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Macroeconomic - Essay Example

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International business is at its zenith when almost all the economies in the globe are open. Business cycles fluctuations are common to almost all the economies in the modern world. This essay will through light on the Global Financial Crisis that had taken place in 2007-2008…
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Download file to see previous pages International business is at its zenith when almost all the economies in the globe are open. Business cycles fluctuations are common to almost all the economies in the modern world. This essay will through light on the Global Financial Crisis that had taken place in 2007-2008. The essay will discuss the impacts created by this financial crisis on different economies in the world. This part of the essay will concentrate on the growth of real Gross Domestic Product, inflation rate and unemployment rate in Australia, United States and United Kingdom. Answer 1: Figure 1: Real GDP, Unemployment, and Inflation Rates of U.S. (Source: ABS, 2013; BLS, 2012) The above graph shows the real GDP, inflation rate and unemployment rate in United States. Figure 2: Real GDP, Inflation and Unemployment of Australia (Source: DFAT, 2013; RBA, 2013) The above graph shows the real GDP, inflation rate and unemployment rate in Australia. Figure 3: Real GDP, inflation and Unemployment in United Kingdom (Source: DFAT, 2013; BEA, 2012) The above graph shows the real GDP, inflation rate and unemployment rate in United Kingdom. Answer 2: The above three line graphs show that global crisis has negatively affected all the three economies in the world. It is clearly visible that due to recession in 2007 to 2008, the real GDP of all the three economies has shown a sharp fall in 2008, 2009 and 2010. The recessionary trails in the economy were responsible for the low velocity of circulation of money in the economy. With fall in purchasing powers, the aggregate demand for goods and services has been low in the three nations. Thus, although there has been an overall growth in real GDP but the global financial crisis has lead to a fall in GDP in the short run. The crisis in the economy has reduced both the income and output levels. As a result, the unemployment rates have also augmented. Economic crisis is often associated with inflationary trails in the economy. Scarcity causes price rise in almost all the goods and services. However, with time all these three developed economies are recovering from the extreme crisis. Answer 3: A nation must always formulate policies of growth in a way that helps it to use the benefits of its core competences. In the modern era almost all the countries in the world are open economies. International trade is at its peak. At this juncture it is always advisable for a nation to produce only those goods and services, over which they have competitive advantages. This would help the nation to allocate its resources in an efficient method. While making resource allocations, the state as well as the business enterprises will always find the stock of resources to be scarce, when compared to the demand in the economy. The country in Africa is a labour surplus nation, then the public as well as the private sectors should stress on labour intensive methods of production. However, that does not mean that the nation would not undertake technological inventions. The state should adopt capital intensive techniques but not at the cost of its labour requirements. Maintaining the labour concentrated methods of production, both public and private sectors of the country would be able to generate more employment for people. A higher employment will increase both income and purchasing power of the people in the country that would ultimately help in raising the aggregate demand of the nation. Rise in aggregate demand will finally help in augmenting the GDP of the country. For economic development, technological inventions are always in race with depletion of national resources. Thus, the government of the country must adopt sustainable technological improvements to protect the rich natural reserves of the nation. As the country concerned has a free or Laissez faire economy, the government should not make unnecessary interventions in the matters of economic affairs because that would involve a fall in the net social welfare. Free forces of market demand and supply should be allowed to set most of the price levels ...Download file to see next pagesRead More
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