Economics Assignment: Discussion Based on Macroeconomic Variables

Question

Task: Write an economics assignment answering the following questions using credible sources: Question 1: The macroeconomic variables (Suggested 1,000 words + diagrams and tables) Answer the following utilising the information contained in the table below from ABS (2021). Explain the nature of the data reported in the table being sure to include in your answer an explanation of the terms GDP, volume measures, seasonally adjusted, change since Dec-19 and change since Dec-20. (Hint: Some of the concepts are not covered in the text and you will need to undertake your own research to find an answer.) What is the data indicating regarding the performance of the economy in each of the countries covered in the table relative to their experience during the period 2017-2019 (Hints: Data on annual real GDP growth rates for each country (except for the EU) for the period 2017-2019 can be found in Central Intelligence Agency (2021). Data from this source was used to construct Exhibit 12.4 in the text. In preparing your answer you may find the material in A Simple Model (2021) useful.

Question 2: Possible impacts on macroeconomic variables (Suggested 1,000 words + diagrams and tables)
Read Kapur (2021), Dusevic (2021) and Commins (2021) and comment on the following statements. Lockdowns impose an unacceptable economic cost.
Extensive coverage of vaccinations will enable economies to return to normal.

Answer

Answer 1: The Macroeconomic Variables
Every economy around the world tends to increase its growth and attempts to become a better economy. As mentioned herein economics assignment, the growth in the economy is measured in GDP (Gross Domestic Product) which is dependent on multiple variables. These variables can be government expenditure, consumption, exports, investments, etc. Each of these variables has a comprehensive set of other dependencies on which they are calculated. The global pandemic due has changed a lot of things and its pace across the globe. This change is not just economically but also psychologically. People became fearful and started shopping panicking. Though business suffered essential products demands and supply surged. The overall economy suffered but at the same time, the countries put immense effort to recover from it as soon as they could. The foremost economic revival came from medical infrastructure which was being upgraded.

Table 1 below shows the change in GDP growth for developed countries. The data shown below is in the form of comparison for considering the change since December 2019 with change since December 2020. There are some countries that have sustained positive growth over the same period while others have been impacted adversely. The purpose of this data is to provide a basis for conceptual analysis of GDP growth. In the table below, it can be seen that Australia has better growth in both categories despite the covid-19 pandemic. This also showcases their rapid response to the situation and channelizing their resources for the continuance of their economy. Similarly, South Korea, which is widely known for their semiconductor production and international infrastructure projects have also seen positive growth for the consecutive period.

There can be multiple factors behind each country performing distinctively in the midst of pandemics. The developing countries were impacted heavily by the pandemic. Even a few developed countries have suffered too. Certain activities are carried out within the country to provide medical facilities to people. Apart from that, the FMCG industry continued to carry out production and thus, people continued to buy things on large scale. On the other hand, the same period witnessed a rise in eCommerce and online purchases. This continued the economic activity in the country.

Changes since Dec, 19
The chart below shows the change in GDP for each country since December 2019 which was mostly negative for every country. Only a few countries managed to remain afloat such as Australia and South Korea because of their quick response and excellent medical strategies. Most of the countries were impacted and negative change went to double-digit figures. But the prominent notion was how much of these countries managed to sustain themselves for the second wave in 2021.

Changes since Dec, 20
The chart below shows the change in GDP since Dec, 20 which show the revival of several economies such as the United States, Canada, etc. In comparison to the previous chart, France and Italy witnessed the most impacting revival while other countries also did better. There could be many reasons how they recovered from the previous year rate this substantially. One of the foremost things that can be seen as change is that countries started developing vaccination and started vaccinating people. This gave an initial boost to the economy.

The reason behind specific change observed by the respective country
Australia and South Kore managed to maintain a marginal positive growth since Dec, 19 and leading growth rate among all the countries in the chart. since Dec, 20. This can be evident from the data of Australia which shows that country’s current health expenditure is 9.8% and 7.6% in South Korea. The hospital bed density for these countries is 3.8 and 12.4 per thousand respectively. Though United States expenditure in medical infrastructure is 16% with a bed density of 2.9 per thousand. So, one could say that the country as a whole went through administrative negligence and mistakes which led them so many cases. That’s why they witnessed positive growth since Dec, 20 ((CIA) Central Intelligence Agency, 2021).

Volume Measures, Seasonally Adjusted
In the chart below, both charts are shown in the form of a comparison. They are seasonally adjusted but it can be seen that the countries which managed to remain afloat since 2019 were somewhere around the same growth. But other countries, which have plunged severely since 2019 has witnessed significant improvement. This is something to look out for in terms of financial activities and administrative procedures that provided countries with enough monetary assistance for growth ((ABS) Australian Bureau of Statistics. 2021).

Average Change in Mobility
In the chart below, it can be seen that the there is a line that passes throughout chart signifying the best fit for change in GDP. On that line, South Korea seems to fit appropriately. While other countries are either above or below it. The notion of comparison is the retail activities that increased since pandemic and there are countries where it decreased. The retail industry was very prominent in providing substantial growth for the countries (A Simple Model, 2021).

Final Consumption Expenditure in Australia
The chart below shows a typical change in consumption pattern of Australia. It shows that how pandemic prevented people not to visit stores and when things started improving, then they started visiting retail stores.

Spend pattern on Goods and Services in Australia

In the chart above, one can see that overall consumption of goods was seen in the initial days of the lockdown and since it has become normalized, people are purchasing goods. Also, the availing of services spiked during lockdown due to social distancing. Thus, on overall basis, the consumption of goods increased since dec, 2019 but services decreased significantly((ABS) Australian Bureau of Statistics. 2021).

Question 2: Impact of Economic Variables
For any developed or developing nation, economic stability is the most important aspect. A nation’s economy is governed by its GDP, inflation-deflation rate, exchange rates, and interest rates. All these factors are known as macroeconomic variables and these play a very important role in bringing economic stability to a country. These factors can be considered positive, negative, or even neutral depending on how they affected the economy. The biggest example of a negative impact on the economy was the spread of the covid-19 virus, which greatly affected the economy of all the nations.

Impact on Macroeconomic Variables
Positive impact implies economic growth and financial stability in the country. There is a higher demand for goods and services and it brings in huge cash flow and this, in turn, encourages the industries to grow. On the other hand, negative impact implies unforeseen disasters that bring the economy to a standstill. The production and sale go down and unemployment is caused. A neutral effect is when the economy can have a positive or a negative impact but which is highly unpredictable. The negative impact is immensely probable on GDP but finding the exact parameter could be ambiguous. Most of the economies around the world witnessed a plunge in the early 2020s but there were few economies that revived very quickly such as China, New Zealand, etc (Commins, 2021).

Every economic variable that contributes to the growth of the country is affected due to the covid-19 pandemic. In the calculation of GDP, there are four variables and among them, government expenditure increased substantially during a pandemic. Along with that the earnings of the government, as well as the country, stopped due to lockdowns in manufacturing and exports. It is evident from the fact that if sector-wise data is extracted, then the manufacturing sector has seen negative double – digit growth. Thus, it is important to consider the effects of those variables in a detailed way. Government expenditure can increase due to a sudden spike in public medical requirements. On the other hand, governments have to provide subsidies on vaccinations and medical treatment of a person who is being infected.

Effect of Covid -19
In the year 2020, the world got stuck with a deadly virus in the name of Covid-19 and this disrupted the economy of the world. The impact of the virus and its effect on the economy was highly unpredictable. Amidst the lockdown, all the sectors of the economy were highly disrupted. Transportation was completely stopped which lowered the economy of many countries, which affected tourism, and the production and manufacturing companies were equally affected due to the virus. Many companies all over the globe were shut down causing a backlog in the production for manufacturing units. Shut down of warehouses due to which companies did not receive their products and shortage of carrier transport bodies caused a fortune to companies with shipping business. In Canada, it was reported that there were huge restrictions on agriculture and medical export in 2020, along with a decline in air cargo. This led to a steep drop in the movement of goods also due to limited passenger flights (Dusevic,2021).

Recovering the Economy
One of the positive signs of the pandemic has been the use of digital services. Digital services have been a boon during the covid-19 times where the people could not physically leave the house but the interaction between people was continuing on digital platforms. Digital financial services were a silver lining to the nationwide pandemic as people could pay their bills or monetarily help anyone without leaving home. In a recent report, it was observed that a 13% growth was seen in 2020 in digital finance services, which is a good sign and a step towards recovery from the downfall of the economy. It is believed that in the year 2022 the growth rate is expected to increase by 5.6% in China and the United States. The US economy planned to contribute one-quarter of global growth in 2021 and they have planned their financial support and vaccinations to reach each and every part of the nation by the end of 2022 (Kapur, 2021). The COVID-19 pandemic is a worldwide catastrophe but it cannot stop the nations from coming up with new strategies to increase their economic growth. To accelerate progress toward sustainable development, it is important to implement fiscal, labour, pension, social, environmental, and economic changes.

Governments should take action as soon as possible. The first stage is to comprehend the crisis's economic consequences in the short and medium term. Second, governments might infuse as little money as possible to keep markets afloat. Finally, they might speed recovery by enacting aggressive fiscal and monetary policies. Debt-to-GDP ratios are expected to rise in most economies and markets, both domestic and foreign. According to Posen, one of the economists, the economic benefits of speeding up vaccines are so significant that more tax revenues and decreased entitlement costs are likely to outweigh any additional government investment required. Economists across the globe believe that the production of covid vaccine is a quicker way to reach normalcy. As a result of which nations have been aggressively spending on the production of vaccines at a rapid pace. It is also believed that the production and procurement of vaccines will increase the GDP tremendously.

Conclusion
Covid-19 driven pandemic has changed the pace of economies across the globe. There are several projects and activities that fell behind several months and funding of many of them were reduced or delayed. Economists also advocate that it will take a few years for countries to get back on their track and recover their losses. But it has also been seen that the pandemic was very opportunistic for several SMEs (Small and Medium Enterprise) and FMCG (Fast Moving Consumer Goods) industry. The data presented in previous questions emphasized the positive growth of some countries while negative for others. This can be implied by their responsive and administrative capabilities which provided them with a quick mechanism to impose lockdown and restrict the spread. They also show signs of quick release of funds for supplying necessary medical assistance for people all around. The countries that have delayed or couldn’t carry out the necessary steps diligently suffered most of the impacts.

References
(ABS) Australian Bureau of Statistics (2021) ‘International economic comparisons after a year of the pandemic’, 2 June, accessed 16 August 2021 https://www.abs.gov.au/articles/international-economic-comparisons-after-year-pandemic (CIA) Central Intelligence Agency (2021) The World Factbook, accessed 17 August 2021, https://www.cia.gov/the-world-factbook/countries/

A Simple Model (2021) ‘Converting an annual growth rate to a monthly growth rate’, accessed 17 August 2021 https://www.asimplemodel.com/reference/117/converting-an-annual-growth-rate-to-a-monthly-growth-rate/ Kapur, S. (2021) ‘Vaccination only way out of our golden cage trap, Economics assignmentThe Australian (Online), 2 August, accessed 20 August 2021 https://www-proquest-com.ezproxy.csu.edu.au/docview/XXXXXXXXXXX/28F92F275E234033PQ/1accountid=10344

Dusevic, T. (2021) ‘Lockdowns could push the economy into a downward spiral even as we learn to live with Covid’, The Australian (Online) 18 August, accessed 20 August 2021 https://www-proquest-com.ezproxy.csu.edu.au/docview/XXXXXXXXXXX/AA3DF0E9EA3D438BPQ/1accountid=10344 Commins, P. (2021) ‘More jabs “mean robust economies”, The Australian (Online) 21 August, accessed 22 August 2021