Macroeconomics - Assignment Example

The amount of trade deficit is 2008 is (422,905 - 460,665) = -37760. The amount of trade deficit is 2009 is (422,905 - 460,665) = -32023. iv. The value of real GDP in 2009 is (Nominal GDP of 2009/GDP deflator of 2009) = ? (1,373,636/ 101.4) million = ?13546.71 million. v. The current macroeconomic situation of the UK can be defined as economic recession. So, there has been no surprise that the economy has experienced a negative rate of growth form 2008 to 2009. The fall in consumption spending, investment, and net exports (exports minus imports) can be explained by the prevalence of ongoing economic recession which cause fall in demand.

The rise in government expenditure can also be explained by the current macroeconomic situation. In order to deal with the recessionary situation, the government has undertaken certain measures to boost aggregate demand of the country. One of these corrective policies is increased government spending that has been reflected by increased government expenditure form 2008 to 2009. 2. There is some problem with this question… What are the coefficient of r in the expression for investment and the expression for real money demand?

The coefficients are important as they denote the rate of response to change in interest rate. if there is no coefficient it should be assumed that coefficients are equal to 1. But this case is either impossible or very rare!!!! 3. The main forms of unemployment are as follows: Structural unemployment: Structural unemployment is a particular form of unemployment. This kind of unemployment takes place when a labor market becomes unable to offer jobs to everybody who wants to work due to the fact that the level and type of skills of unemployed individuals do not match with the skills required for the jobs available in the market.

Structural unemployment usually lasts very long. Very often technological unemployment which results from substitution of workers by machines might be recognized as structural unemployment. In order to deal with structural unemployment, there should be an increase in aggregate demand of the economy. If there is a fall in aggregate demand, then many individuals become unemployed and enter into the vicious circle of poverty, while their skills become obsolete. Since the present economic scenario of the UK can be characterized as economic recession, structural unemployment should be there in the economy as production has reduced drastically and the UK economy has failed to provide job to all who wish to work.

Frictional Unemployment: Frictional unemployment takes place during the time period when a worker shifts one job to another. In other words, frictional unemployment takes place during transitioning from one job to the other. Very often, frictional unemployment is referred to as search unemployment. Very often this unemployment is voluntary in nature. Frictional unemployment can always be found in an economy. Thus in UK economy, it would be quite easy to find out frictional unemployment. Cyclical Unemployment: Cyclical unemployment is very often referred to as Keynesian unemployment.

It is also known as deficient-demand unemployment. Cyclical unemployment takes place when there is scarcity of aggregate demand for providing jobs to everybody who are willing to work. When demands for goods and services reduces, the level