DETERMINANTS OF ECONOMIC GROWTH

Question 1

What is potential economic growth?

Answer 1

The determinants of potential economic growth are the things that increase the capacity of the economy to produce more goods and services.

Question 2

Australia population and population growth rate

Answer 2

Australia’s current population is about 26 million people. We have had an average population growth of 1.4% over the past 40 years.

Question 3

What natural increases mean

Answer 3

Having more births than deaths

Question 3

Three things that increase potentail economic growth?

Answer 3

Population, Participation rate,Productivity

Question 3

What is actual economic growth?

Answer 3

Actual economic growth is determined by how much households, firms and government spending takes place.

Question 4

Percent of increase in population due to natural increases

Answer 4

40%

Question 5

Effects of population on demand

Answer 5

Increased population means increased demand for G&S. This then increases the demand for productive factors of production, which includes labour.

Question 6

Population growth on labour force

Answer 6

Population growth increases the labour force. This is the amount of people who are able to work. Migration has a more immediate impact than natural increases. This is because migrants are quite often of working age, and often come qualified and with skills.

Question 7

Migration effect on economic growth

Answer 7

Population growth through migration promotes economic growth, as it allows the transfer of wealth, knowledge and skills from overseas.

Question 7

What is net migration mean for population increase

Answer 7

Net migration is immigration less emigration. Our population has been increasing by about 220,000 per year due to net migration. Obviously this figure was very low during COVID-19.

Question 7

What percent of population growth from net migration

Answer 7

60%

Question 7

What is female participation rate

Answer 7

Female participation rates have increased for all age groups, and for all occupations, especially in the services sector.

Question 8

Why is participation rate important to the economic growth

Answer 8

High labour force participation rates are important to our economic growth as it means we are making use of our stock of available human resources.

Question 8

Participation Rate definition

Answer 8

The participation rate is the proportion of people over the age of 15 who are in paid work or who are looking for paid work.

Question 9

Why has female participation rate increased

Answer 9

• Lower barriers to female participation at work.
• Changing attitudes to work and family
• Increasing equality of workplace opportunities
• Two incomes better meet family cost of living challenges.`

Question 9

What is the participation rate on July 2023

Answer 9

In July 2023 our participation rate was about 67.0%

Question 10

The relationship between economic growth and participation rates

Answer 10

Greater participation means a higher proportion of people are producing goods and services.

A higher proportion earning an income to satisfy their needs and wants

Rising female participation increases household incomes and a higher level of aggregate demand.

Increased participation by older workforce participations increases the level of experience and therefore the transfer of knowledge.

Question 11

Definition of productivity

Answer 11

Productivity is the efficiency with which firms, industries and the economy as a whole convert factor inputs (labour, capital, raw materials) into output.

Question 12

Productivity examples

Answer 12

Examples of productivity include the introduction of ATM’s, online banking, mobile banking for the banking industry.

Question 13

When does productivity grow

Answer 13

Productivity grows when outputs grow faster than inputs. This means that existing inputs are more efficient.

Question 14

Two types of productivity

Answer 14

Labour and capital productivity

Question 15

What is capital productivity

Answer 15

The value of output divided by the value of all capital inputs. This is usually increased by not only better capital, but also the training and education to be able to utilise the capital. New tech and innovation to improve capital productivity

Question 16

What is labor productivity

Answer 16

Refers to the output per worker. Less hours worked for the same output, or more output for the same hours worked. Labour productivity can be increased through experience, training, education and improvement in skills.

Question 17

Productivity effects

Answer 17

• Goods and services become cheaper (or rise at a slower rate), as there are fewer hours of labour required to make them.
• Likely to improve the quality of products produced
• Greater efficiency usually leads to innovation and therefore new and improved products.
• Increased productivity allows for wage rises à higher aggregate spending