# BEO1105 Economic Principles

## Question:

Data collection, presentation, and analysis Greece’s economic crisis has been making headlines lately. It was looking like it would default on its debt.

This part of the assignment will require you to collect, present, and analyze economic data for Australia and Greece, Germany, Greece, and any other Asian country.

Use The World Bank’s Data website to collect and present annual data for 2005, 2016, and 2017. Some countries may not have data until 2013, in which case data are acceptable from 2005 – 2013.

Tables are the best way to present data.

It is up to you to decide how many tables and what variables/countries are included in each table.

Each table should be clearly numbered, have a title/heading that identifies its contents, and include a reference to the source data.

The data can be used to create the following graphs using Excel’s graphing tool (line graphs).

Each graph should indicate the source table or tables.

Give your graph a title and label each axis.

Table 1: GDP per Capita (constant 2010 US\$).

Source: The World Bank

Table 2: Australia’s GDP growth rate, Inflation and Unemployment rates

Annual GDP growth

Inflation rate

Unemployment rate

Source: The World Bank

Table 3: Germany’s GDP Growth, Inflation and Unemployment Rates

Annual GDP growth

Inflation

Unemployment

Source: The World Bank

Table 4: Growth, inflation, and unemployment rates in Greece

Annual GDP growth

Inflation

Unemployment

Source: The World Bank

Table 5: Singapore’s GDP growth rate, Inflation and Unemployment rates

Annual GDP growth

Inflation

Unemployment

Source: The World Bank

Question 2

Economic Analysis

Graph 1: Australia’s Economic Outlook (2005-2016).

Source: Table 2

GDP Growth and Unemployment Rate

Okun’s law states that the relationship between Australia’s Gross Domestic product and its Unemployment rate is in accord with Okun’s law. This means that there is a negative correlation between growth in Gross Domestic Product and unemployment (Arnold 2013,).

Australia’s unemployment rate declined between 2005 and 2008.

The 2005 unemployment rate was 5.03%, and it was 4.54% in 2008.

The Gross Domestic Product grew during the same time, going from 3.20% in 2005, to 3.70% by 2008 (The World Bank 2017, 2017).

Similar trends were observed in 2010-2011 and 2015-2016.

However, the unemployment rates were very high in 2009 and 2013, 2014, 2015, respectively.

The economy of Australia suffered during these financial years.

This correlation shows how important employment is in driving economic growth.

An increase in unemployment indicates that the employment rate is high.

When more people are employed, consumption and investments will rise, which in turn leads to a rise in real Gross Domestic Product (Sloman Wride & Garratt 2015).

The 2009 low point in Australia’s economic growth, which was 1.81%, occurred between 2005 and 2016.

The 2008-2009 Global Financial Crisis caused this weak growth.

This crisis caused a decline in aggregate demand, which in turn led to a rise of unemployment and a slowdown in economic growth.

Inflation and GDP Growth

Some years had positive correlation between inflation and GDP growth, while other years saw them move in opposite directions.

In 2013, for example, the economic growth was 2.57% as compared to the 3.63% recorded in 2012.

Inflation in 2013 was also lower than 2012’s 2.06%.

This shows that a fall in real GDP due to a decline of aggregate demand leads to a decrease in price levels.

Inflation rose in 2009 as the economy slowed down.

This can be attributed in part to the expansionary fiscal and monetary policies that the Australian government introduced during the Global Financial Crisis (GFC). (Australian Government 2015).

These policies were expansionary and resulted in higher inflation.

Inflation and Unemployment

Inflation and unemployment rate are inextricably linked.

Inflation rises when unemployment falls, and vice versa when it is higher.

In 2005, unemployment was at 5.03% and inflation was at 3.71%.

In 2011, inflation was higher at 6.18%, while unemployment was lower at 5.08% (The World Bank 2017, 2017).

The government’s policies to stabilize the economy result in this tradeoff between inflation and unemployment.

The government uses expansionary economic policies to reduce unemployment.

These schemes increase demand, which leads to economic growth and job creation.

Inflation is when the aggregate supply does not respond to rising demand.

Inflation can also be caused by the use of restrictive policies to lower inflation (Goodwin Nelson & Harris 2014).

Graph 2: Germany’s economic outlook, 2005-2016

Source: Table 3.

Unemployment and GDP Growth

Despite the slowdown in the economy, unemployment in Germany has declined between 2005 and 2016.

After a rise in economic growth by 3.70% (0.71% in 2005), the unemployment rate fell to 10.25% in 2006. A similar trend was observed in 2010.

This shows that an increase in output speeds up employment creation.

Despite the fact that Germany was in recession during 2009, the Global Financial Crisis did not lead to an increase in unemployment.

Inflation and GDP Growth

Germany has experienced relatively low inflation over the past decade.

Inflation and GDP growth have varied over the years.

In 2006, for example, Germany’s economy grew while the inflation fell.

This economic expansion can be attributed to an increase in aggregate demand.

This could have been due to supply side factors like technological advancements and increased labor productivity.

In 2008, the Gross Domestic Product fell and inflation dropped.

Evidently, the decline in GDP was due to a decrease of aggregate demand. This is why inflation fell during the financial year.

Inflation and Unemployment

Between 2005 and 2016, the unemployment rate exceeded that of inflation.

It should be noted, however, that the unemployment rate in this country has been declining.

Low oil prices are responsible for low inflation in Germany (BBC 2015).

The drop in oil prices has led to a reduction in production costs.

The aggregate supply has increased, leading to a decrease of the general prices and an increase in real Gross Domestic Product. This also led to an increase in the employment rate.

Graph 3: Greece’s Economic Outlook (2005-2016).

Source: Table 4.

Unemployment and GDP Growth

The level of unemployment has increased in Greece as the Gross Domestic Product has been falling.

The Great Depression saw unemployment rise in 2009 and reach its peak in 2013. It reached 27.47% in 2013.

Large external debt has adversely affected Greece’s credit worthiness and scared investors. This is what is causing the economic problems in Greece.

Low consumption and investment have caused a decline in aggregate demand and economic growth.

Inflation and GDP Growth

Inflation and deflation have been low due to a decline in GDP growth.

Greece is still unable to attract investment and consumer spending due to its large debt payments.

The aggregate demand has declined, leading to a decrease in general prices and an economic contraction.

Inflation and Unemployment

Inflation began to fall in 2008 after the Global Financial Crisis.

Insufficient aggregate demand caused this trend.

A decrease in total demand will result in a drop in Gross Domestic Product and lower prices.

Companies will reduce their production if there is less demand (Boyes & Melvin 2012).

Thus, there is a decline in labor demand which causes an increase in unemployment.

Some companies may fire employees in extreme situations.

Graph 4: Singapore’s Economic Outlook (2005-2016).

Source: Table Five

GDP Growth and Unemployment Rate

An increase in Singapore’s GDP results in a decrease in unemployment.

In 2006, the GDP growth was 8.86%, compared with 7.49% in 2005.

This increased Gross Domestic Product resulted in a decrease of unemployment to 4.48%, from 5.59% in 2005.

The unemployment rate rose from 3.96% to 4.30% in 2009 when the economy was in recession (The World Bank 2017, 2017).

In Singapore, GDP growth plays an important role in creating employment.

GDP Growth and Inflation

Inflation and deflation are both low in Singapore.

Even during deflation, the country has seen remarkable economic growth.

In 2010, Singapore’s economy grew by 15.24%, while inflation was -0.05%.

This suggests that supply-side factors like technological advancement and labor productivity may have contributed to the growth in GDP.

In recent years, however, Singapore has seen moderate GDP growth.

Low levels of inflation and low deflation are responsible for this slow growth (LEE 2015).

Inflation and unemployment

In Singapore, there is a negative correlation between inflation and unemployment.

Inflation is lower when unemployment is high. However, higher inflation leads to unemployment falling.

Inflation was at 2.23% in 2005 and unemployment was at 5.59% in 2005.

In 2016, the unemployment rate was 1.83% and inflation was -1.44%.

This shows that a country can reduce unemployment but not inflation. Conversely, if it targets inflation, the unemployment rate will rise.

Graph 5: Comparison

Source: Tables 2, 3, 4, and 5

Global Financial Crisis (GFC): Impact

These economies were affected differently by the 2008 and 2009 Global Financial Crisis.

Australia was the exception, as it did not enter recession.

The country experienced a slowdown of economic growth from 3.70% in 2008 down to 1.81% 2009.

Germany, Singapore and Greece entered recessions of varying magnitudes.

Germany’s economy contracted by -5.62%, Singapore by -0.60% and Greece by -4.30.

The unemployment rate during the Great Depression of 2009 was different from one country to another.

The highest rate of unemployment was 9.62% in Greece, while the lowest rate was 4.3% in Singapore.

Global Financial Crisis Recovery

The economic outlooks of these four countries show that they are not all recovering from the Great Depression of 2009.

Singapore, for example, showed remarkable recovery by posting a 15.24% economic growth in 2010. (The World Bank 2017, 2017).

Australia and Germany did well following the crisis.

The Global Financial Crisis has left Greece unable to recover from its losses.

The country’s economy has been in recession five times since 2009.

Improved GDP Growth in 2015 and 2016

All these countries have seen a rise in GDP growth over the past two years, 2015 and 2016.

The GDP of Australia increased from 2.42% a 2.77%, Germany from 1.72 to 1.87%, Greece -0.22%, and Singapore -1.93% to 2.00% (The World Bank 2017).

Question 3

Graph 6: Data taken from the OECD

Graph 7: Living standards

Although money can’t buy happiness, it can contribute to higher living standards and better well-being.

Australians have greater disposable incomes, which allows them to access quality housing, education, and health care.

The Australian GDP per capita is higher than that of Germany or Greece (The World Bank, 2017).

This is a sign that Australians are happier and have higher living standards.

For the health and well-being of people, it is vital to have good personal relationships.

Social networks and active communities are crucial in providing the emotional support that is needed to live a better life.

Research shows that 95% Australians have someone they can rely on, which makes them happier (OECD, 2017).

Education is an important factor in social and economic development.

Education gives individuals the knowledge and skills necessary to participate in labor.

Australia’s education attainment rate of 77.1% means that almost all Australians have access (OECD, 2017).

They have the opportunity to work for income to support their lifestyles.

The environment has a direct impact on the health and well-being of people.

High levels of pollution can lead to serious health problems.

Australia is ranked number one among the 38 countries for air pollution.

94% of Australians have clean water, which gives them high levels of life satisfaction.

The GDP per capita in Germany is increasing like Australia.

This shows that people in Germany are enjoying higher living standards.

Individuals with higher incomes have better access to health care, education and housing units.

Germany also has policies for low-paid workers.

92% of Germans have someone they can rely upon in times of need (OECD, 2017).

Real social networks exist that allow people to receive the emotional support they need, which is a positive thing for their well-being.

Programs that assist migrants in integrating into the community contribute to life satisfaction.

High Education Attainment

The 86.9% education attainment rate indicates that a large portion of Germany’s population have access to education (OECD, 2017).

Education is a key factor in eliminating inequalities in society.

Many people get jobs while others start businesses, which reduces poverty.

Germany’s life expectancy is 81 years (OECD, 2017).

This is a sign that the country’s leadership has created a mechanism to ensure citizens have better health.

Therefore, good health contributes to life satisfaction.

Greece is ranked low in life satisfaction.

This low rate is due to low income.

The GDP per capita in Greece has declined since the Global Financial Crisis.

The result is dissatisfaction as the standard of living is declining.

The quality support network rate in Greece is 83.4%, which is lower than the OECD average 88% (OECD – 2017).

This indicates a weak social network, which can lead to fewer economic opportunities and a lack of or very little emotional support, and ultimately, isolation.

Environmental pollution is another reason for low levels of life satisfaction in Greece.

This country has high levels of air pollution and most people don’t have access to clean water.

It is well-known that pollution can cause serious health problems, which can have a negative impact on the well-being and wellbeing of people.

Education is essential for economic and social development in a country.

Greece’s education attainment rate of 68.3% is below the OECD standard 76% (OECD (2017)).

Low levels of education hinder the ability of the people to find employment that will provide for their needs and therefore low quality of life.

Australian Government.

The Great Depression.

BBC.

German inflation drops to a five-year low.

Mason, OH: South Western.

Macroeconomics in context.

Armonk, New York. M.E.

GOVERNANCE AND ECONOMIC CHANGE IN SINGAPORE.

Singapore Economic Review, 1-15.

OECD

Better Life Index.

Economics (9th edition).

Harlow : Pearson.

The World Bank.

Annual GDP growth.

The World bank.

(2017, August 2nd).

GDP per capita (constant 2010 US\$).

The World Bank.

The World Bank.

(2017).

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