Discuss the effects of economic growth on unemployment and inflation in Australia
This is just my personal style but I usually started each essay off with a definition of the key term - in this case economic growth (this is just what my teacher taught me) Economic growth has several benefits and detriments on both unemployment and inflation in Australia.
Good that you are addressing the directive verb 'discuss' and providing positives and negatives Measured by the growth of real GDP over time, the level of economic growth is influenced by the levels of aggregate demand, aggregate supply and the productive capacity of the economy. Unemployment is the measure of the number of unemployed in the labour force
This could use a little more explanation of what unemployment iswhile inflation is the general increase in the price level over time
This sentence just defining things seems a little disconnected from the rest of the introduction - maybe link it to the fact that it is influenced greatly by the level of economic growth in the economy. Higher levels of economic growth can cause increasing inflation and falling unemployment while lower levels of economic growth can cause decreasing inflation and increasing unemployment.
It's good that you've introduced the effects of eco growth on u/e and inflation; maybe you could add a sentence saying how these have positive and negative flow on effects to the rest of the economy which I'm assuming you will go into a bit more detail in throughout the body Economic growth in Australia has an inverse relationship with the unemployment rate, where rising economic growth and output results in a decrease in the unemployment rate
You shold be careful i acknowledging that the main type of unemployment that falls during times of economic growth is cyclical unemploymentand falling economic growth and output results in an increase in the unemployment rate.
This is quite a general sweeping statement and yes, whilst it is correct; you haven't said anything to prove this relationship. In economics, one of the biggest issues people have is that they know something will eventually lead to another thing happening; but don't take the necessary steps to show the marker they know how it occurs This inverse relationship
It's great that you are talking about the inverse relationship, but I think that it could be strengthened if you refer to the phillips curve and show this relationship through that especially since the other part of this question talks about inflation means that high economic growth will create employment through a higher participation rate and an overall increasing demand from firms to hire labour due to the nature of the derived demand of labour
Can you elaborate a little bit more on this derived demand for labour - why does the demand for labour increase? because the demand for goods and services increases due to increased consumer confidence etc. You should be explaining all the flow on effects to show the marker you have an extensive understanding of the economic theory. Therefore, if the components of aggregate demand(C + I + G + (X-M)) are increasing, the demand for labour will also increase, decreasing the unemployment rate while raising real output, productivity and real GDP.
These are more of those general sweeping statements that you aren't exactly backing up anywhere Additionally, increasing levels of economic growth can lead to employment creation because of the new entrants to the workforce through a higher participation rate.
the way you have worded has made it kinda confusing to read, but I understand what you are saying - however I would mention how in the short term a higher participation rate would incentivise people who were initially not looking for work - start looking; hence increasing the unemployment rate in the short term but due to the increase in demand for labour, these people should become employedThe participation rate
It's great that you are using economic terminology - but sometimes you might need to define a few of them; especially when unemployment is a major part of this essayis influenced by the conditions of the economy, therefore, if the economy's conditions are appealing, such as higher economic growth, more people will be incentivised to work and will reduce the unemployment rate but also the amount of hidden unemployed. For example, the sustained growth of the global commodity boom in 2003-08 saw economic growth average 3.8% as seen in the stimulus graph
To show tha twe had god economic growth, I would say something like "economic growth increased from ... to ... due to an increase in overseas demand for Australia's Exports of iron ore and blah blah, this high economic growth saw a simultaneous decrease in the unemployment rate due to blah blah which dropped from blah to blah etc., resulting in the unemployment rate to fall to a low of 4% due to increased demand for exports and increased consumption
Do you have a statistic to back this up? I haven't seen the stimulus graph I realise ahah and investment compared to the trend of 6-8% unemployment in 1994-2000.
However, high levels of sustained economic growth can lead to major technological and structural improvements in the Australian economy, leading to an increase in the level of structural unemployment.
Good that you consider different types of unemployment This can either be the result of the substitution of capital for labour due to changes in the methods of production or an entire sector of employees becoming redundant. An example of this is the closure of part of the Australian automotive manufacturing industry in 2016, where Ford closed two of its factories in Australia, resulting in 1,200 structurally unemployed workers and an increase in the unemployment rate of Victoria to 6% in December 2016 from 5.9% in 2015.
I like what you are doing with this statistic but you haven't shown how this is a result of anything to do with economic growth which is what is asked by the question Technological improvements due to high economic growth
elaborate a bit more; i'm not sure how technological improvements are a direct effect from economic growth can also affect the productivity of labour, ultimately influencing the unemployment rate. In the short run, higher productivity growth will increase unemployment
in the short term repetitionas employers require less employees per unit of output. However, as high productivity will lead to a rise in real output and therefore economic growth, in the long run, productivity growth will create more employment opportunities
Explain this a bit further - otherwise you are jumping a few steps to a likely conclusion but which you haven't proven, decreasing the unemployment rate.
Additionally, if economic growth is not sustained, a downturn in the business cycle can lead
in to an increase in the level of cyclical unemployment, as the decrease in aggregate demand will cause the derived demand for labour to decrease.
Same issue as above with the elaboration instead of jumping to conclusionsFor example, the Global Financial Crisis led to a fall in aggregate demand and economic activity in Australia during 2008-09. Following the negative growth of -0.5% GDP in December quarter 2008, unemployment rose from 4.2% to 5.8% in mid 2009 seen in the stimulus, depicting the negative relationship between economic growth and the unemployment rate. Furthermore, Okun's Law states that to reduce unemployment, the annual rate of economic growth must exceed the sum of the percentage growth in productivity and the increase in the size of the labour force in one year. During the 2000s, slower productivity growth combined with average economic growth of 3.3% caused the unemployment rate to fall at a steady rate as seen in the stimulus graph.
Good that you have included Okun's law, but I'm not getting a sense of your understanding of it since it seems a little disconnected and clunky, as if you just put it there for the sake of it - you could go a little further into explaining how okuns law relates to what you are saying which would help you to link it to your overall paragraph and essay. Also, this is a stylistic thing for me, but I would have this paragraph just after you talk about cyclical unemploymet before and connect the two through a conjunction such as "conversely" "on the contrary" "however" etc. since breaking up the cyclical unemployment seems a little weird even though i know you are talking about the effects on unemployment when economic growth is high Economic growth has a positive
not sure what you mean by positive, I thought you meant beneficial - but then proceeded to talk about how purchasing power is reduced. You may want to clear that up relationship with the inflation rate, high economic growth will create a higher inflation rate and overall CPI, reducing the purchasing power of consumers while lower economic growth will reduce inflation and the overall CPI
You should spend a little bit more time here explaining the direct process of how economic growth will eventually lead to inflation - you could even show through the different types of inflation (demand pull, cost push). This is due to the increase of aggregate demand
you should be aware that AD is the driver of economic growth in the short term only and that long term economic growth is created through increases in AS; you seem to only be talking about AD throughout this essay even though you mentioned AS in your intro, and as stated in the stimulus, prices will rise as consumers force up prices by bidding for the limited amount of supply available.
The AD curve shifts to the right as shown in the diagram
If you include diagrams that is great! but make sure you refer to the diagram in full detail e.g. the AD curve shifts creating a new equilibrium at point A, lower than previous point B by $5 etc. and therefore will cause an expansion in supply and a rise in the price level, but also an inflationary gap, depicted in the diagram as ab
Could you please go into durther detail about what the inflationary gap is. For example, in the third quarter of 2007, full employment was reached and increasing demand pressures combined with high economic growth(4.8%) lead to higher inflation, peaking at 5% compared to the average inflation rate of 2.7% between 1994 and 2004
You could strengthen this example even further by adding the economic growth rate/average during 1994 and 2004 just to show the contrast of time periods which you are saying high inflation occurs within. High inflation will result in employees demanding higher wages in compensation for their loss of purchasing power, ultimately leading to higher inflation in a form of cost-push inflation.
You could also, in the exam, draw a diagram to illustrate this point further This is due to firms passing on their production costs for labour on to the consumers by raising the prices of their products, causing the wage-price inflationary spiral.
Good The AS curve shifts to the left as they supply less quantity for a given price level,
Not quite sure what you are talking about here - this paragraph could use a topic sentence to sort of introduce what you are talking about since going straight into it is quite confusingand the price level increases
Refering to a diagram could be beneficial here, causing a contraction in aggregate demand. Furthermore, this will lead to falling economic growth due to the decrease in aggregate demand, also increasing unemployment, ultimately creating stagflation.
Stagflation, whilst important, is not part of the HSC syllabus and is not really needed in this essay; I don't think it's adding anything really. Therefore, low economic growth will lead to a lower inflation rate and greater purchasing power for consumers.
AD CURVE HERE
The decrease in aggregate demand will cause a contraction in aggregate supply
You need to connect these two instances a bit more by providing the middle steps and a fall in the price level, decreasing inflation. This occurred during an economic downturn following the GFC in 2008 which reduced consumer confidence, investment, demand for labour and wage growth, ultimately decreasing inflationary pressures. The NAIRU, represented by the Long Run Philip's Curve(LRPC), is the level of unemployment where no cyclical unemployment exists.
When unemployment is at this level, an increase in economic growth will result in an increase in wage prices as firms bid for an existing supply of labour, increasing inflationary pressures.
Haven't you already talked about this when you talked about the wage-price inflationary spiral and how workers demand more moneyIt was estimated to be between 5-5.5% in 2015 as inflation increased when unemployment fell below 5% because of higher economic growth in 2012. Conversely, inflation and wage pressures fell when unemployment rose to 6% because slower economic growth in 2015. In the short run however, the Short Run Philip's Curve can represent the effect of economic growth on both inflation and unemployment as shown by the diagram.
What about the diagram are you trying to point out though? Yes we ca all see the diagram but what should the marker be drawing from it? i.e. how does having the diagram, enhance your argument Do you have a conclusion?