Economics Assignment: GPI as a measure of standard of living, Corporation Tax cut effect on Australia's economy, and Tariff imposition impact on imports

This Economics Assignment discusses the advantages and limitations of using Genuine Progress Indicator (GPI) as a measure of standard of living in Vanuatu, the expected increase in Australia's national output due to a Corporation Tax cut, and the impact of tariff imposition on imports. The GPI considers economic, social, and environmental aspects, making it adequate to measure the well-being of the population of Vanuatu. A Corporation Tax cut for all businesses in Australia is expected to increase the aggregate demand and the national output of the economy. Imposition of tariffs on imports can lead to a fall in the quantity of goods and services imported and a rise in the prices of the same.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Author Note

1ECONOMICS ASSIGNMENT
Table of Contents
Answer 1....................................................................................................................................2
Answer 2....................................................................................................................................3
Answer 3....................................................................................................................................5
References..................................................................................................................................7

2ECONOMICS ASSIGNMENT
Answer 1
Thesis Statement: Using Genuine Progress Indicator as a measure of standard of living in
Vanuatu can have its own advantages as well as limitations.
The Genuine Progress Indicator is a much wider and more comprehensive indicator,
which has been developed as an upgradation over the standard indicator of economic well-
being, the Gross Domestic Product of the countries (Kubiszewski et al. 2013). The GPI
considers not only economic aspect but also the social and the environmental aspects which
contribute to the overall quality of life of the populations in a region, both positively as well
as negatively. The factors which are considered in this indicator can be seen to be as follows:
Figure 1: Components of the Genuine Progress Indicator
(Source: Bagstad and Shammin 2012)
Adequacy of GPI- The GPI takes into consideration the economic factors like
underemployment, net capital investment, income inequality and personal expenditures. It

3ECONOMICS ASSIGNMENT
also considers social aspects like commuting, crime, domestic labour and services of
highways and streets, which are crucial aspects, especially for Vanuatu as it is a small island
and may face issues and hurdles in developing the above-mentioned aspects. Thus, it can be
asserted that the Genuine Progress Indicator is considerably adequate to measure the well
being of the population of the region as it considers those factors which are specifically
difficult to monitor and develop in this island (Robert et al. 2014).
Inadequacy of GPI- In case of Vanuatu, an island located near the Pacific Ring of Fire and
with immense climatic variations like seismic earthquakes and others, the environmental
aspects play considerable roles in the well-being of the people of the region as much of their
wellbeing and sustenance are dependent on the same. It also faces tsunami and other natural
calamities which leads to immense loss of wealth and productivity (Bartelmus 2013).
However, although the GPI incorporates various environmental factors like that of noise
pollution, air pollution, climate change, ozone depletion and others, it does not consider the
aspects of damages caused by frequent natural calamities, on the well being of the population
of a region. Thus, in this context, the GPI shows inadequacy, to some extent, to measure the
overall well-being of the population of Vanuatu (Costanza et al. 2016).
Answer 2
Thesis Statement: A cut in the Corporation Tax rate for all businesses in Australia by 2026-
2027 is expected to increase the aggregate demand and the national output of the economy of
Australia.
The recent proposal of the Australian government has been that of a cut in the
Corporation Tax which, if implemented (by 2026-2027), would be applicable for all the
businesses in the country. The effects of the same on the economy of the country, as a whole,

4ECONOMICS ASSIGNMENT
can be explained with the help of the Keynesian Cross Model, which shows the relationship
between the aggregate demand and the Real GDP (which in turn shows the total productivity
and economic growth of a country) of the region at a particular point of time (Dixon and
Nassios 2016). The aggregate demand or aggregate expenditure schedule shows the total
consumption and investment of the population of a country and there remains a 45-degree
line which is drawn with the intention of equating the aggregate expenditure with the total
output of the country. The equilibrium condition occurs at the point where the Aggregate
Demand curve intersects the 45-degree line which indicates towards the situation where
Aggregate Demand is equal to the total output (AD=Y).
Keeping this into consideration, the effects of a Corporation Tax can be seen with the
help of the following Keynesian Cross Diagram:
Figure 2: Effects of Corporation Tax Cut on economy of Australia
(Source: As created by the author)
As can be seen from the above Keynesian Cross Figure, with the cut in the
corporation tax, applicable for all the businesses in Australia, the tendency of the businesses
to invest will increase, thereby increasing the investment component of the aggregate
expenditure. This in turn is expected to shift the AD curve upwards from AD0 to AD1.

5ECONOMICS ASSIGNMENT
Higher businesses will also lead to higher employment generation, thereby leading to higher
income for the population which will turn will increase the consumption of the population,
thereby contributing to the increase in the AD (Murphy 2016). Thus, the equilibrium will be
shifted to a point where both the aggregate demand and the aggregate output in the economy
will be increased. This will in turn lead to an overall increase in the national output in the
economy of Australia in the coming years.
Answer 3
Thesis Statement: Imposition of tariffs on the imports of a country can lead to a fall in the
quantity of goods and services imported and a rise in the prices of the same.
Although almost all the countries across the world have incorporated free trade
approach in the contemporary period, however, some countries like that of the United States
of America, have still kept or newly imposed tariffs on some of their import commodities and
services. A tariff, in this context, is defined as the tax which a country imposes on the imports
which come from foreign countries. This economic tool is often used to protect and promote
the domestic industries and to safeguard them from the unfair foreign competitions (Salvatore
2014).
The imposition of tariff on the imports makes the commodities imported much more
expensive than the domestically produced counterparts, which in turn decreases the
competitiveness of the former than that of the latter. More of the customers shift to domestic
products due to high price of the foreign and imported ones and this also discourages the
foreign businesses to infiltrate the markers of the concerned country (Gandolfo 2013). The
effect of the same can be seen to be as follows:

6ECONOMICS ASSIGNMENT
Figure 3: Effects of Imposition of Tariff on imports
(Source: As created by the author)
As the above figure shows, with the imposition of the tariffs on the imports of
commodities and services, the price of the same increases, which in turn discourages the
foreign sellers to sell in the markets of the concerned country. This in turn decreases the
supply of the goods and services in the domestic market, as the people of the country are
forced to buy only from the domestic producers (Brown 2013). The absence of competition
and decrease in supply of the goods and services in the market of the concerned country,
enable the domestic producers to charge more price.

7ECONOMICS ASSIGNMENT
References
Bagstad, K.J. and Shammin, M.R., 2012. Can the Genuine Progress Indicator better inform
sustainable regional progress?—A case study for Northeast Ohio. Ecological Indicators, 18,
pp.330-341.
Bartelmus, P., 2013. The future we want: Green growth or sustainable
development?. Environmental Development, 7, pp.165-170.
Brown, A.J., 2013. Applied economics. Routledge.
Costanza, R., Daly, L., Fioramonti, L., Giovannini, E., Kubiszewski, I., Mortensen, L.F.,
Pickett, K.E., Ragnarsdottir, K.V., De Vogli, R. and Wilkinson, R., 2016. Modelling and
measuring sustainable wellbeing in connection with the UN Sustainable Development
Goals. Ecological Economics, 130, pp.350-355.
Dixon, J.M. and Nassios, J., 2016. Modelling the impacts of a cut to company tax in
Australia. Centre for Policy Studies, Victoria University.
Gandolfo, G., 2013. International Economics II: International Monetary Theory and Open-
Economy Macroeconomics. Springer Science & Business Media.
Kubiszewski, I., Costanza, R., Franco, C., Lawn, P., Talberth, J., Jackson, T. and Aylmer, C.,
2013. Beyond GDP: Measuring and achieving global genuine progress. Ecological
Economics, 93, pp.57-68.
Murphy, C., 2016. The effects on consumer welfare of a corporate tax cut. Arndt-Corden
Department of Economics Working Paper, (2016/10).
Robert, C., Kubiszewski, I., Giovannini, E., Lovins, H., McGlade, J., Pickett, K.E., Vala
Ragnarsdóttir, K., Roberts, D., De Vogli, R. and Wilkinson, R., 2014. Time to leave GDP
behind. Nature, 505(7483).

8ECONOMICS ASSIGNMENT
Salvatore, D. ed., 2014. National Trade Policies. Elsevier.