DETERMINANTS OF ECONOMIC GROWTH Flashcards
What is potential economic growth?
The determinants of potential economic growth are the things that increase the capacity of the economy to produce more goods and services.
Australia population and population growth rate
Australia’s current population is about 26 million people. We have had an average population growth of 1.4% over the past 40 years.
What natural increases mean
Having more births than deaths
Three things that increase potentail economic growth?
Population, Participation rate,Productivity
What is actual economic growth?
Actual economic growth is determined by how much households, firms and government spending takes place.
Percent of increase in population due to natural increases
40%
Effects of population on demand
Increased population means increased demand for G&S. This then increases the demand for productive factors of production, which includes labour.
Population growth on labour force
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.
Migration effect on economic growth
Population growth through migration promotes economic growth, as it allows the transfer of wealth, knowledge and skills from overseas.
What is net migration mean for population increase
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.
What percent of population growth from net migration
60%
What is female participation rate
Female participation rates have increased for all age groups, and for all occupations, especially in the services sector.
Why is participation rate important to the economic growth
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.
Participation Rate definition
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.
Why has female participation rate increased
- 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.`
What is the participation rate on July 2023
In July 2023 our participation rate was about 67.0%
The relationship between economic growth and participation rates
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.
Definition of productivity
Productivity is the efficiency with which firms, industries and the economy as a whole convert factor inputs (labour, capital, raw materials) into output.
Productivity examples
Examples of productivity include the introduction of ATM’s, online banking, mobile banking for the banking industry.
When does productivity grow
Productivity grows when outputs grow faster than inputs. This means that existing inputs are more efficient.
Two types of productivity
Labour and capital productivity
What is capital productivity
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
What is labor productivity
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.
Productivity effects
- 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
