Sources Of Economic Growth

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Analyze the main sources of economic growth in the Australian economy and the policies the Australian government can use to achieve a higher sustainable rate of economic growth.

Economic growth is considered to be an increase in the volume of goods and services that an economy produces over a period of time. It is calculated through the change in real GDP over a certain time period. The main sources of economic growth are the changes in aggregate demand and supply, which encompass various factors, which influence the levels of economic growth in both short and long term periods. The Australian government also applies a range of policies in order to sustain a high level of economic growth in order to allow national wealth to increase and to
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Changing levels of interest rates will also impact the level of consumption by individuals; if there is a rise in rates, individuals will be more willing to save their income but if there is a decrease in interest rates, this will lead to individuals to be more willing to spend. The two main factors that influence business investment are the cost of capital equipment and business expectations. The cost of capital equipment can be influenced by the change in interest rates; a drop in interest rates would make borrowing funds cheaper whilst an increase in interest rates makes borrowing funds in order to purchase the equipment more expensive. Any alterations to government policies can also influence the cost of capital labor e.g. if the business was allowed to claim the full cost of capital equipment immediately, this means that their tax charges would be reduced which makes capital equipment cheaper. A change in the price/productivity for labor will affect the relative cost of labor to capital equipment e.g. if the cost of labor decreased in comparison to the cost of capital equipment, this will make labor more appealing to businesses. Meanwhile, future business expectations can also influence the level of investment. A change in prospected demand for a good can influence expectations, as

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