Geo Pain PDF

**3.3.1.** The 3-sector-model in economics divides economies into three sectors of activity: extraction of raw materials (primary), manufacturing (secondary), and services which exist to facilitate the transport, distribution and sale of goods produced in the secondary sector (tertiary). 1. 2....

**3.3.1.** The 3-sector-model in economics divides economies into three sectors of activity: extraction of raw materials (primary), manufacturing (secondary), and services which exist to facilitate the transport, distribution and sale of goods produced in the secondary sector (tertiary). 1. 2. **3.3.2.** The GDP provides an economic snapshot of a country. The nominal GDP is the total value of all goods/services produced in a country (by nationals and foreigners) within a year To compare the real GDP of a country with other countries, the GDP is often transferred to \$. The change in the GDP against the previous year is called economic growth, which can also be negative within a crisis. To compare the GDP with previous years, the nominal GDP needs to be adjusted for inflation. This is then the real GDP. The real GDP is always lower than the nominal GDP. (To explain: 100 euros might have been worth 100 when it was introduced in 2000, but now it's only worth 80) Another measurement is the gross national income (GNI = gross national product GNP) as the total value of all goods/services produced by all e.g. Austrians in the course of a year. An Austrian living and working in Germany contributes to the Austrian GNI but not to the Austrian GDP. A comparison of the total GDP of several countries provides little information about the actual prosperity, since Austria, for example, is a much smaller country than Germany and therefore has a lower total GDP. So the real GDP per capita is used by dividing the country's real GDP by the total population. 1. **3.3.3.** The business cycle shows phases of expansion and contraction in an economy. Aggregate economic activity is represented mainly by real GDP. The Kondratieff Wave: The ups and downs showed the development of the economy. Economists estimate that the waves last for 40 to 60 years, with each cycle demonstrating alternate intervals of high and low growth rates. Development of growth drivers in Austria 1. 2. 3. Assessment of the labour market, inflation and the public budget 1. 2. 3. The institutes assume that the introduction of compulsory vaccination will lead to an increase in the vaccination rate and that the restrictions on the unvaccinated will gradually have less of an impact on the economy. The forecast does not take into account possible renewed restrictions due to the Omikron variant or a stronger flare-up of the Covid pandemic. Also the view on the Russian aggression in Ukraine and the economic sanctions can not predict a clear picture of the economic future in Austria, but with close ties to Russia a decline of GDP and a new crisis in the business cycle is expected. 1. 2. **3.3.4.** Income comes from different sources. The most common types of income are \- income from employment/Arbeiter & Angestellte (e.g. wages, salaries) \- income from self-employment/Selbstständige (e.g. profits from business activities) \- income from assets/Vermögen (e.g. interest income) \- transfer income/Transferzahlungen (e.g. unemployment benefit, educational leave) The Lorenz curve and the Gini coefficient/index are used to measure economic inequality The cumulative shares of income (income added together in 1 group) is plotted as the Lorenz curve, developed by Max Lorenz in 1905. There, a straight line indicates an equal division of income throughout the population: that is, e.g. the poorest 20% earning 20% of the total income, the poorest 40% together earning 40% of the total income, and so on. Further, the added shares of total income actually earned by each group is added up cumulatively and the points plotted below the line of perfect equality. The further away the curve is from the diagonal, the more unequal the distribution of income. The smaller area A is, the smaller the Gini coefficient will be, indicating a better distribution of income.  *1.The term equal (equality) is not the same as the word equitable (equity). Define the 2 terms* **3.3.5.** Inflation is the increase of prices of goods/services in an economy. When the price level rises, each unit of currency can buy fewer goods/services. Consequently, inflation corresponds to a reduction in the purchasing power of money. The opposite of inflation is deflation, a sustained decrease in the general price level of goods/services. The common measure of inflation is the Consumer Price Index (CPI). As prices for different goods/services do not all increase at the same rates the CPI collects price-data of a standardised basket of consumer goods/services. The calculation of inflation looks how the prices for all goods/services have changed over a given time period. The Austrian CPI/inflation is also harmonized to compare it within the European Union and is called Harmonised Index of Consumer Prices (HICP). Two ingredients are needed for inflation to rise: too much money and a shortage of goods and labour. Especially since the financial crisis of 2008, the European Central Bank has put a lot of money into circulation. The amount of Euros increased from 1.5 trillion euros in 2008 to 8.7 trillion euros 2023. Despite the fact that a lot of money was put into circulation, the inflation rate remained relatively low because the second ingredient was missing: there was no shortage of goods/services and labour due to globalisation. Efficient global supply chains ensured an oversupply of cheap goods and enough cheap labour. Thus, prices and inflation could be kept low. With the Covid 19-pandemic, borders have been closed, conflicts have led to trade barriers, tariffs have been increased and transport costs have risen. Risen energy prices additionally affect every production process as well as services, so prices are also rising. And there are fewer and fewer workers available because not enough young people are joining the labour market and many workers want to work part-time instead of full-time. In order for inflation to fall again, people have to consume less and companies need to invest less. That is why the central banks raised interest rates to reduce the desire to buy. This makes loans and debts more expensive. A recession could be the result. 1. 2. 3. **3.3.6.** To keep the inflation with maximum 2% is the main goal of central banks. This policy is not done by the government. In the €-zone the European Central Bank (ECB) is responsible for the price policy. Price stability, economic growth (higher GDP) and low unemployment are of the three important goals of every economy. Central banks can influence the inflation rate through expansionary or contractionary monetary policy.\ - If the economy is in a recession and not doing well with a very low inflation or even deflation, a central bank uses an expansionary monetary policy with a lowered key-interest-rate. So also commercial banks have low interest rates on the loans they give out. A loan is therefore very cheap as there is not much interest to pay back to the bank. So with a low interest rate more people might take a loan from the bank and invest.\ - If the economy is in a boom time and overheating with inflation on its way, a contractionary monetary policy is used with increased interest rates. So, people are less willing to take loans and put less money into the system. 1. 2. **3.3.7.** As unemployment always exists in some form or the other, economists regard a low unemployment rate of 4% already as \"full-employment\". Above it starts to become a serious problem, as unemployed people depend on governmental support. According to the definitions of the International Labour Organization (ILO), the unemployed are those persons who are not employed, are able to take up a job and also want to work but are unable to find jobs. For being officially unemployed (and to receive unemployment payments) a person must have worked for at least 6 months and register then at the AMS (Arbeitsmarktservice/Employment Service). The unemployment rate according to the international definition is the share of unemployed people in the labour force (employed and unemployed), aged 15 to 74. There are 4 types of unemployment - - - - **3.3.8.** The concept of a basic income guarantee is quite simple: The state gives everyone a set amount of money every month, no matter who they are or what they do. The income cannot be reduced, nor do the recipients have to earn the money in any way. They may, of course, work to earn more money. Critics have feared that the majority of citizens would prefer not to work at all, if given the chance. However, a study has shown that three out of four people would continue to work, regardless of the level of a basic income. \"Instead, people would rather just reduce their working hours in order to have more time for family or volunteer work,\" said Marwa Fatafta, \"not many would quit her job if granted a basic income. \"I like my work,\" she said, \"but admitted that an unconditional income would reduce the pressure. It would be nice if people could make professional decisions not out of fear but out of a positive feeling,\" she said. \"And if we could do things because they have a meaning for society and for us and not just market value.\" 1. **3.3.10.** Education is an essential success factor for the social, economic and environmental future of a country. The Federal Ministry for Education, Science and Research has jurisdiction for the entire educational system from kindergarten, primary school, secondary school, vocational school and further on to university or colleges. Adult education and life-long learning are also parts of education. The Republic of Austria enjoys a free and public school system. Laws dealing with education effectively have a constitutional status because, like Austrian constitutional law, they can only be passed or amended by a two-thirds majority in parliament. Before 1774 poorer people remained illiterate, because they couldn't pay school fees. Mandatory education was introduced by Empress Maria Theresa of Austria, in 1775. In Austria there are nine years of compulsory education in school. After that, all young people must either continue school education, or go into vocational training (Lehre) until the age of 18, respectively until the successful completion of a further educational level (Ausbildungspflicht). The American work force has some of the weakest mathematical and problem-solving skills in the developed world. In a recent survey by the Organization for Economic Cooperation and Development (OECD), adults in the United States scored far below average. Worse still, the United States is losing ground in worker training to countries in Europe and Asia whose schools are not just superior to ours but getting steadily better. The lessons from those high-performing countries can no longer be ignored by the United States if it hopes to remain competitive. Though it dropped several rankings in last year's tests, Finland has for years been in the highest global ranks in literacy and mathematical skills. The reason is when Finland considers creating comprehensive schools that would provide a quality, high-level education for poor and wealthy alike. All high school students must take one of the most rigorous required curriculums in the world, including physics, chemistry, biology, philosophy, music and at least two foreign languages. But the most important effort has been in the training of teachers, where the country leads most of the world. There is no short answer for why the Finnish education system is really so successful, but we gathered a list of elements that contribute to Finland's education system's success: - - - - - - - - **3.3.11.** Economic policy covers a wide range of measures which a government and the central bank use to manage the economy. These include monetary policy from the central bank (money supply and demand to change the key-interest rates), and fiscal policy from the government (public funds through the national budget and taxes). The central goals of Austrian economic policy, which is built on a foundation of stability-oriented macroeconomic policy, are (see M1) - - - - - - In general, the budget of a state is the financial plan or forecast of governmental expenditures and revenues for a given period of time (mainly for 1 year from January to December). In modern economies the budget is the key instrument for the execution of a government\'s policy. The most important sources of revenues for the Austrian state budget are taxes In Austria the federal budget is prepared and discussed by Austria\'s Minister of Finance in cooperation with the different ministries and government departments. During this process all ministers hand in their financial needs and demands for the upcoming years. If the federal government approves the agreement, this budget draft has to be presented to the National Assembly in Parliament 10 weeks before the end of the current year. There, the Minister of Finance holds the so-called budget speech/Budgetrede, which is then discussed in parliament. When the federal budget passes parliament, it becomes a law, which has to be executed and checked by the different ministries and government departments. The Audit Office (Austrian Court of Auditors/Rechnungshof) watches over the development of the federal budget and gives a final report at the end of each budget period. The budget shows what the government will focus on in the coming year and is at the same time the foundation and framework for their work. Preparation for the 2024 budget took place in a particularly challenging environment: The fiscal compensation costs with the 9 provinces (Finanzausgleich mit den 9 Bundesländern) cost the federal government 3.4 billion euros. In addition, interest rates were rising: the federal government\'s payments for financing alone amounted to 4.4 billion euros from January to May 2023. This was an increase of 1.5 billion euros or 50 percent compared to the same period of the previous year. In addition, the federal government also had higher costs due to inflation, e.g. higher construction costs, energy costs and also expenses for pensions and personnel. Relieving the burden on people, expanding childcare, supporting the economy, science and research, and security were the priorities of the national budget for 2024. Chancellor Karl Nehammer announced 4.5 billion euros in investments by 2030, especially for childcare. 2 billion more than in the last financial framework will be made available for investments in the area of security and the armed forces. 70 percent of this amount will flow directly into equipping the Austrian Armed Forces/Bundesheer. The budget for universities will be increased to a total of 16 billion euros in the coming years. \"An important part of success is a functioning research landscape,\" said the Finance Minister. \"Austria is already among the top 3 in the EU in terms of research quota. We want to expand this position, because innovation comes from research. And that in turn leads to excellence and higher economic power.\" As Austria is a member of the EU and the €-zone, the deficit budget must follow the criteria set by the EU (Maastricht Criteria\*). These thematic priorities are set against the backdrop of the Maastricht criteria, which should again be met with next year\'s budget. \"The stability of the national budget is important. We therefore pay attention to every euro of taxpayers\' money and make sure that it is used sparingly,\" Brunner concluded. \* the government deficit (in this year) in % of the GDP must not exceed 3% at the end of the preceding fiscal year & the government debt (all together) in % of the GDP must not exceed 60% at the end of the preceding fiscal year 1. 2. **3.3.12** 1. 2. Tax systems fall again into three main categories depending on the percentage the tax takes from the income of individuals: 1. 2. 3.  Lohnsteuer = wage tax (if you work an an employee for a company)\ Einkommensteuer = income tax (if you have an income from your own business)\ Körperschaftssteuer = corporate tax (on the capital or profit of corporations/companies)\ Kapitalertragsteuer = capital gains tax (additional tax on e.g. interest from investments, dividends, income from investment funds)\ Umsatzsteuer (Mehrwertsteuer) = turnover tax (value added tax, sales tax) levied on the price of a product/service at each stage of production, distribution, or sale to the end consumer)\ Verbrauchssteuer = extra consumption tax (on the supply or consumption of certain goods/service e.g. excise duties on alcohol, certain alcoholic beverages and tobacco)\ Verkehrssteuer (Grunderwerbsteuer) = transfer tax (real estate transfer tax) (transaction fee imposed on the change of title to property from one entity to another) Multinational corporations and wealthy individuals try to save taxes using the most aggressive methods. They shift profits to tax havens. Countries then lose lots of revenue from this that could have been their tax money. Multinational corporations can use various strategies to move profits away from a high-tax country. One popular strategy is that a subsidiary(another smaller company) of a group pays fees for the use of intellectual property (eg. patents) to a sister company located in a tax haven. If the fee is high enough, a good portion of the profits can be taken away. Google, for example, has registered patent rights in Bermuda, so Google subsidiaries worldwide pay for the use of these very rights. 1. 3.3.13. In Austria there are 4 basic patterns of disparities: 1. 2. 3. 4. \*Centres (agglomerations) or active areas\ Agglomerations are characterised by pull factors as a region\'s attraction forces. The most important characteristics of an agglomeration are: - - - - - - - Many people from the periphery commute to the centres or even move there. However, migration from the periphery also causes problems in the centres. These include the additional demand for housing, rising unemployment (not everyone finds a job), the additional need for infrastructural facilities (kindergartens, hospitals). Metropolitan areas in Austria account for 43% of national GDP and 40% of employment. Between 2000 and 2020, they generated 37% of the national GDP growth. In terms of GDP per capita, Vienna and Linz rank highest. But also problems like air pollution in Austrian metropolitan areas are above the average. The two Austrian metropolitan areas are among the third most polluted in the EU. \*\*Peripheral areas, passive areas or problem areas\ Peripheral areas are characterised by push factors (repulsive forces of a region). Important characteristics of peripheral areas are: - - - - - - - - Regions have a certain \"attractiveness\". This attractiveness is particularly determined by spatial conditions and location. Locally available facilities and their accessibility influence the quality of life. Kindergartens, schools, hospitals or workplaces are spatially distributed differently from the population. The most obvious and significant regional disparities are the differences between urban and rural areas, i.e. between the centre and the periphery.