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June 29, 2017 admin Macro
Define and explain what is economic growth. You might want to think about if it’s
increasing GDP or growing potential output or both?
You might jump right into explaining why GDP is increasing: AD shifting to the right due
to several reasons which are mentioned in the macroeconomics article. Those include
higher consumption, possibly increasing investment, also growing exports. Draw a
diagram – choose either the Keynesian or the Neo-Classical approach and stick with that
for now.
Remember to mention the multiplier and the accelerator effects! Define both concepts
and explain how do they affect GDP growth.
Both articles mention growing inflation and falling unemployment. This should trigger
your memory right away – Phillips curve. The relationship between unemployment and
inflation. That could be a good point for discussion. Maybe even a diagram?
To evaluate, does the relationship between unemployment and inflation described in
the macroeconomic article is the same as the one described by the Phillips curve? Why
or why not? What does the future for German economy look like if the theoretical
relationship holds? You could evaluate at this point by “simulating” different scenarios of
what might take place.
To evaluate further, look back at your choice of the diagram and the conclusions drawn
from it. Would they change if you chose a different school of economic thought? If you
chose the Keynesian diagram before and let’s say wages increased because AD reached
the bottleneck… what were the long term implications/predictions for/of the economy?
What if you had chosen Neo Classical view?
http://ibeconomist.com/macroeconomics-article-economic-growth-in-germany-changes-in-inflation-
unemployment/
The German economy expanded by 0.6 percent in the first quarter, and
the government expects growth to hit 1.5 percent for the full year, while
several economists have predicted it would reach or top last year's level
of 1.8 percent.
The Ifo survey "suggests that GDP growth will accelerate sharply in the
months ahead," said Capital Economics' Jennifer McKeown, chief
European economist.
"While growth is unlikely to match the pace implied by this survey, we see
the German economy outperforming consensus expectations this year."
McKeown cautioned there were some reasons "not to take this survey at
face value" because "it has been too optimistic for several months now".
"Nonetheless, the health of global demand and the very strong state of
the German labour market both suggest that growth should gain pace in
the months ahead," she said.
Thomas Strobel of UniCredit Research said that the fifth consecutive
monthly rise of the index supported the view that German economic
activity would remain robust throughout this year.