Gross Domestic Products Essay Example | Topics and Well Written Essays - 1500 words

Gross Domestic Products - Essay Example When wage increases it would yield to higher production costs, thereby producing higher prices of goods and services and also increases the inflation rate. To station an equilibrium, unemployment rate must be consistent with the full employment rate. The interaction of supply and demand is a vital part of macroeconomics, consumer’s ability to adapt price changes and employers increasing the prices of the commodity may have several implications triggering the either inflation or stagflation. If consumers are cannot keep pace on the increasing price commodities, inflation may occur, however if employers are passing their labor cost index on consumers aiming to generate profit through price increase on commodities yet consumer can still cope up with the changes, stagflation occurs, where business did not gain anything and yet did not have any single loss. To illustrate further, we have to examine the country’s GDP of two of the world’s most prosperous nation, Austra lia, and United States. For over the past years, Australia’ economy has displayed worthily, however in 2006, it began to decline yielding only 2.5 % in real GDP. Drought, inflation, high oil prices, and economic deceleration attributed to the decreased in real GDP. (Economic and Social Survey of Asia and the Pacific 2007). Domestic demand brought for the country’s thrust. Domestic demand comprises of business investment. High capacity utilization and high corporate profits served as a catalyst for the growing business investment in Australia.... When wage increases it would yield to higher production costs, thereby producing higher prices of goods and services and also increases in the inflation rate. To station an equilibrium, unemployment rate must be consistent with the full employment rate. The interaction of supply and demand is a vital part of macroeconomics, consumer's ability to adapt price changes and employers increasing the prices of commodity may have several implications triggering the either inflation or stagflation. If consumer's are cannot keep pace on the increasing price commodities, inflation may occur, however if employers are passing their labor cost index on consumers aiming to generate profit through price increase on commodities yet consumer can still cope up with the changes, stagflation occurs, where business did not gain anything and yet did not have any single loss. To illustrate further, we have to examine the country's GDP of two of the world's most prosperous nation, Australia and United States . For over the past years, Australia' economy has displayed worthily, however in 2006, it began to decline yielding only 2.5 % in real GDP. Drought, inflation, high oil prices and economic deceleration attributed to the decreased in real GDP. (Economic and Social Survey of Asia and the Pacific 2007). Domestic demand brought for the country's thrust. Domestic demand comprises of business investment. High capacity utilization and high corporate profits served as a catalyst in the growing business investment in Australia. Capacity utilization refers to the amount pf physical capital available to firms that is in use. Firms are given ample stock of capital equipment such as machinery, office spaces, factories, computers and telecommunications as