Examine the arguments for and against increasing economic growth ratesIncreases in real GDP are necessary to improve peoples standards of living, since government have more revenue and can increase government expenditure in areas such as: health care, the provision of infrastructure, and environmental protection. However, negative impacts of economic growth are: income may not be shared equally in rural areas, and negative externalities may occur such as pollution and depletion of natural resources due to rapid economic growth.

Investigate the economic and social problems created by unemploymentEconomic CostsOpportunity Cost The opportunity cost of unemployment is that the economys resources are not being used to their full capacity, thus the economy is operating below the production possibility frontier. Lower living standards Lower living standards due to reduced production causing a reduction in economic growth. Decline in labour market skills for the long term unemployedUnemployment leads to a loss of skills, self-esteem and experience for people unemployed for long periods of time.Costs to the government High levels of unemployment will result in increased transfer payments (unemployment benefits). This decrease in govt. revenue and increase in expenditure will cause a deterioration of the budgets balance.Lower wage growthHigh levels of unemployment means that there is an excess of labour supply in the economy, which should lead to a fall in the equilibrium level of wages.Social costs Increased InequalityUnemployment means a loss of income, and widens the income gap contributing to poverty and overall unequal distribution of income. Other social costsLoss of work skills, family tensions and breakdown, increased levels of crime

Analyze the effects of inflation on an economyInflation is the main constraint on economic growth, since as prices rise consumers reduce spending and consumption. Inflation also distorts economic decision making of producers and consumers. High levels of inflation will force consumers to spend rather than save, because the purchasing power of their money will reduce over time. Sustained low inflation is likely to encourage consumers to save a higher proportion of their income. Inflation will also lead to wage increases, as employees will demand higher incomes to compensate for the erosion in purchasing power of their nominal wages. High inflation rates tend to have a negative impact on the distribution of income because lower income earners often find that their incomes do not rise as quickly as prices. Higher levels of inflation will usually result in more contractionary fiscal and monetary policies, resulting in slower economic growth and higher unemployment in the short to medium term. High inflation also results in increased prices for Australias exports, reducing international competitiveness. This will also worsen the CAD as consumer will switch to imports, worsening the trade deficit.

Discuss the effect of a continued current account deficit on an economyConstraint on economic growth in the long term, since there is a limit on the amount we can borrow before reaching a blow out in external accounts leading to a debt trap scenario. A sudden loss of international investor confidence due to high external imbalances and may lead to capital flight where foreign investors move their investments to countries with more favorable conditions. More contractionary economic policy to reduce the CAD, which will lead to reduced economic growth due to a lack of spending. However, the Pitchford thesis states that the private sector is accountable for up to 95 % of Australias foreign liabilities are generated by the private sector. So as long as the foreign borrowing help to fund profitable investment projects, Australias CAD should be sustainable due to sustained economic growth allowing to meet interest repayments.Investigate recent trends in the distribution of income in Australia Age and EducationThe Abs shows that in 2009 the 45-54 age bracket earns the highest mean income per week of 1158, while those aged 15-19 earn the lowest of 276. This suggests that income levels in earlier years of working life are lower due to lack of education and experience. Gender and OccupationGender is another important influence on income distribution. This is shown by the ABS stat where the average weekly earnings of women were only two thirds of those of males in 2009-10. This suggests discrimination in the workplace and is confirmed by the an observation of the average weekly earnings of males and females working full time in the same occupation group where in 2010 males were paid 1179 and females paid 764. Ethnic and Cultural background The Abs shows that immigrants from mainly English speaking countries income levels tend to be higher than for those born in Australia likely due to stronger education. However, migrants from non-English speaking countries have lower income levels than Australian born likely due language difficulties. Indigenous Australians income is also on 65 % of non-indigenous people due to lack o education and rural occupancy, limiting job prospects. The extent of income inequality is quite severe as in 2007-08 weekly incomes ranged from around 150 per week to 1400 for the majority of people. Over half of the population earns less than the mean income of 811 per week highlighting this unequal distribution of income. Income also varies according to age. The ABS showed that income tends to be highest between 25 and 64 which are the main years of a person working life, while income levels are low in the early years due to a lack of education and experience. Gender is also a factor, where in 2010, the average weekly earnings of women were only two thirds of those of males likely due to discrimination. This is confirmed by an observation of the average earnings of males and females in the same occupation working full time where in 2010 males earned 1179 on average and females earned 764 average weekly. Ethnic and cultural background

Identify the impact of specific economic policies on this distributionThe decentralization of the labor market has widened inequality between wage earners. Under enterprise agreements, workers with greater skills and bargaining power have achieved higher average wage increases than less skilled workers who rely on industrial awards for wage rises. Monetary policy indirectly influences distribution of income. For example, when interest rates are high, this widens the gap since low income earners are borrowers and would have less money to save, and would therefore receive a much lower return in contrast with a high income earner. Microeconomic reforms such as reducing tariffs can are aimed to improve efficient production methods, which may lead to firms restructuring and cutting off workers. This will lead to income inequality since unemployed persons will have no form of income and cause widening income disparity. Analyze the economic and social costs of inequality in the distribution of income Economic Benefits Inequality acts as an incentive for the labor force to increase education and skill levels to obtain a job. Inequality encourages the labor force to work longer and harder through the incentive to earn higher incomes. Inequality makes the labor force more mobile since it provides an incentive to move to high job prospect areas which is an efficient allocation of resources and a higher rate of economic growth. Economic CostsInequality can reduce economic growth as low income earners spend higher proportion of their income than higher income earners. This means that an economy with a high level of income inequality will have relatively lower levels of consumption and higher levels of savings, causing reduced economic growth, and living standards. Inequality creates poverty and social problems which reduces educational opportunities and lowers self-esteem. Inequality increases welfare payments and worsens the budget balance.