Comparison of Gross Domestic Product - Economics Paper Example

Gross Domestic Product is calculated annually in every country to show the monetary value of finished goods and services. The goods and services are usually produced within the countrys specific borders for a given period of time, usually one year. Though GDP is calculated annually, it can also be calculated semi annually and quarterly. The comparison between the Australia and Singapore for the last a few years shows the distinction in their economy. Their GDP comprises of the net exports, public and the entire private consumptions, government expenditure and investments. The essay compares the economic activities of Australia and Singapore. The comparison of GDP in the two countries will indicate their difference in the economic wealth. GDP is accurate in comparing economic productivity of two countries since it is measured uniformly for all the countries (Afonso, 2015). A country with a developed economy has her citizens enjoying higher standards of living.

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Comparison of Australian economy with that of Singapore for the last five years

In comparing the GDP of Australia and Singapore for the last five years, the general formula is used; which is given as:

GDP= C+G+I+(X-M),

Where C denotes the all the private and public consumptions, G indicating the government budgetary expenditure, I showing all the investments and (X-M) showing the net exports (David, 2007). GDP usually concentrates on the economic expenditure of the country. In a country, the demand for goods and services regulates the prices allocated. If the production exceeds the consumption, then prices are lowered. If the consumption exceeds the production, prices are usually higher than usual.

According to Transparency International, Australian economy is higher than the economy of Singapore from 2013. Australian GDP in the last quarter of 2016 ranged at $1.34 trillion while that of Singapore during the same period ranged at $293 billion. More so, the Australian GDP is ranked 22nd in the world while that of Singapore being 39th in the world. In 2015, the GDP growth rate between the two countries varied, with Australia having 2.24% growth rate while Singapore having 2.01% growth rate. This shows Australia has a higher GDP growth rate than Singapore.

From World Economic Outlook article, in the International Monetary Fund; the GDP per capita varies between Australia and Singapore. Australia has GDP per capita of $56,311 whereas Singapore has GDP per capita of $52, 889 by 2014. A research from the World Bank shows that the unemployment rate varies between the two countries, with Australia ranging at 6.0% while that of Singapore being 3.0 %. Moreover, the population varies, with Australia occupying 23.8 million people whereas Singapore has 5.54 million people as research indicated by 2015. Australia having a higher population than Singapore has increased workforce, hence contributing to their higher GDP than Singapore.

Factors affecting the GDP of Australia and Singapore

There are various factors that affect the GDP of the two countries. Unemployment rate of a country affects her GDP in the sense that those people who are unemployed depend on the few who are employed. Therefore the unemployed do not participate in wealth generation of the specific country. For example in Singapore, the unemployment rate is 3.0 %, and this percentage contributes little to economic growth. The 6.0% of the unemployed population in Australia also undermines the economy of the country. In general, unemployment has a negative effect to GDP.

Moreover, population affects the GDP since the labor force is determined by the number of population. In Australia, there is a higher level of the labor force than in Singapore because of her higher population. The 23.8 million of the population in Australia provides a higher labor force for economic development than in Singapore, with a population of 5.54 million, hence producing a little labor force.

In addition, literacy is another determining factor fir economic growth. In Singapore, approximately 96.6% of the adults are educated and have skills to develop the economy (Meng, 2012). On the other hand, Australia has approximately 94% of the literate adults, who contribute to higher GDP. Economic growth is highly dependent on education. The more the literate citizens in a country, the more the level of economic growth, hence improve GDP.

Inflation rate is another factor affecting GDP both in Australia and Singapore. When inflation increases, the GDP of the specific country increases. Increase in prices of goods and services are as a result of little production when the consumption rate is high.

According to European Journal for Business Management, the accumulation of both capital and the consumer goods is a determining factor for GDP growth. The rate of the depletion of goods should be lower than the rate of production. In addition, the level of investment should always be increased to help in GDP growth both in Singapore and Australia. The two countries have increased the rate of investment in order to promote the GDP growth.

Moreover, the demand for national goods is a factor contributing to economic growth. The domestic demand has a connection with the household and the government expenditure. If the citizens have greater demand for the goods they produce in their country, GDP will grow. Both Singapore and Australia have demand with their own produce. They utilize the goods they produce locally and reduce the rate of imported goods, and this has helped in the growth of their economy.

For any economic activity to grow there should be changes resulting to positive production in goods and services. The percentage increase in GPD results to economic growth. In Australia and Singapore for the last three years, there is increase in net production for the two countries. Human recourses in Singapore have affected the countrys GDP. The resources from Singapore have facilitated the advancement in the production of goods and services. In Australia, the human resources like industrial skills and educational values have helped in the growth of GDP.

Capital formation is a factor affecting GDP in Australia and Singapore. In the two countries for the last five years, people have utilized the machinery and advanced communication mediums to facilitate increase in capital to workers. This increases the output in these countries resulting to economic growth.

Since 2014, Australian residents have maintained political stability. All people socialize in all sectors without fear of attack. In Singapore, the same has happened whereby the economy has grown since people live in harmony. Therefore, social and strong political stability is crucial in the growth of GDP.

More so, technological advancements affect the GDP of Australia and Singapore. There has been application of new scientific methods which have improved the way goods and services are produced. The advancement in technology has resulted to reduced utilization of human labor. The production work has been made easier by the new technology. This has affected GDP of many countries, with Australia and Singapore included for the last five years (Poke, 2009).

Conclusion

According to International Monetary fund, many countries in the world vary with their economy. The comparison of Australia with Singapore is an example, but the factors which affect GDP are relating. For example, though the population of the two states varies, human resource is needed from the available population to contribute to economic growth. Many states share the same international markets. The competence of goods produced by the country, determine their demand in the market. The prices allocated to goods in a country can be used to analyze the economic growth of that state. The prices indicate the financial safety in that country. In Australia, the GDP growth rate is higher compared to Singapore. The rapid economic growth makes Australia more populous than Singapore.

In comparison with the population growth rate of the two countries, both in rural and Urban centers, research shows that Urban areas exceeds rural areas with population growth. Most of the population work in urban areas where they depend on their skills to earn a living.

References

Afonso, O., & ALVES, R. H. (2015). Economic Growth Effects Of An Iternational Crisis. The Singapore Economic Review, 60(02), 1550012.

David, H. P. (2007). The World According to Economists. PsycCRITIQUES, 52(16).

Meng, C. K. (2012). BOOK REVIEW: "Review of Economic Growth of Singapore in the Twentieth Century: Historical GDP Estimates and Empirical Investigations" edited by Ichiro Sugimoto. The Singapore Economic Review, 57(01), 1280002.

Poke, J., & WELLS, G. (2009). The Term Spread and GDP Growth in Australia. Economic Record, 85(269), 121-131.