model. This model develops a theory that would explain determinants of saving, consumption, investment and production. In that theory, the interaction of aggregate demand and aggregate supply determines the level of output and employment in the economy.

From the article, we can conclude the weakness in fiscal policy. There is no doubt that fiscal policy do contribute to economic growth but it is only for short run, We must understand that increase in government expenditures will end with a increase in tax.

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 over 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

The effectiveness of fiscal police to stimulate economic activities has been a polemic topic for several years. This controversy exists basically due to differences between the Keynesian and the New Classical macro models analysis. However, what it is clear is that the government has the tools to adjust to positive or negative responses of economic fluctuations. Fiscal and monetary policies must be timely adjusted to overpass economic phasedowns using government spending or taxes. Consequently, good decisions have to be done based on different factors that influence fiscal and monetary policies.

Keynesian theory is a concept developed by John Maynard Keynes, in which it is believed that governments should intervene with the economy and how it is dealt. Keynesian economists believe that saving beyond planned investments is a very serious problem that encourages recession. If saving goes beyond investments, there will not be enough demand to purchase the goods and services that the economy is producing. Therefore, leading into a recession, or worse – a depression. Keynesian economists believe that a government stimulus is more effective at boosting aggregate demand than a tax cut because they believe that government intervention is a way to stabilize an economy.

In March 2015, Greg Jericho published an article called Weak, weak growth and six things about the state of Australia’s economy that outlined how in the past 6 out of 10 quarters the Australian

Fiscal policy can also be used to sustain aggregate demand enabling a recovery during a recession or slowing inflation during boom period by moderating rapid activity. A couple of ways of fiscal policy is applied is through government spending and taxes. By reducing taxes and increasing government spending this policy can mitigate a recession and promoted an economic recovery or the government can increase taxes and reduce government spending to economic activity during inflationary business cycles. There is a certain advantage that monetary has over fiscal policies when it comes reaction to an extreme economic event which is since monetary policy is relatively free from the political process it can react to events much faster if and when required

As the financial crisis intensified the government sought to use a mix of monetary and fiscal policies in order to keep inflation around 2% and maintain positive economic growth. Monetary policy aims to control the money supply through the central bank interest rate. Fiscal policy is the way in which a government adjusts its spending levels and tax rates to change the level of output in an economy. Both policies effects can be shown using a IS-LM diagram.

1- Economic Growth Expected to Slow in Major Economies During 2005, http://economics.about.com/od/taxesandeconomicgrowth/a/economicgrowth.htm, Accessed on 23/04/2005.

An increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation. For comparing one country 's economic growth to another, GDP or GNP per capita should be used as these take into account population differences between countries. Economic growths is an increase in what an economy can produce if it is using all its scarce resources. An increase in an economy’s productive potential can be shown by an outward shift in the economy’s production possibility frontier. A country 's economic growth is usually indicated by an increase in that country 's gross

Fiscal policy is a very important part of the economic. Its foundation were laid after the great depression of 1929. Fiscal policy can be defined as action

Economic growth is defined as a positive change in the level of production of goods and services by a country over a certain period of time. It is usually measured using GDP and labour earnings.

Alternatively, if a contractionary fiscal policy overshoots, this could lead to unexpectedly large demand-deficient unemployment. The government would again be forced into a quick reversal of policy switching this time from a stop and adopting a go policy. It can be concluded that at best fiscal policy allows 'coarse not fine tuning' 3. Financing Expansionary Fiscal Policy Operating reflationary policies involve running budget deficits ie the government is spending more than it is receiving in taxation revenue.