BUS102 Introduction to Economics : Global Financial Market

Questions:

1.Access the article at the URL given above and read it carefully. Based on your reading, answer the questions in the spaces below. Use full sentences and show all necessary working but do not use more space than is given here. Other references are not necessary but, if you do use any (for example, online economics glossaries) please list at least the URL of your source.

2.In 2008-2009, although real GDP grew, real GDP per capita fell. Give the rates of growth reported in the article for 2008-2009 of the two terms in italics and explain why they differ.

3.What is population growth for 2008-2009?

4.After falling in December 2008, it took until September 2010 for GDP per capita to exceed its September 2008 level. What annual growth rate of GDP per capita over the period from September 2008 to September 2010 is implied by the figures in the article?

5.What is the official definition of a recession? On what basis does Greg Jericho argue that, although there may have been no official recession since the 1990s, he thinks there was one?

(a) Jericho argues that the GFC is “having an extremely long tail.” Explain what he means by this. What evidence does he give to back up his point?

(b) In which two States or Territories is the problem worst and what does he suggest could be the political impact?

Answers:

1.According to the article by Greg Jericho (2016), the annual GDP growth for 2008-2009 was 1.82%. The GDP per capita for this period was -0.36%. The difference in these figures is because the GDP per capita factors in population in calculating the productivity of the economy. It takes the total output of the country based on the purchasing power divided by the number of people in the economy. GDP on the other hand is the monetary value of all finished products produced within a country on a specified period. A rise in GDP per capita is a sign of economic growth and shows that productivity of the economy has increased.

2.Given the GDP growth rate is 1.82%, GDP per capita growth equals GDP growth divided by the population growth.

GDP per capita = 1.82/p.g = -0.36%

0.36 (p.g) = 1.82

Population growth (p.g) = GDP/ GDP per capita

= 1.82/0.36

= 5.06%

3.Between 2008 and 2009, the GDP per capita fell by 0.72%. This figure changed in the consequent year as the GDP per capita grew by 0.9%. The annual growth rate for the period between September 2008 and September 2010 is the average of the growth between these two periods of 2008-2009 and 2009-2010. This is [0.9+ (-0.72)] divided by two. The growth rate for this period is 0.09%

4.The Business Dictionary defines a recession as a period during which the economy generally declines signified by a contraction in the GDP for six consecutive months or more, but not more than a year. A recession is usually characterised by high unemployment, stagnant wages, and reduced sales in retail.

5.Greg Jericho argues that there was a recession in 2008-2010, because during this time. The annual household consumption fell two quarters in a row as described above. It was during this time also that the GDP per capita was lower than it had previously been.

a.The writer means that the effects of the GFC are felt much later after it has passed. This is evidenced by the fall in employment and the average working hours by adults since the GFC when compared to the other recessions during the 1980s and 1990s.

b.The two areas worst hit are Queensland and Western Australia. The political impact is that these talks about economic growth by politicians does not mean much to the people. It shows why the people think the government is not in touch with the economic concerns of the people.

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