Introduction to Economics

Economics seek to make sense of the economic problem; it is a discipline in which people try to figure out how to organize production and economies so that the max number of wants can be met. Economics is the branch of knowledge concerned with the production, consumption, and transfer of wealth. Today I’ll be talking about 3 different economies and the procedure they use to solve the simple economic problem. What is the economic problem? The issue that every economy appears to have is this desire to have an unlimited supply of goods and services however it is almost impossible to accomplish that.

Firstly, Australia operates under a mixed market economy. A mixed market economy is an economic system in which production and prices are determined by unrestricted competition between privately owned businesses. In a market economy, there are markets for all the goods and services produced, as well as for resources that produce them. The sellers are the businesses and their output decision makes up the supply of products. A market economy has many different characteristics. They include the following: price mechanism, private ownership of the property, consumer sovereignty, freedom of enterprise and competition. The market or the price mechanism brings the supply and the demand together to determine the price for each good and service. If there is a big demand on a product, the price usually increases so the business can make profit. Private property is a legal designation for the ownership of property by non-governmental legal entities. Individuals have the right to own the means of production and can use these to derive income and acquire wealth. This is known as private ownership of property. Freedom of enterprise refers to an economy where individuals have the right to use their resources as they want. This means that entrepreneurs are free to set up profit making activities and have the right to determine what goods and services they produce and how they will undertake that production. Consumers determine the answer to the question of what to produce and how much should be produced.

Australia’s economy has many different ways of solving the simple economic problem. Some are outlined below. The government mainly tries to “solve “the economic problem by intervening in certain areas of the market. The government intervenes to limit the extent to modify certain market outcomes. The output of certain agricultural products (such as wheat and milk) may be subject to government quotas that limit the quantity that may be produced. it also limits, or even prohibit, the production of goods that it considers undesirable such as drugs but it can provide encouragement for some forms of productions through subsides, tax incentives etc. governments can also encourage greater provision of certain goods and services that are desirable, but would otherwise be under provided. The government can have an influence on the number of certain products that are produced. The government can provide collective goods and services such as schools, roads, bridges and a defense force.

The United States of America is a North American nation that is one of the world’s biggest leading money – based economy. The united states of America operate under a capitalist economy. Capitalism is an economic system in which capital goods are owned by private individuals or businesses. Capitalism permits personal possession to spur manufacturing of goods and lets in the personal proprietor to preserve and tune income for what sells. This lets in special rights and patents to the manufacturing of modern technology and boosts the social economy. Perhaps most importantly, the federal government guides the overall pace of economic activity, attempting to maintain steady growth, high levels of employment, and price stability. By adjusting spending and tax rates (fiscal policy) or managing the money supply and controlling the use of credit (monetary policy), it can slow down or speed up the economy’s rate of growth.

Australia is the 13^th largest economy in the world. The CommSec’s chief economist Craig James quoted: “We’ve got an Australian economy that’s growing at the fastest rate in four years, that’s a truly remarkable situation.” Australia’s economy is excepted to expand 3.1% every year. One of the biggest contributors to the economic growth of Australia is agriculture. Agriculture today is a very sophisticated and highly technical industry, and in Australia it has been one of our most innovative and efficient industries. For Australia, food security is inextricably linked to the political stability of our region and has the potential to affect our national security. Agriculture has an excellent record of productivity growth over the past 50 years, allowing global production to meet the large population increase and, for countries such as Australia, these gains have kept food prices low while keeping farmers in business. Australia’s greatest contribution to agricultural innovation was through the development of solutions to global food security challenges & how they delivered these solutions to partnering economies. On average Australia earn about $32.5 billion a year just from exporting agriculture goods.

Unlike Australia and the United States of America, Spain’s economy suffers from a crippling downturn in the financial crisis. Substantial amounts of foreign investments are helping Spain’s economy grow. The Spanish economy on average expands 3% each year. The Spanish economy was expected to grow by 3.1% in 2005, due to strong momentum in the domestic economy, and then was forecast to gradually slow to 2.4% by 2007. Spain had one of the fastest rates of expansion in the EU in 2015, their economy grew by 3.2 percent. The main reason why Spain’s economy expands at a decent rate is because of tourism. Tourism is the strongest industry in the country and has helped to sustain rapid expansion of the Spanish economy. One should take into consideration that the fact is that tourism in Spain is booming in comparison to other industries such as imports, exports, investments etc. Travelling has become more facilitated and is taken into account as a human that it to be explored. On average Spain gets about 63 million tourists every year.

A country’s quality of life is measured using the “human development index.” The human development index (HDI) is a summary measure of average achievement in key dimensions. Factors like income, life expectancy, adult literacy and education are all taken into consideration when measuring the quality of life of a country.

Australia is considered one of the best places in the world to raise a family, while also coming second in the sub-rankings for both the availability of education and education options in general. When it comes to the quality of life, Australia is currently ranked 4th in the world. The quality of life of Australia has changed drastically over the years. Australia is ranked 4th for many different reasons. They generally work long hours to be able to afford the cost of living and spend their income on consumer items like food, manufactured goods etc. they currently score 9.8 in economically stable, 10 in a good job market, 9.7 for safety ,9.8 for politically stable, 9.2 in a well-developed public education system and 8.6 in well develop public health system. A majority of these aspects help increase Australia’s quality of life.

Behind a country’s wealth and success are the policies that create possibilities, the people that drive the effort and the history that shapes the environment and perspective. America is ranked as one of the best countries for housing conditions, with good basic facilities and general feelings of safety and personal space. America’s overall score is 5.2. They are presently ranked 18^th in the world. The united states perform relatively well in comparison to other countries in the better life index. They rank at the top in housing, income and wealth. They are above the average in health, jobs, earning, education, environmental quality etc. One of the main reasons why the united states of America’s affordability received such a low score is because a majority of Americans don’t have a high enough income. On average an American’s household disposable income is listed at $38,000 a year — much higher than the OECD average of $23,000.

Whereas Spain is ranked 19^th in the world. Spain is known for its good weather, people say that friendliness and, more specifically, the attitude of locals towards foreigners makes it a great place to live. Even though Spain ranks above the average in work-life balance, housing, health status, social connections and personal security, there are some aspects of the economy that are below the average. They include the following: levels of income, wealth, civic engagement, environmental quality, education, skills and jobs are all below the average. In Spain, the average household net-adjusted disposable income per capita is USD 22 007 a yearwhich is lower than the OECD average. The top 20% of the nation’s population earn close to seven times as much as the bottom 20%.

A board that measures all g/s produced by a nation, divided by the total population of that country is established as the GDP of a country. The GDP is measure per capita so we are able to look at the proportional size of the economy, not the overall size of different economies.

With a population of over 23 million, Australia’s has a relatively high GDP. In the year 2000, Australia’s overall GDP was $414,952 billion and the GDP (per capita) was $21,665.12 (USD). It is currently $47,644 (USD) per capita and the overall GDP is 1.5 trillion. the quarter household consumption expenditure increased by 0.8%, leaving the annual growth rate at 2.9%. It contributed 0.4 percentage points (ppts) to the quarterly GDP figure. The ABS noted that the increase was driven by growth in services industries such as information, media and telecommunications (2.7%), retail trade (1.0%) and arts and recreation services (2.2%). Government final consumption expenditure also rose by 0.7% for the quarter, leaving annual growth at 3.6%. This contributed 0.1ppts to quarterly GDP. Public gross fixed capital formation, linked to an increase in military spending, rose by 6.0% over the quarter, adding 0.2ppts to GDP. Net exports, as opposed to the previous quarter, made no contribution to GDP.

In terms of per capita income, America’s current gdp (per capita) is $56,084. Ten years ago the gdp was $36,449. This shows an increase of $19.635. The main reason why Americas gdp increased was because they were able to adapt to new technology. They called this method a “tech bubble burst”. A tech bubble burst is a pronounced and unsustainable market rise attributed to increased speculation in technology stocks. A tech bubble is highlighted by rapid share price growth and high valuations based on standard metrics like price/earnings ratio or price/sales. As a result of America adapting to new trends, they were able to boost their economy. Adapting to new technology increased their economy in many different ways. It has contributed to gdp growth, the creation of new services and industries. It also created new opportunities for businesses to innovate and transform their business. All these factors helped increase the overall gdp and the GDP per capita.

Although their economy only generates around 10 percent of the European union’s total GDP, Spain still accounted for around 30 percent of all new homes built in the EU. The GDP Annual Growth Rate in Spain averaged to be 2.15 percent. In the first quarter of the year 2000 it reached an all-time high of 5.60%. Within investments and tangible fixed assets accounts for 16 percent of the GDP. Construction was 10 percent; capital goods was 7 percent; and intellectual property products was 3 percent. On the expenditure side, household consumption is the main component of GDP accounting for 58 percent of its total use, followed by gross fixed capital formation (20 percent) and government expenditure (19 percent). Exports of goods and services account for 33 percent of GDP while imports account for 30 percent, adding 3 percent of total GDP. Unfortunately, Spain’s GDP has dropped over the years. The overall GDP is currently 1.5%.

Australia’s unemployment levels have recently fallen below the average for industrialized countries. Even though Australia compares well in that unemployment levels for men and women are relatively similar, they are still falling under the average. The unemployed rate in 2000 was 6.29 percent. The Australian bureau of statistics recently released new statistics that show Australia’s current unemployment rate is between 5. 7 percent and 5.8 percent. This shows a decrease of 0.49 percent which means employment levels have risen. The employment rate in Australia was 61.49 percent in December. It has now dropped to 60.04. Australia’s average employment rate is 58.84 percent.

Spain has the second most elevated unemployment rate in the European Union after Greece.

The average unemployment rate for Spain is 16.54 percent. Since Spain’s economy grows at a slow pace, the average unemployment rate hasn’t changed in 40 years. Since 2008, more than 3 million jobs have been lost, around half of them in the construction and related sectors. Unemployment has been in decline for the past two years but the jobless rate – at 21 per cent – is still one of the highest in the western world.

In terms of employment, 68% of people aged 15 to 64 in the United States have a paid job, above the OECD employment average of 66%. Some 73% of men are in paid work, compared with 63% of women. In the United States, around 12% of employees work very long hours, slightly lower than the OECD average of 13%, with 16% of men working very long hours compared with 7% of women. During the year 2000, the united states of America unemployment levels dropped to 4% but in 2011 it rose to 8.9%.

The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change, which commits its Parties by setting internationally binding emission reduction targets. The treaty could not go into effect until at least 55 countries, accounting for 55% of the world’s emissions in 1990, ratified it.

The united states of America used to be part of this treaty but they resigned from it in 2001. One of the main reasons as to why the United States has not ratified the treaty is because there is a lack of participation in the developing world. The United States is the largest emitter of greenhouse gases but developing countries, which are quickly increasing their burning of fossil fuels for energy, are predicted to surpass the amount of greenhouse emissions released by the United States. The way that the treaty is designed, fourteen out of twenty of the top emitting countries would not have to limit their emissions. By not requiring these countries to reduce their emissions, it would damage any attempts by other countries to reduce their emissions.

Australia did sign the treaty but ended up resigning when John Howard was prime minister. Australia is the world’s largest exporter of coal. Mr Howard claims that signing up to the Kyoto Protocol would lead to a ‘flight of jobs’ from the country as coal-based companies relocating to developing countries where there are fewer restrictions. Spain signed the treaty on the 29^th of April 1998 but were only accepted on the 31^st of May 2002. By signing this treaty, Spain agreed to never breach the Kyoto limit of 20% emission until 2020. Spain has long planned to bridge a gap of 22 percent above Kyoto limits by offsetting 20 percentage points by purchasing emissions rights from less industrialized countries, and another two points by investing in carbon-capturing forests.

To conclude, the three countries I’ve chosen have distinct ways of solving the economic problem. The way these countries chose to try and solve the economic problem depends on what economy they operate under. All of these countries operate under various types of economies which results in their economic growth being, very different.