Business Economic Growth Economic Health

Question: Describe about the Business Economic Growth for Economic Health. Answer: 1. Economic growth generally measures the economic health by taking into consideration the economic growth and development of the country. The economic growth of a country is increased as the GDP of the country increases. It can be measured in both nominal and real terms, the latter of which is adjusted for inflation. Economic growth in any country is a way out to poverty and unemployment as it helps to generate jobs and enhances purchasing power so that individuals can meet their requirements. The paradox of economic growth is where economic growth increase along with inequality in income. Social welfare payments are not included in GDP as it is a form of double counting. The number of working-age people who receives welfare payments is related strongly to the status of labor market. However, the number of individuals who are receiving payments related to social welfare do not fall as rapidly as the rate of unemployment. Economic growth does not include the unemployment programs as lon g-term rate of unemployment directs to a weakening in skill levels and confidence. This in turn, diminishes the intensity of a person who looks for a job (Meade 2013). GDP measures the value of production of commodities and services. The formula for calculating GDP is as follows: GDP = C + I + X M. The calculation shows the GDP data for the country Australia from March Qtr 2016 to Jun Qtr 2016 and from Jun Qtr 2015 to Jun Qtr 2016 (Polasky et al. 2015). March Qtr 2016 to Jun Qtr 2016 (% change) Jun Qtr 2015 to Jun Qtr 2016 (% change) GDP Trend Seasonally adjusted 0.7 3.1 0.5 3.3 Final Consumption Expenditure Trend Seasonally adjusted 0.8 3.2 0.8 3.2 Gross fixed capital formation Trend Seasonally adjusted -3.4 -4.5 GDP chain price index Original Terms of Trade 0.9 0.3 Seasonally adjusted 2.3 -5.4 Real net national disposable income Trend Seasonally adjusted 1.0 2.1 Social welfare payments are associated with the trade-off between the program of redistribution of income as well as economic growth. The increase in social welfare payments that started accounted for slowdown in the economy. Social welfare payments lead to reduction of insecurity with respect to uneven as well as unexpected expenditures. 2. Unemployment mainly leads to a situation where an individual is searching for a work actively however; he is not able to get one. There are various types of unemployment such as cyclical unemployment, Structural unemployment, Voluntary and Involuntary unemployment as well as frictional unemployment. Unemployment can be divided into both voluntary and involuntary unemployment where voluntary unemployment takes place when a person is leaving the previous job at his own wish. On the other hand, involuntary unemployment refers to the situation where a person gets fired from their work. According to the economists, involuntary unemployment is a larger problem as compared to voluntary unemployment (Hobson 2013). The downturn in aggregate demand leads to cyclical unemployment as the existing individuals lose their jobs. Similarly, demand deficient takes place when the decline in aggregate demand is unrelenting that leads to long-term unemployment. Cyclical unemployment takes place mainly during the period of recession particularly when the demand and services in the economy declines. The overall trends in growth and production that takes place within the trade cycle is caused by cyclical unemployment. The main reason that leads to unemployment is bubble burst as well as financial crisis in the economy. However, cyclical unemployment tends to disappear when an economy tends to recover from recession as well as depression. The graph shows that aggregate demand curve shift towards the left from AD to AD1 and as a result, quantity decreases from Y1 to Y (Diamond 2013). Figure: Aggregate Demand (Source: Created by Author) Structural unemployment takes place when certain industries turn down due to long-term changes in the market circumstances. It also takes place when some labor markets have more workers as compared to the jobs available. Structural unemployment are also likely to take place when the skills that are possessed by the individuals are not in high demand in the market. In other words, a mismatch takes place between the skills of the workers and the needs of the employers. Structural unemployment is of a long-term variety and as a result, it is thought of a considerable problem (Quercia, Pennington-Cross and Tian 2014). The easiest form of unemployment is the frictional unemployment as it takes place when individuals take time to move from one job to another. In other words, it takes some time for the workers to search for the work that suits the criteria and is a good fit for the individual. However, with the advancement of technology the employees and the companies had found it easier to search jobs in a more proficient manner. This type of unemployment is also termed as voluntary unemployment as employees are choosing to stay unemployed rather than get the initial job that comes along. However, frictional unemployment is not necessarily incompetent as the individuals get the time to search for the correct job. Structural unemployment is more serious as compared to cyclical unemployment as a cyclical problem can be solved by simply encouraging economic growth with low rates of interest. However, structural unemployment replicates a deeper problem and it does not disappear even if the monetary recovery increases traction (Elsby, Hobijn and Sahin 2015). References Diamond, P., 2013. Cyclical unemployment, structural unemployment.IMF Economic Review,61(3), pp.410-455. Elsby, M.W., Hobijn, B. and Sahin, A., 2015. On the importance of the participation margin for labor market fluctuations.Journal of Monetary Economics,72, pp.64 Hobson, J.A., 2013.The Economics of Unemployment (Routledge Revivals). Routledge. Meade, J.E., 2013.A Neo-Classical Theory of Economic Growth (Routledge Revivals). Routledge. Polasky, S., Bryant, B., Hawthorne, P., Johnson, J., Keeler, B. and Pennington, D., 2015. Inclusive wealth as a metric of sustainable development.Annual Review of Environment and Resources,40, pp.445-466. Quercia, R.G., Pennington-Cross, A. and Tian, C.Y., 2014. Differential impacts of structural and cyclical unemployment on mortgage default and prepayment.The Journal of Real Estate Finance and Economics, pp.1-22.