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Economies: similarities and differencesSyllabus:
Examine similarities and differences between Australia and at least one economy in Asia in relation to: economic growth and the quality of life employment and unemployment – distribution of income – environmental sustainability – the role of government in health care, education and social welfare. L.Thompson 2019
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So how do we compare economies?
a)Economic growth
b)Size of the economy
c)Employment and unemployment
d)Quality of life
e)Environmental quality
f)Role of the government
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1. Size of the economy
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How do we measure the
size of an economy?
GDP
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The overall level of economic output or GDP is used to measure economic growth.
This figure gives us a picture of the value of an economy.
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The size of the
economy
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GDP1980($USBill)
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GDP2017($USBill)
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But these figures use $USD to compare…
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Purchasing Power Parity
Compares different currencies through a basket of goods approach.
According to this theory two currencies are in equilibrium or ‘at par’ (taking into account exchange rates) when a basket of goods is priced the same in both countries.
Closely related to the Law of One Price theory and the Big Mac Index!
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Measuring in Purchasing Power Parity it looks like this…
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Country GDP (Nominal)$ trillion
GDP (PPP)$ trillion
1. USA 19.39 19.39
2. China 12.01 23.15
13. Australia 1.38 1.24
GDP 2018 a comparison
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But is it a complete
picture of how the economy is
doing?
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In actual fact, GDP/Capita is a better measure.
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China's economy produced $23.12 trillion in 2017, based on purchasing power parity. It's the world's largest economy. The European Union is second, at $19.9 trillion. The United States fell to third place, producing $19.3 trillion.
https://www.thebalance.com/china-economy-facts-effect-on-us-economy-3306345
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Let’s try a PETEL paragraph with this information…..
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Point of the ParagraphGross Domestic Product(GDP)/ capita can be used to compare the size of different economies.
Explain the point of the paragraph
A country’s population determines how many people the GDP must be shared between. A country that has a large GDP together with a small population will be immensely better off than a country with a large GDP combined with an even larger population.
Theory/graphto help your explanation
N/A
EvidenceExample/statistic/quote to prove your point
China and Australia both have relatively large GDP’s-China having the 2nd largest in the world at $USDxxxxx, Australia having the 13th largest in the world at $USDxxxxxx, however, when divided by their population, China’s GDP/Capita is $USDxxxxxxx, whilst Australia’s is $USDxxxxxx
Link to your questionWhen comparing economies, whilst GDP is useful to ascertain the actual size of a country’s economy, GDP/Capita is a much more useful figure to use to compare those economies.
Write a paragraph that explains how GDP/capita can be used to compare the economies of Australia and China.
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2. Economic Growth
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Economic Growth
Is the increase in the value of real GDP over time!
The target range for economic growth is between 3-4%
Currently Australia is hovering around 2% Growth -( low atm)
China, has high growth, at the moment of 6.5%
Previously, China has recorded growth of up to 15%
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Growth in Australia…
27 Years of uninterrupted growth…
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Growth in China…
25 Years of uninterrupted growth…
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Theory of Economic Convergence?
Those countries that are at an emerging/developing level will grow at a faster rate than more developed countries.
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Let’s try a petel paragraph with this information…..
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Point of the Paragraph
Explain the point of the paragraph
Theory/graphto help your explanation
Convergence economics- Those countries that are at an emerging/developing level will grow at a faster rate that those more developed countries.
Evidence Example/statistic/quote to prove your point
Link to your question
Write a paragraph that explains how GDP growth can be used to compare the economies of Australia and China.
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3. Inequality
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Inequality relates to how resources are distributed across the whole of society
If a country has great wealth (High GDP) but high inequality, then the standard of living in the economy is reduced.
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In Economics, we measure inequality using the...
Gini Coefficient and Lorenz Curve The Gini Coefficient is a number between 0 and 1
With 1 being perfectly Unequal.
(As one person owns all the wealth)
The Lorenz Curve Is a graphical representation of inequality
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Gini Coefficient= A / (A +B)
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According to the IMF, if the Gini-coefficient is above .4, then GDP will be adversely affected.
Country Gini
Australia 0.33
China’s 0.47
USA 0.39
(2018 World Bank)
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Let’s try a petel paragraph with this information…..
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Point of the Paragraph
Explain your point
Theory/graph to help your explanation
Gini Co-efficent/Lorenz curveIMF claim a Gini Higher than .4 will reduce growth levels in an economyGraph of lorenz curve
Example/statistic/quote to prove your point
Gini Coefficient of:Australia .34China .465
Link to your question
Write a paragraph that explains how inequality can be used to compare the economies of Australia and China.
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4. Employment/ Unemployment
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Unemployment levels vary between nations.The unemployment level indicates:
a)The success of a nation’s macroeconomic policies
b)The level of economic growth within a nation
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Point of the Paragraph
Explain your point
Theory/graph to help your explanation
Example/statistic/quote to prove your point
Link to your question
Write a paragraph that explains how unemployment can be used to compare the economies of Australia and China.
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5. Quality of life
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The physical quality of life of citizens varies widely between nations.
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Factors that contribute to the quality of life include:
a)quality of healthcare
b)quality of education
c)technological access
d)cost of living
e)working hours
f)treatment of women
g)government intervention in daily life
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The Human Development Index(HDI)
Education
Life Expectancy
GDP/Capita
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Let’s compare the HDI of China and Australia...
http://hdr.undp.org/en/composite/trends
Rank Country Index value
Life Expectancy at Birth
Expected years of schooling
Mean years of schooling
GNI per Capita(PPP)
3 Australia 0.939 83.1 22.9 12.9 43,560
13 United States
0.924 79.5 16.5 13.4 54,941
86 China 0.752 76.4 13.8 7.8 15,270
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Why does Australia have a consistently high Standard of Living?
1. Universal healthcare—Medicare
2. Public Education
3. Highest minimum wage in the world $18.61/hour
4. Compulsory Superannuation 9% paid by Employer
Government Intervention in the market?
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Point of the Paragraph
Explain your point
Theory/graph to help your explanation
HDI
Example/statistic/quote to prove your point
Link to your question
Write a paragraph that explains how ‘Standard of Living’ can be used to compare the economies of Australia and China.
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6. Environmental Quality
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Why do some countries have lots of natural resources and yet not the ability to extract them?
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They may lack:1. Human Capital-Skill, education,
health, Standard of Living2. Capital3. Stable political system4. Infrastructure
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Yet, the key question for most nations is “What is a sustainable use of resources?”
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Sustainability in Economics refers to:
Intragenerational equity
-Within one generation
Intergenerational Equity
-Between generations
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Nations vary in how they protect and preserve their environments.
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The world has called for environmental changes in the areas of:
a)renewable energy sourcesb)recyclingc)preservation and protectiond)greenhouse gas emissions
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https://www.sciencenews.org/article/global-carbon-dioxide-emissions-will-hit-record-high-2018
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Country CO2 Emissions metric tons
Australia (4th in World) 16
USA (5th in World) 14.95
China (16th in World) 6.57
Per Capita CO2 Emissions 2016 (Metric tons)
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China is also the largest investor in renewable
energy sources globally.
We are kind of the opposite.
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China will invest 2.5 trillion yuan ($361 billion)
into renewable power
generation by 2020
Reuters January 5, 2017
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Theory: Kuznet’s Curve
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Point of the Paragraph
Explain your point
Theory/graph to help your explanation
Kuznet’s Curve
Example/statistic/quote to prove your point
Link to your question
Write a paragraph that explains how environmental quality can be used to compare the economies of Australia and China.
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7. The role of Government
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Categorisation of Economic
typeAccording to Government
Intervention
● Planned/Command● Mixed/Semi Planned● Free Market/Capitalist
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What role should the Government
play in the market?
Intervention Vs Deregulation
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Government intervention looks like...
tax
subsidies
public goods
public services
minimum wage
price setting
regulation
market regulation
legislation
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The Political SpectrumIt’s all an Economic debate!
Communist Fascist
Right WingLeft Wing
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● Government intervention vs deregulation source of political debate.
● Governments can also vary in the way they either promote or hinder economic freedoms.
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Rank Country Overall Points
5 Australia 80.9
18 USA 75.7
110 (Up from 144)
China 57.8
Index of Economic Freedom 2018
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Governments can provide a variety of public services or allow the private sector to fund or help fund them. Including:
a)health careb)educationc)welfare
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Australia’s level of Government
interference in the market has always been considered to be relatively
high.
See slide on why we have a high standard of living!
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Changes to China’s policies post 2010 mean that they are making health, education and welfare a greater priority.
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● Social Welfare is now standardised
● A basic, universal Healthcare system.
● Working to increase the quality and quantity of education provided. Now 9 years minimum. New Universities.New curriculum
Reform of Government intervention in China:
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Point of the Paragraph
Explain your point
Theory/graph to help your explanation
Example/statistic/quote to prove your point
Link to your question
Write a paragraph that explains how the role of Government can be used to compare the economies of Australia and China.