Impact of Low Real Wage Growth on the AD AS Curve

Running head: ECONOMICS
Economics
Name of the university
Name of the student
Author note

2ECONOMICS
Table of Contents
Answer 1....................................................................................................................................3
Investment..............................................................................................................................3
Net exports.............................................................................................................................4
Government spending............................................................................................................5
Consumption..........................................................................................................................6
Answer 2....................................................................................................................................8
Concept of the real wage growth...........................................................................................8
Reasons behind the low wage growth in Australia ( media reports).....................................8
Impact of low real wage growth on the AD AS curve.........................................................10
Response of the government................................................................................................10
Reference list............................................................................................................................12

3ECONOMICS
Answer 1
The value have been collected from Table 2. Expenditure on Gross Domestic
Product (GDP) from Australian System of National Accounts. After that the determinants
of GDP which are consumption, net exports, consumer spending and government expenditure
are divided by the population from 1987/88 to 2017/18 in order to find the values in per
capita terms. The net exports is calculated by subtracting the exports and imports.
Investment
Figure 1 Investment per capita
The factors which comprise the gross domestic product are the government spending,
investments made by the industry, the excess of exports versus the imports and the consumer
spending. The gross domestic product increases when the industries are known to invest in
real estate, infrastructure and in other physical operations. The business investment is known
as the powerful catalyst for calculating the GDP of the economy (Hall, 2018). The industries

4ECONOMICS
whose business invest more of its profits will be growing and it comprise a large percentage
of the gross domestic product. Investment can also result to boom in the economy.
The graph above shows the investment in terms of per capita from the year 1987 to
2018. The graph shows that the rate of investment had not been so high during the initial
periods. However it starts increasing from 1997 and reached the record high during 2012
2013. One of the reason for this high rise is due to the mining boom which took place during
2012 and 2013. Therefore it can be said that the during the period of 2012 and 2013, mostly
took place due to the mining investment or the commodity bubble. The investment spending
had been historically high from the past decade.
Net exports
Figure 2 Net Export per capita
The net exports is the excess of exports versus the imports. Australia is known as the
23rd largest export economy in the world. The net exports is the amount by which the total
exports of the country will be exceeding its total imports. When the total exports of the
country are less than the value of the goods it imports, the net exports are known to become
negative in nature. The net exports are known to affect the gross domestic product of the