Global Economy Question Answers

Question 1

Solution:

Real GDP tells about the production of the goods and services of a country. It tells that how much a country is producing.  However, to account for the impact of inflation as it affects the good and services of a country nominal GDP is calculated thus, the difference between the real GDP and the nominal GDP is that the nominal GDP is adjusted for inflation.  Thus, the graph also shows that the trend is similar. However, when the inflation premium is added to adjust the real GDP for inflation the number of nominal GDP increases.  It can be seen from the graph that the in 1991 the real GDP witnessed a dip and while in the crisis of 2008 the real GDP also observed the decline and Nominal GDP also observed a recession during this period.

Question 2

1. Inflation, consumer prices (annual %)

Country Name	Australia	China	United Kingdom	Japan	Korea, Rep.
Indicator Name	Inflation, consumer prices (annual %)	Inflation, consumer prices (annual %)	Inflation, consumer prices (annual %)	Inflation, consumer prices (annual %)	Inflation, consumer prices (annual %)
1991	3.223	3.557	7.533	3.298	9.300
1992	0.986	6.354	4.262	1.707	6.306
1993	1.813	14.610	2.507	1.267	4.746
1994	1.895	24.257	1.978	0.688	6.257
1995	4.638	16.789	2.656	-0.123	4.480
1996	2.612	8.313	2.481	0.132	4.923
1997	0.250	2.787	1.778	1.761	4.447
1998	0.853	-0.850	1.589	0.663	7.512
1999	1.465	-1.359	1.335	-0.329	0.811
2000	4.475	0.257	0.785	-0.653	2.265
2001	4.381	0.720	1.236	-0.740	4.066
2002	3.003	-0.767	1.256	-0.923	2.763
2003	2.771	1.165	1.363	-0.257	3.515
2004	2.344	3.889	1.345	-0.009	3.591
2005	2.669	1.814	2.050	-0.283	2.754
2006	3.538	1.466	2.334	0.249	2.242
2007	2.332	4.767	2.321	0.060	2.535
2008	4.353	5.843	3.613	1.380	4.674
2009	1.820	-0.701	2.166	-1.353	2.757
2010	2.845	3.326	3.286	-0.720	2.939
2011	3.304	5.411	4.484	-0.268	4.026
2012	1.763	2.643	2.822	-0.052	2.187
2013	2.450	2.628	2.555	0.346	1.301
2014	2.488	2.000	1.460	2.762	1.275
2015	1.508	1.437	0.050	0.790	0.707
2016	1.277	2.000	0.642	-0.117	0.970

 

Graphical Presentation: (Figure 1)

2. Unemployment, total (% of total labor force)

Country Name	Australia	Australia	China	China	UK	UK
Indicator Name	Unemployment, total (% of total labour force) (modelled ILO estimate)	Gross capital formation (% of GDP)	Unemployment, total (% of total labour force) (modelled ILO estimate)	Gross capital formation (% of GDP)	Unemployment, total (% of total labour force) (modelled ILO estimate)	Gross capital formation (% of GDP)
Indicator Code	SL.UEM.TOTL.ZS	NE.GDI.TOTL.ZS	SL.UEM.TOTL.ZS	NE.GDI.TOTL.ZS	SL.UEM.TOTL.ZS	NE.GDI.TOTL.ZS
1991	9.6000	24.22	4.9000	35.87	8.6000	19.59
1992	10.7000	22.34	4.4000	39.84	9.8000	18.83
1993	10.9000	23.59	4.3000	44.24	10.3000	18.38
1994	9.7000	24.25	4.3000	40.95	9.6000	19.38
1995	8.5000	25.94	4.6000	39.68	8.7000	18.64
1996	8.5000	24.78	4.6000	38.37	8.2000	18.84
1997	8.4000	24.80	4.6000	36.34	7.1000	18.01
1998	7.7000	25.47	4.7000	35.68	6.2000	18.63
1999	6.9000	26.10	4.7000	34.96	6.0000	18.06
2000	6.3000	26.28	4.5000	34.43	5.6000	18.47
2001	6.7000	23.42	4.5000	36.42	4.7000	17.86
2002	6.4000	24.40	4.4000	37.08	5.0000	17.76
2003	5.9000	25.93	4.3000	40.63	4.8000	17.38
2004	5.4000	27.06	4.3000	42.89	4.6000	17.02
2005	5.0000	27.43	4.1000	41.39	4.8000	17.22
2006	4.8000	27.66	4.0000	40.93	5.4000	17.59
2007	4.4000	27.85	3.8000	41.46	5.3000	18.11
2008	4.2000	29.13	4.4000	43.27	5.6000	16.99
2009	5.6000	27.91	4.3000	46.44	7.5000	14.43
2010	5.2000	27.55	4.2000	47.61	7.8000	15.68
2011	5.1000	27.11	4.3000	47.69	8.0000	15.56
2012	5.2000	28.33	4.5000	47.23	7.9000	15.76
2013	5.7000	28.44	4.5000	47.39	7.5000	16.36
2014	6.1000	27.20	4.6000	47.01	6.1000	17.11
2015	6.1000	26.74	4.5000	45.40	5.3000	16.97
2016	5.7000	25.54	4.6000	44.31	4.8000	16.96

 

Country Name	Japan	Japan	Korea, Rep.	Korea, Rep.
Indicator Name	Unemployment, total (% of total labour force) (modelled ILO estimate)	Gross capital formation (% of GDP)	Unemployment, total (% of total labour force) (modelled ILO estimate)	Gross capital formation (% of GDP)
Indicator Code	SL.UEM.TOTL.ZS	NE.GDI.TOTL.ZS	SL.UEM.TOTL.ZS	NE.GDI.TOTL.ZS
1991	2.1000	33.93	2.4000	41.37
1992	2.2000	32.16	2.5000	38.49
1993	2.5000	30.78	2.9000	37.48
1994	2.9000	29.54	2.5000	38.54
1995	3.2000	29.88	2.1000	39.00
1996	3.4000	30.87	2.0000	39.68
1997	3.4000	29.95	2.6000	37.42
1998	4.1000	28.52	7.0000	27.76
1999	4.7000	27.12	6.3000	30.92
2000	4.7000	27.31	4.4000	32.94
2001	5.0000	26.56	4.0000	31.56
2002	5.4000	24.66	3.3000	30.94
2003	5.3000	24.40	3.6000	32.01
2004	4.7000	24.35	3.7000	32.12
2005	4.4000	24.75	3.7000	32.16
2006	4.1000	24.75	3.5000	32.70
2007	3.9000	24.48	3.2000	32.58
2008	4.0000	24.55	3.2000	33.02
2009	5.1000	21.32	3.6000	28.47
2010	5.1000	21.30	3.7000	32.02
2011	4.5000	22.10	3.4000	32.96
2012	4.3000	22.65	3.2000	31.00
2013	4.0000	23.19	3.1000	29.10
2014	3.6000	23.88	3.5000	29.28
2015	3.4000	23.91	3.6000	28.92
2016	3.1000	23.34	3.7000	29.21

 

Figure 2 (Australia)

The analysis of the graph of Australia, it can be seen that the gross capital formation in the country has remained stable since 1991 and it has also seen a downward shift in 2001 and 2004. Further, the unemployment rate shows a declining trend whereas it took an upward shift after 2008.

Figure 3 (China)

The graph made for Gross capital formation reflects that the country has seen the upward trend twice in1992 and in 2003. However, after 2008, the trend is still positive. On the other hand, there is no change in the unemployment which is almost equal to zero.

Figure 4 (United Kingdom)

The graphical analysis shows that the gross capital formation of the country has seen a decline since 1991 however there remained no change after that. Further, the unemployment rate of the country shows that there has remained instability in the unemployment rate of the country. It has also seen a decline after 1992 and an upward shift after 2009, however, it started declining after 2011.

Figure 5 (Japan):

The capital formation trend line of the country Japan shows that it has consistently seen a declining trend whereas unemployment rate has seen a steady pattern over the years.

Figure 6 (Korea)

The graph shows that the country (Korea) has seen two major declines in 1998 and 2009 however it remained stable after 2011 whereas the unemployment trend saw an increase only in 1998 after that it has remained stable. Further, analysis of the year 1998 shows that there had been few remarkable events which impacted the variables such as the deadliest flood, missile test and battle of yeosu etc.

Question

Analysis

The analysis of the above-mentioned graphs shows that the exchange rates and the trade balance have a direct relationship with each other. When the exchange rates increase the balance of goods and services get a positive return and vice versa.

Part B

Question No. 4

According to the aggregate expenditure model Y = C + I + G, when the government shall introduce a tax cut, the money supply in the economy shall increase to reduce the recessionary effects. Further, as the propensity to consume is 0.2 thus the fall in the taxes that are 60 billion shall cause the aggregate expenditures to shift up to (=60bn*0.2) 4 billion.

Question No. 5:

The decline in the investment expenditure causes to reduce the economic activity in the country. As it has been seen that the tax cut shall shift the aggregate demand curve upward and to the right, it shall tend to increase the output. The increase in output shall also increase the consumption spending of the people as they shall have more incomes to spend. Also, the level of investment spending shall also increase. Not only this the increase in the money demand shall increase the interest rates. This will result in reduced consumption as people start saving more and the investment shall decline because the cost of investment will become higher. Thus to reduce the cost of investment the central bank must follow the expansionary policy and must focus on a different strategy to achieve this goal so that the cost could be maintained at optimal levels.

Part C

The organization that I have chosen to see the role of a macroeconomist in an institution is Bank of England. It is a regulator of the commercial banks and serves the banking industry. The bank started as a private bank in 1694 and initially worked as a private bank. Later on, it became a banker to the government and started working independently. The bank became independent so that it could perform its function of setting monetary policy for the country and was freed from the political interference. However, the Government still owns the bank. Bank of England also operates under the framework provided by the government.

The bank provides opportunities to the young graduates to be a part of it.  The jobs offered also include a proper job description that provides a criterion of skill set the bank requires the individuals to possess while applying to the organisation. Further, an aspirant for the job in this prestigious organisation, there is a test which conducted to shortlist the candidates for the interview process and further selection processes. My credentials and the projects I have done while studying shall support me in front of my employer. Further, the score I shall obtain in the test shall also complement my stance. However, while encountering the panel interview, I will make an effort to demonstrate the practical application of the concepts that we have learned during study. However, it depends on the questions of the employer that what the direction I will take.

As mentioned earlier, being a student of economics we extensively go through the theoretical knowledge, and we also attempt to obtain a field experience while making our projects and different problems solving. However, if my skills match the job description offered by the company, there get maximum chances of getting the job. The job that I aspire to obtain requires me to have excellent research skills, good it skills and statistical information. Not only the technical knowledge but the interpersonal skills are also needed such as working in the teams and maintaining productive working relationships and ability to work under pressure. Thus, my credentials affirm my technical and my interpersonal skills get the validation by the team projects we have done so far. The feedback from the supervisors, while I was working as an intern, is also complementing in this regard.

References

History, O. (2018). History | Bank of England. [online] Bankofengland.co.uk. Available at: https://www.bankofengland.co.uk/about/history [Accessed 13 Apr. 2018].

2012books.lardbucket.org. (2018). The Aggregate Expenditures Model and Fiscal Policy. [online] Available at: https://2012books.lardbucket.org/books/macroeconomics-principles-v2.0/s25-02-the-aggregate-expenditures-mod.html [Accessed 13 Apr. 2018].

Abs.gov.au. (2018). 5368.0 – International Trade in Goods and Services, Australia, Dec 2017. [online] Available at: http://www.abs.gov.au/AUSSTATS/[email protected]/DetailsPage/5368.0Dec%202017?OpenDocument [Accessed 13 Apr. 2018].

Reserve Bank of Australia. (2018). Historical Data | RBA. [online] Available at: https://www.rba.gov.au/statistics/historical-data.html [Accessed 13 Apr. 2018].

Data.worldbank.org. (2018). Indicators | Data. [online] Available at: https://data.worldbank.org/indicator [Accessed 13 Apr. 2018].

Abs.gov.au. (2018). 5204.0 – Australian System of National Accounts, 2016-17. [online] Available at: http://www.abs.gov.au/AUSSTATS/[email protected]/DetailsPage/5204.02016-17?OpenDocument [Accessed 13 Apr. 2018].