Inventor Of Global Gross Domestic Product â€Myassignmenthelp.Com

Question: Discuss About The Inventor Of Global Gross Domestic Product? Answer: Introduction In recent times Australia has made an enormous growth in terms GDP. GDP stands for gross domestic product. It is an economic barometer that is used to measure the economic success of a country. Currently Australia is on 13th rank and is contributing 1.74% of the total worlds economy. United States, China, Japan, U.K and India are the top contributors of the total world economy(machille 2015). In this assignment we are going to study about the economy and recession trends of USA and Australia. Both these countries shares international trade with each other. USA has a bigger economy compared to that of Australia; however the recession rate of USA is much higher than that of Australia. The gross domestic product of Australia for the year 2017 is 1359.723 billion dollars, where as for USA it is 19417.144 billion dollars. In this assignment we are going to discuss about the affects of the Global Economic System (United States of America) on the other well developed economies of the world. Critical Analysis Australia has made a remarkable growth in terms of everything; the number of immigrants going to Australia in search of work is also growing day by day. The economy of Australia is giving a tough competition to the existing international players. Most of the economists are of the view that the economy of Australia is linked with the economy of USA, Because Australia trades with the States, financial market commentators has even said that any changes in the USA economy will result in the recession or expansion of the Australian economy, which we believe is not a true statement. It cant be ignored that USA is the worlds largest economy currently but if it made any changes into its economy, then the Australian economy will remain unaffected. To prove this we are going to provide various facts and cases. The economy of USA is much higher than that of Australia but it does not have anything to do with it, in terms of recession or expansion. In the year 2016 the GDP- real growth rate of US A was 1.6%, as compared to 2.9% that of Australia(Adam 2014). The unemployment rate in the year 2016 for USA was 4.7% and 5.8% for Australia. Australia is a developed country that has earned everything on its own. There is no doubt that its economy is related to many other big countries but any change in their economy will hardly affect the Australian economy. Below is a table that shows the GDP real growth rate of USA Australia from the year 1985-2015(Weber 2012). YEAR GDP growth rate % AUSTRALIA GDP growth rate % UNITED STATES 1985 5.5 3.3 1990 1.5 0.8 1995 2.9 1.5 2000 3.2 2.9 2005 3.2 2.4 2010 2.3 1.7 2015 2.4 1.9 So as you can see the above table shows the data from 1985 to 2015. Australian economy is at every point has achieved an enormous growth where as the American economy is also growing but at a slow rate. There is no doubt that United states has relatively a much bigger economy than that of Australian economy but, the growing rate of Australian economy is much better than that of the States economy. In the year 1985 the real growth rate of Australian economy was 5.5%, 2.2% more than the growth rate of USA growth rate. Australian economy in the last 2 decades has worked in favor of the country and has made it possible for the country to compete with the big players of the international market(Botha 2017). Coming to the year 2015 again Australian growth rate is 2.4% and 1.9% is of USA growth rate. There is a huge difference in the growth rate even in 2015. The reason behind this is Australias low population, with no one living below the poverty line(Teshicia 2013). Australia is projected to be in the top 7 ranks of the global players in the next 15years. Exports Now we will talk about the exports of both the countries. We will see if any decrease or increase in the exports of USA has affected the exports of Australia. Exports means sending of any good or services outside the country of its origin is known as exports(Fiscal policy and private investment expenditure: a study of Australia and the United States 2012). Below is a table that shows the data of exports done by Australia and United States between the years 1985-2015: Years Australia ( Amount in AUD million) United States of America ( Amount in USA million Dollar) 1985 3800 35000 1990 5100 50000 1995 6500 65000 2000 10000 85000 2005 13200 100000 2010 20000 140000 2015 25000 190000 So now the above table depicts the exports data of Australia and USA from the year 1985-2015. In the year 1985 Australia had an export rate of 3800million AUD, on the other hand USA was having the export rate of 35000 million US dollars. In 1990 Australia increased its export by 1300 million AUD and USA increased its export by 15000 million US dollars. By each passing year Australia made growth but it was nowhere close to that of the export rate of USA. In the year 2015 Australia managed to touch the milestone of 25000 million AUD and at that point of time the export of USA was touching the milestone of 190000million US dollars. The exports capability of USA is really huge than that of Australia. However the growth rate in exports of Australia and USA doesnt seem to be linked. As USA is having really large number of export whereas the export of Australia is nowhere closes to that of USA(Tulip 2014). Fed Rate In this section of the assignment we are going to discuss about the Fed Rates of USA and its effects on the Australian economy. It is not wrong to say that the worlds biggest economy has its effect on every other economy of the world more or less. But it would be inappropriate to totally support this statement. Every country is responsible of making their own economy fail or successful. Fed rates are the interest rates that a depository institution charges from the other depository institution to lend funds. These transfers of funds generally happen for overnight and it only happens between the most credit worthiness institutions(D'suza 2017). The federal funds rate is the most high-ranking funds rates of United States of America as it affects the financial and monetary condition of the country(Clinton 2016). In the year 2017 the fed rates in USA have been increased which has proved to be good for Australian economy. USA is the worlds largest and the strongest economy, and it is capa ble to shake the economy of other countries directly or indirectly, same happened with Australia(Gomes 2017). On the one side United States of America increased their fed rates and on the other side it came as good news in Australian economy. The fact cant be ignored that every other economy of the world is related to United States economy but todays market progress does not matters a lot. The increase in fed rates of United States of America will result in the increased rates of the bank interest rates of Australia. This increase will help the reserve bank of Australia to increase the cash rate. Another main reason is that if United States of America increases the interest rates then the investment of Australian economy can shift to earn much more interest from the American economy, so in order to maintain their investments and economy the Australian government will need to pay high interest to its investors or depositors(Clarke 2014). To make the audience understand fed rates easi ly, below is a graph provided: So now as you can see in the year when the US fed rate was on point 4, the increase in the interest rate of RBA can be easily seen, it hiked to 6.8%. Then if see the year 1996 US fed rate was hitting on 5.2% which resulted in the increase of Australian RBA interest to 7.1%. There only came 2 years when the Australian reserve bank lowered or maintained the interest rates in spite of the increase in the US fed rate(Horton 2015). Monetary Policy of Australia Monetary policy of any country is responsible for regulating the financial situations of the country. The interest rates, employment rate, inflation and a lot more is covered under the monetary policy of the country(Eastwood 2012). In Australia it is the Reserve Bank of Australia that regulates and Implements the monetary policy and it is responsible for everything that is covered under monetary policy of Australia. The objectives of the monetary policy of Australia are as under(Reserve Bank of Australia 2017): The primary objective of the monetary policy of Australia is to maintain stability of the legal tender of Australia(Tah 2013). The second most important objective of monetary policy of Australia is to maintain full employment in Australia. Another objective of the monetary policy of Australia is to look after the welfare of the Australian citizen. It is mentioned in the monetary policy of Australia that the centre piece of a monetary policy is to maintain the inflation rate. Inflation means rise in the prices of the commodity and decrease in the value of purchasing power of the consumer(Eban 2015). Below is image that is taken from the official website of the Reserve Bank of Australia to show the inflation rate data of the Australia(RBA 2017): The above picture clearly states the inflation rate in Australia since 1965 to 2017. The main work of the reserve bank of Australia is to maintain a good inflation rate so that the Australian economy remains stabilize(Mill 2010). Monetary Policy of United States of America As mentioned above, monetary policy of any country is to regulates and stabilize the economic conditions of a country. The monetary policy puts its main emphasis on to decrease the inflation rate and to maintain a good stability and full employment in the country(Krugman 2015). The United State of America is the global system of the economy in the world. The concept of having a monetary policy was came in practice after the United States of America introduced its first monetary policy(Makin 2016). In the United States of America the monetary policy is implemented and regulated by the Federal Reserves Open Market Committee (FOMC) under the Federal Reserve act. The main work of FOMC is to control inflation, maintain full employment and to stabilize the American market in order to maximum economic harmony to the country(Harford 2011). The main objectives of the monetary policy of the United States of America are under(Merkley 2015): To maintain full employment in the economy of the United States of America. To work for the social welfare of the citizens of the USA. To stabilize the economy by maintain the interest rates. Above are the few main objective of the monetary policy of the USA. There are not many differences in the monetary policies of the countries. As each and every country aims at minimizing the inflation rate and maintaining the full employment rate. Monetary policy of a country defines its capability of tackling with the financial crises. The United States of America has the strongest monetary policy in the world(Mrokgen 2015). Fiscal Policy of United States Australia There is not much difference between a fiscal and a monetary policy, however fiscal policy is created and implemented by the national government of a country whereas the monetary policy is created and implemented by the Reserve Bank of a country both of these policies works for economic welfare of the nation. It is a certain thing that USAs fiscal policy is capable of affecting other nations economy(Buck 2000). Now as Donald trump has become the president of USA, his decisions regarding taxes and other economical things are affecting the fiscal policy of USA which is resulting in the expansion and contraction of the economy of other nations related to it. There is no doubt that Australia possesses a threat from such decision of the US president still it is not going to affect that hard(Dav 2017). Conclusion After observing all the facts and the information, a detailed conclusion and a brief is provided here that will help the audience to understand more precisely about the topic. There is no doubt or a second thought that the United States of America has the most strongest and the powerful economy in the world and all the other economies are effected by any movement in the America economy, But it would be inappropriate to say that Australian economy is mostly and largely effected by the changes in the U.S economy. Australian has maintained its economy even when the most powerful nation was suffering from the worst recession in their history. The United States of America is said to be the global system of the economy and any change in its dollar rate, bonds, and shares will affect the economies of other countries positively or negatively. However as the time is passing each and every country is working in the direction of becoming self sufficient and to not to be dependent on other econo mies. Now in the modern times any changes of the international market hardly matters for the other countries. There may be some affects that can be seen in the economies after any change occurred in U.S economy but there wont be any big or significant change. Hence it is wrong to say that USAs real GDP has tendency to cause recession or expansion in Australia. References Adam, B 2014, 'Nations Wealth', Property Business, vol 3, no. 100, p. 20. Botha, B 2017, 'The Road of the country to success in economics', The Monthly Times of Economics, vol 5, no. 100, p. 50. Buck, H 2000, 'Commerce, trade Industries', Effective leaderships, vol 1, p. 1. Clarke, R 2014, 'Philosphers psychology in economics', RBA interests weekly, vol 27, no. 105, p. 52. Clinton, C 2016, 'Fed Rates', The world with no Economy, vol 1, no. 21, p. 20. 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