Posted: February 20th, 2017

Using a 450 line diagram, explain how an increase in the saving rate may affect the output level in the short-run.

An economy’s economic performance reflects global economic conditions and over the past few years all major economies have experienced to varying degrees the global financial crisis and economic downturn. You are required to collect and interpret data on the economic performance of Australia, the United States, and one European economy of your choice. Q1. Collect and present (in graph format), annual data showing the rate of growth of real GDP, the inflation rate, and the unemployment rate for Australia, the United States and one European country over the past ten years, 2004-2013. Using the graphing tool in Excel, present, for each country, a line graph containing all three variables. Label each axis and give your chart a title.   Q2. What evidence does the data provide of the countries experiencing the economic downturn in recent years? On the basis of the data collected, what similarities and differences are there in the performance of the economies?  Q3. Suppose you are an economic advisor. You have been asked to assess the possibilities of growth in an African country. It is a country abundant in labour and some natural resources. The capital to labour ratio is low. It has a free market economy. The political system of the country is stable. Assess this country’s prospects for growth. Recommend two things that would enhance the country’s growth. Q4. Stock market crashes are often followed by economic downturns. Using an Aggregate Expenditure diagram, explain how a stock market crash has the potential to lead to a recession in an economy.                                                                                                                                                                                Q5. One important aspect of the recent global downturn has been the sharp increase in household saving rates in many advanced economies. Using a 450 line diagram, explain how an increase in the saving rate may affect the output level in the short-run. Is higher saving rate good or bad for an economy’s long-run growth? Explain.

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