How external forces effect the Australian economy
Real Gross Domestic Product is a measure of GDP. RGDP is an inflation-adjusted measure that reflects the final market value of all goods and services produced at the end of any given year, regardless to any change in price or purchasing power. The inflation rate is a measure of inflation and is the percentage increase in the price of goods and services expressed on a yearly basis. The inflation rate can be measured by observing the consumer price index and the GDP Price Deflator. The unemployment rate is a measure of unemployment. The unemployment rate is a percentage of the total workforce who is currently unemployed. Low rates are seen as inflationary because of the upward pressure on
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So during an expansion when the unemployment rate is low, the inflation rate would be high. And during a contraction when the unemployment rate is high, the inflation rate would be low. The Australian Economy seems to be currently in a sound position. It has been rapidly increasing over the past couple of years and performing strongly against other major global economies. The RGDP growth is increasing at a steady rate indicating a strong return on the goods and services produced. With larger amounts of outputs needed to be produced by the market, unemployment continues to fall. With unemployment at record lows, the Australian Economy is getting the most from its ever increasing labour force. With the economy performing strongly, the rate of inflation rises due to the upward pressure on salaries. The Australian Economy has experienced two main stages of the business cycle. In the early 2000’s the economy experienced a contraction, with a low RGDP and a high unemployment rate due to the low quantities of outputs being produced. However towards the mid to late 2000’s the economy recovered to bounce back into an expansion stage. RGDP growth rose and unemployment fell, thanks largely to a boom in the exports of natural resources.
Gans J, King S, Stonecash R and Mankiw N G, 2005, Principles of Economics, Thompson Australia. Hansen J