The Global Economy - Essay Example

The Global Economy Name University An economist in the modern world can actually be described as a person who studies how our modern societies and the general markets distribute the resources. Resources can take the dimension of human man power, the financial capital, land and most importantly the raw materials that are required in the manufacture of goods and services that essentially keep the world going. We can clearly now understand that economists are persons who research and then report how countries and markets across the globe utilize the human labour and the natural resources to purposely produce the products and services. Economists are normally very important careers specialists who are normally employed by the different world governments, international non-government organizations, several world and national banks, large corporations to essentially collect data, analyze reports, the proceed to using the modeling techniques to forecast into the future and predict what may happen in the future if certain trend is adhered to. They also advice on the most suitable actions to be undertaken and the right time to undertake those prescribed actions. Economists are actually very learned professionals. They have attained high levels of education. For any person aspiring to be an economist in this modern world setting, he or she must have a master`s degree in the economics arena. However there are certain positions that require a person to have a Doctor of Philosophy (PhD). In many world Universities, a master program in Economics consumes a period of 2-3 years whilst a Doctor of Philosophy requires a time period of five years to complete. We can comprehend that economists spend substantial period at the university seeking knowledge. As we all know, economists find their way into large corporation and world organizations where they practice and put their knowledge into proper use. An example of such large worldwide organization is s the International Monetary Fund. The International Monetary Fund is an international organization with its bases at the USA. It comprises of 188 member countries and was formed to purposely facilitate global monetary cooperation, secure the world countries financial security and promote the international trade. Member countries contribute funds according to a quota system and those countries that are in need can borrow. Though these funds, many third world countries have been able to build their economies due to the enhanced financial liquidity and also the enhanced trade between the world nations. We can clearly note that the absolute goal of the IMF is to build the economies of the nations and the world in general. Therefore an economist attached to this particular organization should clearly focus with the improvement of the existing economies especially those lagging behind. The economist in this organization analyzes the various data packets availed, analyzes the reports and sits back to produce the required results. The results are generally how the economy is doing and how it will do in the near future. The results are essentially obtained through the use of the modeling techniques where the raw data is manipulated to forecast into the future. Part B 1.0 (i) Real GDP growth rate- this is the total value of services and goods produced after subtracting all costs involved in the creation of those goods and services. (ii) Real gross fixed capital formation growth rate- this is a statistical entity that purposely measures the value of the real acquisitions of the very new and rather existing fixed assets by any particular business entity. (iii) Unemployment rate- this is the rate at which citizens of a specific country are being rendered jobless. (iv) Consumer Price Index (CPI) - this is an estimate that is statistical in nature normally employed to measure any change in the price level of consumer goods and services purchased by nation`s population. (a) USA YEAR Consumer price index (CPI) Real gross fixed capital formation growth rate Unemployment rate (%) Real GDP growth rate (%) 2001 177.1 2300 4.7 1.0 2002 179.9 2210 5.8 1.8 2003 184.0 2200 6.0 2.8 2004 188.9 2380 5.5 3.8 2005 195.3 2550 5.1 3.4 2006 201.6 2690 4.6 2.7 2007 207.3 2610 4.6 1.8 2008 215.303 2570 5.8 -0.3 2009 214.537 2100 9.3 -2.8 2010 218.056 2000 9.6 2.5 Figure 1: Economic Aspects of USA (b) AUSTRALIA YEAR Real GDP growth rate (%) Real gross fixed capital formation growth rate Unemployment rate (%) Consumer price index (CPI) 2001 1.5 5000 6.8 74.5 2002 4.0 5200 7.0 76.6 2003 2.9 6100 6.2 78.6 2004 4.5 6500 5.5 80.6 2005 2.8 6900 5.2 82.6 2006 3.0 7720 5.3 85.9 2007 4.0 8000 4.5 87.7 2008 3.7 8600 4.25 91.6 2009 0.8 8900 5.25 92.9 2010 2.7 9200 5.3 95.8 Figure 2: Economic Aspects of Australia (c) GREECE YEAR Real GDP growth rate (%) Real gross fixed capital formation growth rate Unemployment rate (%) Consumer price index (CPI) 2001 -0.15 -4000 10.2 78 2002 0.1 500 11.3 79.2 2003 2.0 -9000 10.2 83.5 2004 1.9 -15000 10.0 85 2005 -0.8 -18000 10.3 86.1 2006 2.0 -21000 9.7 91.2 2007 0.6 -20500 8.9 93.2 2008 0.1 -24000 7.8 96.3 2009 -3.2 -32000 9.1 96.8 2010 -1.1 -9000 10.4 101.9 Figure 3: Economic Aspects of Greece The charts (a) Real GDP growth rate Key: Blue series- USA Red series- Australia Green series- Greece (b) Real gross fixed capital formation growth rate Key: Blue series- USA Red series- Australia Green series- Greece (c) Unemployment rate Key: Blue series- USA Red series- Australia Green series- Greece (d) Consumer price index (CPI) Key: Blue series- USA Red series- Australia Green series- Greece 2.0 YEAR USA (Annual official interest rate %) AUSTRALIA (Annual official interest rate %) GREECE (Annual official interest rate %) July 2000-June 2001 3.8 5.0 4.5 July 2001- June 2002 1.9 4.2 3.2 July 2002- June 2003 1.2 5.0 2.75 July 2003- June 2004 1.0 5.4 2.0 July 2004- June 2005 2.3 5.6 2.0 July 2005- June 2006 4.3 5.6 2.2 July 2006- June 2007 5.2 6.2 3.5 July 2007- June 2008 4.0 6.7 4.0 July 2008- June 2009 0.2 3.2 2.0 July 2009- June 2010 0.2 3.7 1.0 Figure 4: The Official Average Interest Rates Interest Rate Chart for USA, Australia and Greece Key: Blue series- USA Red series- Australia Green series- Greece 3.0 Chart of USA Chart of Greece Chart of Australia We came to a conclusion that the lower the interest rate the higher the GDP growth of a country. When interest rates are low, better investment growth is achieved since many persons can borrow from the banks. Unemployment is characterized by high interest rates meaning that fewer investors can invest in a country to provide job opportunities. Also it was noted that high levels of inflation occur during the times of high interest rates due to currency losing value. PART C: 4.0 Monitory policy can arguably be defined as the absolute process by which monetary authorities in our countries seek to address the supply of money to essentially curb the inflation rates or the interest rates. The control of the interest rates and the inflation rates is normally undertaken to ensure the stability of the goods and services prices as well as the stability of the nation`s currency. Therefore these authorities are always up to the task of ensuring that certain limits are normally not surpassed especially the interest rates in many banking and financial institutions. Monetary authorities can be termed as the citizen`s watchdog. These particular authorities are also aimed at predicting the exchange rates of various currencies in their countries and fostering the economic growth to lower the unemployment rates in their nations. The central banks of various nations are the monetary authorities tasked with ensuring the values of monetary policy are adhered to by the respective institutions. These authorities have and normally implement an official interest rate that should not be surpassed by banks and other money lending financial institutions in a country. This particular process involves little variation in the supply of the central bank general liabilities. 5.0 we can see that GDP growth rate is higher (red colours) for smaller values of interest rate and respectively for higher values of investment ratio. Contrary, smaller growth rate (blue colours) corresponds to higher values of interest rate and respectively to smaller values of investment rate The Gross Domestic Product (GDP) of a nation is key indicator of its economical progress. GDP is on the other hand directly affected by other variables which are the interest rates, the inflation, unemployment and the investment growth. In a nation where the official interest rates are relatively low, there is great investment growth since many persons and companies will be willing to secure loans form financial institutions for starting and expanding the current businesses. This will translate to a greater number of job opportunities meaning that unemployment rates will be low and since there is great income in the nation, the GDP will be high and since goods and services are produced at relatively low costs, them the inflation rates will be very low making it possible for low income earners to be able to access basic services in the nation. Consequently in a nation of high interest rates, low investment growth is normally recorded since very few personalities will be able and willing to secure financial resources to starting and expansion of the businesses. This clearly means that very low job opportunities can be realized which in turn means high levels of unemployment and high inflation rates due to increased costs of production of goods and services. 6.0 The Australian Monitory policy for the year 2015 has been adopted to address the current critical issues in the nation. It was established that it was very vital to address those issues to foster the country`s economic growth. These main issues of concern were; weak or low inflation characterized by the rising value of the dollar, the rising unemployment levels. The unemployment rates hit as high as 6.4%. The interest rates were lowered to essentially increase the consumer demand. In the European nation of Greece, very high levels of unemployment were recorded as well as high interest rates. The country is struggling to recover from economic recession and its negotiating hard with other members of the Euro zone to be bailed out. Therefore we can truly understand that even the inflation rates are high since the nation is heavily borrowing from outside. In the US, the monetary policy has achieved the predetermined objectives of lowering unemployment rates, reducing the levels of inflation and the interest rates. America has so far the best implemented monetary policy followed by Australia while that of Greece is relatively poor since the unemployment rates are high, low levels of GDP growth and high rates of rates in the recent past. America’s monetary policy emerged best due to its high values of GDP followed by Australia. References PACEK, N. (2012). Global economy. Singapore, Marshall Cavendish Editions. http://site.ebrary.com/id/10583770. SPILSBURY, R. (2012). Global economy. Chicago, Ill, Heinemann Library. http://www.freading.com/ebooks/details/r:download/ZnJlYWQ6OTc4MTQzMjk2OTU4NTpw. GULATI, G. J., YATES, D. J., & TAWILEH, A. J. (2010). Explaining the Global Digital Divide TARGOWSKI, A. (2003). The New Informated Business Architecture. BREUER, W., QUINTEN, B., & SALZMANN, A. J. (2015). Bank vs. Bond Finance. BALK, B. M. (2008). Price and quantity index numbers: models for measuring aggregate change and difference. Cambridge, Cambridge University Press. TAYLOR, S. (2007). Asset price dynamics, volatility, and prediction. Princeton, N.J., Princeton University Press. http://public.eblib.com/choice/publicfullrecord.aspx?p=664610. SMITH, C. (2008). Option strategies profit-making techniques for stock, stock index, and commodity options. Hoboken, N.J., Wiley. http://site.ebrary.com/id/10250337. BAUMOHL, B. (2013). The secrets of economic indicators: hidden clues to future economic trends and investment opportunities. Upper Saddle River, N.J., FT Press. LIESNER, T. (1989). One hundred years of economic statistics: United Kingdom, United States of America, Australia, Canada, France, Germany, Italy, Japan, Sweden. London, Economist Publications. http://www.rba.gov.au/statistics/tables/index.html#interest-rates http://databank.worldbank.org/data/views/variableselection/selectvariables.aspx# Read More