Economic growth refers to the rate of increase in the total production of goods and services within an economy. Economic growth increases the productivity capacity of an economy, thereby allowing more wants to be satisfied. A growing economy increases employment opportunities, stimulates business enterprise and innovation. A sustained economic growth is fundamental to any nation wishing to raise its standard of living and provide a greater well being for all. Gross domestic product (GDP) is the monetary value of all final goods and services produced in Australia over a specific period of time, usually a year. It is the total value of production within the economy. The total value of production is the total value of the final goods or services less the cost of intermediate goods purchased. GDP at market prices (nominal GDP) measures the value of total production at the present price level. That is, GDP at market prices measures both the total physical volume of goods and services produced and the prices at which these goods and services are sold. GDP at market prices has considerable usefulness when measuring the growth rates and relative importance of different industries or sectors within the economy. The method for measuring GDP at market prices is implied by the following formula; [(current year quantity) x (Current year price)]. However GDP at constant prices is the most common method of measuring economic growth. GDP at constant prices excludes the effect of price variations and allows for the measurement or comparison of real or actual production levels. Because of this, GDP at constant prices is usually referred to as real GDP. Real GDP is measured by the following formula; [(current year quantity) x (based year price)]. A more reliable measure of economic growth is real GDP per capita; this measurement takes into account both the total production of the nation and the total population. Real GDP per capita measures …
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