Global Context of Business - Assignment Example

iii) Devaluation of domestic currency and thus a fall in profitability of investment ventures. This might restrain many potential investors from pouring their funds in the afflicted nation which can adversely affect the economic growth process. B) Unemployment rate is measured as the percentage of unemployed people in the total labor force. Discouraged workers and people not seeking jobs though belonging to an age group above 16 are not included in the labor force. In the present case, the total labor force comprises of 110 million people and the number of people employed among them is 90 million.

This leaves a total of 20 million people jobless, in the total workforce. Thus, the rate of unemployment in the nation is, 3. In economics, domestic aggregate demand is treated at par with the real GDP of an economy. There are three primary sources which sum up to give the aggregate demand in an economy, viz., consumption expenditure, investment expenditure and government expenditure. A fall in any one of the three factors will lead to a fall in total domestic demand and hence the resultant GDP will be affected accordingly When the government decided to implement tax cuts, it led to a rise in the disposable income and an inferred rise in the amount of consumption expenditure.

However there was a simultaneous shortfall in the availability of government’s resources to meet its expenses, so that the proportion of government expenditure in aggregate demand depreciated. A rise in one component accompanied by a fall in another left the aggregate demand as well as the real GDP unchanged. With no changes in the domestic money supply, the general price continued at the same level.