Economics assignment on: Article analysis on Macroeconomics

Q1. Discuss the macroeconomic environment within the last two years. You are to take reference to any specific country of your choice (other than Singapore).

Ans1.Macroeconomics refers to the study of an economy as a whole. It explains the various economic concepts taking into consideration the equilibrium theory. The various variables covered under macroeconomics include the national income, rate of unemployment, (Lo, 2007) inflation in the prices, investment spending & its elements. Macroeconomics of a particular country is studied in order to have relevant information regarding the fiscal as well as monetary policy (Taylor & Francis, 2010).

The essay takes into consideration the micro economic environment within last two years of China. The People’s Republic of China refers to the second largest economy after US. It refers to one the fastest growing economy having an average GDP rate of 10% (Lo, 2007).As per The World Bank, the Chinese Economy has been growing at an average rate of 13 percent. The approximate Gross Domestic Product i.e. GDP of China is US$ 3.38 trillion in the year 2008. The GDP mentioned above has recorded China as one of the fastest growing economy since 1994 (Prasad, 2006).

In order to overcome from the Global Financial Crisis, China had launched an Economic Stimulus Plan which majorly took into consideration (Taylor & Francis, 2010) affordable housing, low taxes on the real estate, infrastructural development i.e. ports, railways, roads, etc. In the late 2009, it was seen that China was in a recoverable state (Lo, 2007).

In the year 2010, it could be seen that China had expanded itself & was became an export dependent economy in order to develop its internal market. Remuneration was on rise & China was referred to an economy which majorly focused upon a better standard of living (Prasad, 2006).

In the year 2010, approximate GDP of China’s was evaluated to be US$5.87 trillion surpassing the GDP of Japan. Based on the evaluation done by the World Bank, China became the second largest economy after US. It has also been evaluated that China would become the largest economy in the year 2020 (Taylor & Francis, 2010).The estimated credit given by China to the other countries was evaluated to be 20.8 % of that of the US Treasury Securities. The rate of inflation of China has increased up to 5.1% in the year 2010 with a simultaneous increase in the food prices. Beginning of 2010 was referred to a year which led to a huge shortage of labor & obstruct the production process altogether. By 2010, there were frequent rise in the wages & an increase in the living standard of the people (Prasad, 2006).

The GDP of China from 1955 till 2010 has been enumerated in a tabular form. It is as under:

(2000 = 100)Nominal Per Capita GDP

(as % of USA)195591,0002.4619.22.431960145,7002.4620.03.041965171,6002.4621.62.631970225,3002.4621.32.201975299,7001.8622.42.321980460,9061.4925.02.521985896,4402.9330.01.6519901,854,7904.7849.01.4819956,079,4008.3591.02.1720009,921,5008.27100.02.69200518,308,5008.19106.04.05201025,506,9566.97112.06.23

                                                            (Source: Lo, 2007)

Q2. Find an article concerning Singapore’s economy from a local newspaper (not more than one page). The concern should preferably be one of the following:

Þ    GDP or Growth rate

Þ    Unemployment

Þ    Inflation

Ans2. Article Name: Singapore raises inflation forecast, vigilant on growth risks

The article chosen is in regards to the rise in the inflation rate at Singapore, which in turn leads to high levels of risks in the economy. The central bank of Singapore has led to an increase in the rate of inflation. The rise in the rate of inflation has led to an increase in the prices of the commodities by 4% – 5% as compared to the prices increase. It has also been estimated that, with an increase in the prices of the commodities would lead to a rise in the overall standard of living. The rise in the standard of living would lead to an increase in the GDP level of Singapore (Singapore Business News, 2011).

The article highlights that the Singapore dollar has reached an unprecedented level which in turn led to an increase in the inflation at Singapore.  Due to an increase in the currency, the consumer prices rose up to 4.5% in the month of May as compared to January (Singapore Business News, 2011). This led to a significant rise in the inflation level, with a rise of 5.1% as compared to the previous year.Rise in the inflation rate also had an adverse effect on the labor market. This led to a tight pressure amongst the labors & had an adverse effect upon the supply shocks. There have been vulnerable fluctuations in the demand from the global markets. This led to a fall in the GDP level by 7.8% as compared to the previous three months (Singapore Business News, 2011).

The article is concluded by saying that – “If the pickup from the downturn last quarter is weaker than currently expected, Singapore’s growth could come in at the lower half of the 2011 forecast” (Singapore Business News, 2011).The article is majorly concerned about how an increase in the inflation rate would lead to an increase in the prices of the general commodities. It has been denoted that with an increase in the prices of the goods & services, people tend to buy less amount of commodities. This in turn leads to a decrease in the purchasing power of an individual indirectly leading to a loss of real value & an increase the level of risk (Prasad, 2006).

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