Question:
Explain about the Gross Domestic Product.
In current, GDP (Gross Domestic Product) is considered as one of the major quantitative technique that plays a significant role in order to measure economic activities of a nation. Along with this, GDP is also valuable to signify the monetary value of all goods/services that are produced within geographic borders of a nation over a particular period of time. Moreover, GDP also plays a vital role to evaluate as well as determine the overall economic and financial performance of a nation for the global assessments (Mankiw, 2014). Consequently, GDP is measured as one of the most significant indicators that are used to measure the economy health of a nation in an appropriate way.
In addition to this, there are numerous methods or approaches such as: income approach, production approach and expenditure approach that play a major role in order to determine and evaluate the GDP of a nation in an effective and an appropriate manner. All the approaches of GDP present detailed information related to the economic situation of a nation over a specified period of time (Mankiw, and Taylor, 2006). In this way, GDP is considered as the most important measure in order to evaluate economic health as well as wealth of a nation in an effective way.
On the other hand, this research paper is helpful in order to develop a clear understanding about GDP. Moreover, in this research paper, the five years GDP of Australia would be judge against with the GDP of Canada. In this way, this research paper would be able to appraise that which nation’s economy is more industrious for the other nations. Apart from this, this research paper would also be helpful in order to discuss the major factors that affect the GDP of the both nations Australia and Canada. In this way, this paper would be beneficial for the researchers to increase their knowledge about GDP.
In general, GDP reveals the final economic value of the products/services that are produced by the business organizations of a nation in a specified time period. Along with this, the annual growth rate of GDP is the rate that is helpful to determine the economic performance of a nation in a particular period of time (Kroon, 2007). In addition, both Australia and Canada comes in the developed economy that is a sign of strong economic situation of the nations.
On the other hand, in Australia, the Australian Bureau of Statistics (ABS) presents all the information along with data that are related to the GDP of the nation. Apart from this, in the Canada, national statistical agency of Canada distributes all the information and data related to the GDP of the nation (Mirow, 2016). Moreover, the World Bank plays a significant role in order to provide all the information and data related to the GDP of the countries. The data provided by the World Bank would be useful to estimate and evaluate the economic performance in term of GDP of both nations. In addition to this, the information and data published by the World Bank would also be beneficial to weigh up the actual and real GDP growth rate of the nations in an effective and an accurate manner (The World Bank Group. 2016).
In addition to this, it should also be noted down that, the economic or financial crisis of 2007-2008 has influenced the economy of the nations in a negative way. Consequently, it has also declined the GDP growth rate of the nations at that time period (Schuerkens, 2012). For case, after the financial crisis of 2007-08, in 2009, the GDP annual growth rate of Australia was 1.73%. Moreover, the GDP annual growth rate of Canada was -2.71% that is an indication of negative economic performance of the nation. On the basis of the comparison between the GDP of Australia and Canada, it should be noted down that, for the period of the recession, the GDP of the Australia was stronger than Canada (Nielsen, 2016).
Along with this, the below given table is helpful to represent the annual growth rate of GDP of both nations.
|
Year |
Australia GDP Annual Growth Rate |
Canada GDP Annual Growth Rate |
|
2011 |
2.40% |
3.00% |
|
2012 |
3.60% |
1.90% |
|
2013 |
2.40% |
2.00% |
|
2014 |
2.50% |
2.40% |
|
2015 |
3.00% |
1.20% |
(Source: The World Bank Group, 2016)
By considering the data of the above table, it can be observed that, the annual growth rate of Australia is rising on the regular basis. In 2015, the GDP rate was 3.00% that was .50% higher than 2014. In 2014, the annual growth rate was 2.50% only. Moreover, in the year 2013, 2014 and 2015, the GDP growth rate of Australia was 2.40%, 2.50% and 3.00% in the same way (McEachern, 2012). In this way, it should be noted down that there is an increase in the annual GDP rate of the Australia.
Apart from this, on the basis of the above table, it can also be analyzed that, the annual GDP rate of Canada was decreased in 2015. For example, in 2014, the GDP rate of Canada was 2.40% and 1.20% in 2015. For this reason, the GDP rate was half in the year 2015 that show negative trends in the economy of the Canada. On the other hand, the above table is also helpful to represent that, the GDP of Australia is increasing every year; however the Annual GDP growth rate of Canada is turning down. Moreover, in 2012, the GDP rate of the Australia was 3.60% other than Canada was only 1.90% (Karanfil & Li, 2015). Same as, in 2013, the GDP growth rate of the Australia was 2.40% although Canada was only 2.00%. These data indicate that the GDP of Canada is not as good as Australia.
At the same time, On the basis of the comparison between the GDP of Australia and Canada, it should be noted down that, the GDP rate of the Australia is stronger than Canada. Moreover, it can also be analyzed that, after the financial crisis 2007-2008, the annual GDP growth rate of the Australia has increased on the regular basis (Kenen, 2008). In this way, the GDP of Canada reveals the market fluctuation as well as negative economic trends that are affecting the annual growth rate of the Canada.
Apart from this, the increased GDP rate of Australia demonstrates that the economy of the nation is less fluctuated than the economy of Canada. Consequently; there is a expected increase in the annual GDP growth rate of the Australia. Moreover, an important factor is that, Australia also has strong average GDP rate in comparison to Canada. For case, the Average GDP rate of Australian is 3.50%; whereas the average GDP annual growth rate of Canada is only 2.4% (Herndon, Ash, & Pollin, 2014). Thus, it can be said that, Australia has strong economic conditions in comparison to Canada.
Moreover, the below give chart is also helpful to provide an effective comparison of GDP of Australia and Canada. Moreover, with the help of the chart, it can be clearly understood that how the GDP rate of both nations has been changed in the last five years.
(Source: TRADING ECONOMICS. 2016)
In the above given chart, the blue line represents the GDP rate of Australia while the black line points out the GDP rate of Canada. The graph is helpful to show that there is a decrease in the GDP rate of Canada that reflects the highly fluctuated economic trends in the nation. In addition to this, the chart is also helpful to demonstrate that the economy of Canada is fluctuated than Australia. Along with this, the graph represents that there is an increase in the GDP of Australia in the last five years. The increased GDP rate of Australia points out positive as well as strong trends in the economy of the nation (TRADING ECONOMICS. 2016). That’s why, on the basis of above chart, it can be estimated that, the economy situation of Australia is favorable for the nation as compare to Canada.
On the other hand, it is also essential to know the major causes that increase the GDP rate of Australia in the last five years. For case, the major reason behind it is that the government of the nation provides support to the business organizations that offer growth opportunities to the nation (Shahiduzzaman & Alam, 2014). Apart from this, the increased demand of the raw material is also the major reason that increased the GDP of austral in the previous years. Moreover, high investment in the mining sector also improved the GDP rate of the nation in the last five years. For case, the growth in the mining sector has improved the production capacity of the nation and consequently; there is an increase in the economic condition as well as GDP of the nation (Thorpe & Leitão, 2014).
In addition to this, an increase in the purchasing power & investment, growth in price of commodity, boom in coal & iron, and so on are the main factors that improve the economic conditions and also improve the GDP level of the nation in an effective and a more comprehensive manner. Along with this, the government of the nation also played a major role in order to attract the Asian countries to invest in the Australian market that also improved the GDP of the nation in an effective manner (Sabillon, 2008). Moreover, after the financial crisis of 2007-08, the boom in the financial as well as banking sector of the Australia also improved the economic condition of the nation. Also, in Australia, there can be seen a rapid growth in the service and manufacturing industry that improved the annual GDP growth rate in the last five years.
Apart from this, in Canada, positive export, more government & private consumption, and high demand of the domestic products/services play a significant role to improve the economy of the nation. Moreover, the service business sector of Canada directs the economy of the nation and also plays a significant role in order to improve the GDP rate of the nation in an effective and a more comprehensive manner (Marthinsen, 2008). In addition to this, banking & finance sector, real estate services, public administration and so on also improved the GDP rate of the nation. Also, the oil and logging sectors also play a significant role in order to improve the economic condition and to increase GDP rate of the nation.
It should be noted down that, there are lots of factors that have an impact on the economy as well as GDP rate of the nation in a direct and indirect manner. Along with this, these factors also influence the GDP of the nation in both positive and negative manner. For case, increased unemployment rate, inflation, decreased price of commodities, decreased investment level, higher interest rates, weather conditions, and so forth are the major factors that have an influence on the GDP of the nations (Harris & Roach, 2013).
There are numerous factors that affect the GDP of Australia. These factors are as below:
Increased Unemployment Rate: The increased unemployment rate is a major factor that influences the economy as well as GDP of a nation in a negative way. It should be noted down that, the unemployment rate of Australia is high. The main reason behind it is that there is a lack of employment opportunities in Australia (Focus Economics. 2016). Along with this, the below given graph is helpful to represent that the unemployment rate of Australia is increasing and for that reason; it is affecting the economic health of the nation in a negative way.
(Source: TRADING ECONOMICS, 2016)
Along with this, the above graph is also helpful to indicate that the unemployment rate of Australia is constant at 5.7% and there are no changes in the unemployment rate in the last years. The increased unemployment rate has a major impact on the economic as well as GDP of the nation.
Inflation: Inflation is also an important factor that affects the GDP of a nation. Inflation is also present in the economy of Australia and also plays a dangerous role in order to decrease the economy level of the nation. Along with this, the below given chart is also helpful to understand the impact of inflation on the economy and GDP of Australia (Focus Economics. 2016).
(Source: TRADING ECONOMICS. 2016)
On the basis of the above graph, it should be noted down that, there is a rapid increase in the inflation rate in the 2013 and 2014 that influenced the economic and GDP of the nation in a direct way. Moreover, it should also be observed that, the government of Australia took steps and also use effective economic models as well as policies to manage the inflation that reduced the inflation rate in 2015 and 2016.
Interest Rates: High interest rate is also a major factor that influences the economy and GDP of a nation in a direct manner. The interest rates of Australia are higher than any other developed countries. The high interest rates of Australia have been created numerous challenges and serious issues to the government of the nation. The main reason behind it is that the high interest rates of the nation affect the economy as well as GDP rate of the nation in a negative way. The higher interest rates reduce the numerous of investors and consequently influence the economic growth of the nation in a negative way (Thorpe, & Leitão, 2014). The below given graph is helpful to represent the interest rates of the Australia in the past years.
(Source: TRADING ECONOMICS. 2016)
Decreased Price of Commodities: Decreased price of commodities is also a major factor that has influenced the economy and GDP of Australia in a negative way. The below given chart is helpful to demonstrate a decrease in the price of commodities in the last ten years.
(Source: TRADING ECONOMICS. 2016)
On the basis of the above graph, it should be noted down that, there is rapid decrease in the price of commodities in the last years that has been influenced the economy and GDP rate of Australia in a negative way.
Government Spending: The low government spending also affects the GDP of a nation. In Australia, a low government spending influences the economy as well as GDP of the nation. The main reason behind it is that the government of the nation did not make a satisfactory investment in the major areas or programs such as: social welfare & programs, infrastructure, investment, and so forth (Anderson, & Strutt, 2014). Consequently, the low spending of the government influenced the economy growth and GDP of Australia.
Government Investment: Investment is an important factor that improves the economy of a nation. But, in Australia, there can be observed a low level of investment that influenced the prosperity level of the nation (Victor, 2012). Along with this, the issue relates with the transport, communication, etc. increased the costs for the business organizations and that consequently; influenced the economy and GDP of the nation in a negative manner.
Consumer Confidence: The consumer confidence level also has an impact on the GDP of the nation. But, after the financial crisis 2007-2008, the consumers of Australia have begun to save money and also avoid the spending to protect their life in future economic recession. It points out that there is low level of consumer confidence as regards to the goods/services (Égert, 2015). The low confidence level of consumers has been affected the economy and GDP of the nation in a negative way.
Apart from this, there are numerous factors that affect the economic condition as well as GDP of the nation. These factors are as below:
Trade Agreement: In current, the Canada has made lots of free trade agreements with countries that has been influenced the economic and GDP of the nation in a negative manner (Arnold, 2006).
Increased Oil Price: The rapid increase in the oil price increased the costs of the companies that exist in Canada. So, this also influenced the GDP and economic of the nation negatively.
Increased Housing Price: The housing price of the nation is higher than the price of other nation. It also affected the economy as well as GDP of the nation (Arnold, 2008).
Decreased Number of Workers: The decreased number of factory employees also affected the economy and GDP of the nation in a negative way. For case, in the year 2014, the total numbers of the factory workers was recorded 750,000; but in the year 2015, the total numbers of the factory workers was only 710,900 (The World Bank Group. 2016). In this way, it can be said the above discussed are the major factors that have an effect on the economy and GDP of the nation.
Conclusion
On the premise of the above analysis, it can be presumed that, in current, GDP is a noteworthy pointer that assumes a huge part with a specific end goal to quantify the economic performance, growth and success of a country in a successful and an exact way. On the other hand, it is also observed that, income approach, production approach, and expenditure approach are the major approaches that are helpful in order to measure the economic value of the final goods/products/services in an appropriate way. Along with this, with the help of a comparison analysis between the GDP of Australia and Canada, it is also scrutinized that, the economy of Australia is stronger than the economy of the Canada. The strong economic situations and trends of Australia are also helpful to increase the GDP rate of the nation in an effective and a more comprehensive manner. In addition to this, it is also observed that, there are numerous factors that have an impact on the economy as well as GDP rate of the nations. Finally, it is recommended that, both countries must adopt and implement effective economic policies, strategies, and methods to improve the economic conditions and GDP in an effective and a significant manner.
References
Anderson, K., & Strutt, A. 2014. Emerging economies, productivity growth and trade with resourceâ€Ârich economies by 2030. Australian Journal of Agricultural and Resource Economics, 58(4). PP. 590-606.
Arnold, R.A. 2006. Macroeconomics, Concise Edition (9th ed.). Cengage Learning.
Arnold, R.A. 2008. Macroeconomics (9th ed.). Cengage Learning.
Égert, B. 2015. Public debt, economic growth and nonlinear effects: myth or reality?. Journal of Macroeconomics, 43. PP. 226-238.
Focus Economics. 2016. Australia Economic Forecast.
Focus Economics. 2016. Canada Economic Forecast.
Harris, J.M. & Roach, B. 2013. Environmental and Natural Resource Economics: A Contemporary Approach. M.E. Sharpe.
Herndon, T., Ash, M., & Pollin, R. 2014. Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff. Cambridge journal of economics, 38(2). PP. 257-279.
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