The Economic Economy Of Australia - 1777 Words

Every year, the statistical organization of each country will count the gross domestic product (GDP) of the country, and calculate the growth rate compared with other countries. In general, GDP growth has become an important manifestation of the country s comprehensive national strength. In economics, GDP is an important index of a country s economic health. It is important because each component of GDP will represent in daily life. In Australia, GDP growth dependent on its service sector, manufacturing and agriculture, in which the service sector accounted for the highest proportion of total GDP. Moreover, Australia is a country which has rich resources, and this become another economic growth point that different from other countries.†¦show more content†¦For different purpose, the different GDP frames will be used. â€Å"Real GDP is the value of final goods and services produced in a given year when valued at the prices of a reference base year; Nominal GDP is the value of final goods and services produced in a given year when valued at the prices of that year. The maximum level of real GDP that can be produced while avoiding shortages of labour, capital, land and entrepreneurial ability that would bring rising inflation is called potential GDP (McTaggart, Findlay Parkin, 2012).† In this essay, GDP stands for real GDP, and real GDP can be calculated by either the expenditure approach or the income approach. In this essay, the expenditure approach will be used. Aggregate expenditure describes the relationship between total consumption and national income. It can be calculated with a formula: AE = C + I + G + NX. In this formula, the C stands for household consumption, the I stands for investment expenditure, the G stands for government expenditure and the NX stands for net export expenditure. The change of these components will eventually affect real GPD. The expenditure approach is important because it can tell the government of consumersâ⠂¬â„¢ demand so that the government can better allocate resources. It can also convey the economic situation signals to the central bank to help them to carry out macroeconomic regulation and control. The figure 1 below shows the aggregate expenditure