Global Economy - Assignment Example

Running head: GLOBAL ECONOMY Global Economy [Writer’s name] [Institution’s name] Global Economy Answer 1: Real GDP: Real GDP often referred as GDP in constant Dollars. It is an inflation- adjusted measure which highlights the value of all goods and services that are domestically produced within a given period of time. It expressed of prices in one year called the base year. Source: http://www.oecd.org/dataoecd/28/14/18640945.htm Source: http://www.economywatch.com/economic-statistics/ Source: http://www.abs.gov.au/ausstats/abs@.nsf/mf/1350.0 Source: http://data.worldbank.org/country/china Real GDP Per Capita: Real GDP per capita takes under consideration the average gross domestic product per person in the economy. Source: http://www.oecd.org/dataoecd/28/14/18640945.htm Source: http://www.abs.gov.au/ausstats/abs@.nsf/mf/1350.0 Source: http://www.economywatch.com/economic-statistics/ Source: http://data.worldbank.org/country/china Annual Real GDP Growth Rate: It is defined as the increase in the amount of goods and services produced by the country overtime. It is normally measured as the percent rate of increase in real GDP. Source: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG Source: http://www.abs.gov.au/ausstats/abs@.nsf/mf/1350.0 Source: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG Source: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG Unemployment rate: The percentage of the total labor force means number of individuals aged 16 and over, is unemployed but aggressively seeking jobs and willing to work. Source: http://www.oecd.org/dataoecd/28/14/18640945.htm Source: http://www.abs.gov.au/ausstats/abs@.nsf/mf/1350.0 Source: http://www.economywatch.com/economic-statistics/ Source: http://data.worldbank.org/country/china Real Interest Rate: It is defined as the rate of Interest that the investor expects to get after allowing for inflation. The formulae for calculating the Real Interest rate of an investment is: Real Interest Rate = Nominal Interest Rate - Inflation (Expected or Actual) Source: http://www.oecd.org/dataoecd/28/14/18640945.htm Source: http://www.abs.gov.au/ausstats/abs@.nsf/mf/1350.0 Source: http://www.economywatch.com/economic-statistics/ Source: http://data.worldbank.org/country/china Source: http://www.oecd.org/dataoecd/28/14/18640945.htm Inflation Rate: Inflation rate is defined as the rate of increase in the Consumer Price Index (CPI).It is calculated in percentage, increasing in the price of goods and services overtime usually annually. Source: http://www.oecd.org/dataoecd/28/14/18640945.htm Source: http://www.abs.gov.au/ausstats/abs@.nsf/mf/1350.0 Source: http://www.gecodia.com/Greece-Inflation-Rate_a608.html Source: http://data.worldbank.org/country/china Government Expenditure: Government expenditure is the amount that a government spends in a particular period. It includes all government consumption and investments made by a state excluding transfer of payments. Source: http://www.oecd.org/dataoecd/28/14/18640945.htm Source: http://www.oecd.org/dataoecd/28/14/18640945.htm Government Taxes: It is defined as a fee or sum amount of money imposed by the government on citizens, product, and property and on business entities for its support or for specific facilities or services. Source: http://www.oecd.org/dataoecd/28/14/18640945.htm Source: http://www.oecd.org/dataoecd/28/14/18640945.htm GDP Measures GDP Per Capita GDP per capita is the indicator used globally to measure macroeconomic output. It gives an in depth comparison of each country’s capacity to generate growth and income. However, it has been often considered as a measure of economic well-being and life style. GDP GDP is an approximation of market outturn, for the value of all goods and services that are domestically produced and traded for revenue generation within a given period of time. It is usually measured by summing up a net exports and imports, net capital formation, personal consumption and government expenditures. Human Development Index: Another well know measure is the Human Development Index, utilized by the United Nations Development Programme. This defines human development as the “process of enlarging people’s choices...to live a long and healthy life, to be educated, have access to resources needed for a decent standard of living, to have political freedom, guaranteed human rights and personal self-respect.”(Human Development Report 1992) PPP as a GDP Measure Used To Compare Two Countries Purchasing power parity (PPP) is the most commonly accepted method to compares the standard of living between two countries by taking analyzing the effect it has on their exchange rates. A good example of this is as under: By utilizing the official exchange rate, China's 2010 GDP was $5.745 trillion as compared to $14.6 trillion for the United States of America. Thus it may be concluded that, for all the 1.337 billion residents of China, the GDP per capita would be $4,297. On the other hand, it is more economical to reside in China as compared to the United States of America as its currency is fixed at a rate to keep it lower than the dollar. Thus, it costs less to manufacture the consumer items for export to the USA. Thus, China's production in dollar terms should not be compared as its cheaper currency is also considered. (Avakov 2010) Purchasing power parity resolves such type of issues. By using PPP, China's GDP is $9.872 trillion (2010 est.); this means it is considered as the third largest economy after United States and Europe. According to the above, it makes China's Gross Domestic Product per capita $7,400 per person. It is still less then US GDP per capita of $47,400. Answer2 Comparison of Macroeconomic Variable Real GDP Fastest growth in Chinese Real GDP is at a rate double that of Australia’s Real GDP. Strong and positive growth in trade volumes between china and Australia in excess of growth in Real GDP. Real GDP per Capita Income: This macroeconomic indicator is considered as an indicator of country’s standard of living.GDP Per Capita Income of Australia is 41000 US$ as compared to Greece which is approximately 29600 US$. As compared to both the countries, Per Capita Income for the China is around 7400 US$. Annual Real GDP Growth: As per the collected data, Annual Real GDP growth rate of Australia is 1.8% while the annual Growth rate of the Greece has decrease up to .-6%.As compared to both of the before mentioned countries, China has a very strong growth rate up to 9.5% per annum. Unemployment Rate: Due to the biggest global financial crisis, almost every single country faces the issue of high unemployment rate. This trend may also be noted in the above given graph which shows unemployment rate of Australia is 5.7 percent, while the Greece has 9.1% unemployment rate. As compared to Australia and Greece China has an unemployment rate of 6.1%. Budgetary Position between Australia and Greece Budget position is plays a vital role in the movement of the Government's asset and liability position, positive or negative changes in the economic assumptions may also have an effect on the Government's financial stocks. Australia’s budget projects a surplus of $3.5 billion (0.2 per cent of GDP) in 2012‑13. This represents a fiscal consolidation of $52.9 billion (3.8 per cent of GDP) in the space of two years (Budget 2011-12, 2012). Due to the global financial crunch touched a deficit of three year, however in the current year it has attainted surplus. The 2012 budget may have a negative effect on Greece into the fourth Consecutive year of negative growth. In the midst of a crisis and a recession on any short of fruitful investments; this has affected the working class. Answer3 GFC GFC is abbreviated as global financial crisis or economy crisis, which began in the early days of 2007 from the United States. Most of the public and private financial institutions and blue chip business loose their value and assets. As per the above data it may be said that the GFC influenced China. Australia and Greece as they are integrated into the capitalist world economy as a result of globalization policies. Due to the increase of globalization in the world financial system, causes countries to face GFC. China’s economy has been slow since the last three years due to low export volume and weak property market as compared to before 2007-2008.(Jones etal 2010) Among other economically sound countries, Australia was the least effected by global finical crisis. Its banking sector was slightly affected as compared to other nations. The before mentioned sector didn’t face failures and their profitability still remained high. However, it was down compared to pervious years and the debt level had also increased. As compared to China and Australia, the global financial crisis has affected Greece the most. The United States stock market has been continuously affected due to Greece’s massive debt load. Due to the global economic crunch, as per the data unemployment in Greece rise to 16.3% and the revenue shows downward trend as a result. (Jones etal 2010) In most of the developing countries, global financial crisis affect the major macroeconomic variable due to the collapse and volatility of stock markets. There is a very strong relationship between stock market and macro economic variables. The collapse of a stock market, weak export demand, fall in the commodity prices and reduced prices of natural resources always tends to startup a financial crisis and push the economy into recessions. All the macroeconomic variables are dependent on the above mentioned notions which play an important role in determining the trend of the economy. Bibliography Avakov V. Alexander (2010); Two Thousand Years of Economic Statistics: World Population, GDP and PPP. Algora Publishing Budget 2011-12 (2012); retrieved from http://www.budget.gov.au/2011-12/content/bp1/html/bp1_bst3-01.htm on 9 May 2012 http://www.abs.gov.au/ausstats/abs@.nsf/mf/1350.0 http://data.worldbank.org/country/china http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG http://www.economywatch.com/economic-statistics/ http://www.gecodia.com/Greece-Inflation-Rate_a608.html http://www.oecd.org/dataoecd/28/14/18640945.htm Human Development Report (1992), Human Development Report 1992-Review." The Geographical Journal. Vol. 159, Part 3, Jones Stephany, Ocampo Jose Antonio, Stiglitz E. Joseph (2010); Time for a Visible Hand: Lessons from the 2008 World Financial Crisis. Oxford University Press Read More