Macro Economy

In: Business and Management

Submitted By gusimei
Words 591
Pages 3
2001-2005 USD vs. Euro
Contact: When the euro has just born, the world is full of doubt to this new currency. The euro against the dollar value by listing all 1.1805 dropped to 0.8225. Then the prospect of euro problems aroused widespread concern and controversy. However, in 2002 after euro unified monetary official circulation, the situation appears 180-degree shift: in just less than 6 years, the euro against the dollar had become the second-largest currency against the dollar.
Interest rate parity (“IRP”)
When Euro just born in 1999, the interest rates spread of dollar and euro is as high as 2.5%. Higher interest rates resulted in euro carry trade: a number of European cash flow to the United States. Yet there has been a market shift in 2001. After 911, the fed’s lowered benchmark interest rate four times in a row and therefore the interest rates spread of dollars and euros began to change. The interest rate of euro is 1.5% higher than of dollar. The capital flowing from euro toward America sharply declined.
After IT bubble broke, the fed maintained the lower interest rate and thus inflation risk kept rising. Beginning in June 2004, the fed launched a new interest rate hikes cycle. Then the interest rates spread of dollar and euro again expanded. The euro against the dollar sharply fall from record high 1.3670 and continued dropping until December 2005 when the European central bank increased euro’s interest, the exchange rate had fallen back into the 1.1639. At this time the Eurozone inflation pressure also became obvious, and following the fed, European central bank launched the interest rate hikes cycle too. So, the euro has been appreciated again.
Deep reason: GDP support euro’s strong showing
The euro’s strong showing from 2001 to 2005 was inseparable from its international status. The birth of unified monetary euro promoted European economic…...

Similar Documents


...Tendency for level of output (quality and quantity) to increase over time * Growth in the material wellbeing of the population * Is the responsibility of governments and international organizations | 2. Stable Business Cycle | * Low volatility in fluctuations of actual output around its trend or potential output Avoiding extremes of short-run macroeconomic performance * An economy that is growing excessively may be prone to inflation | 3. Relatively stable price level | * Maintaining the real value of the currency * Low (positive) rate of inflation | 4. Sustainable levels of public and national debt | * Public debt: during a budget deficit, the government must borrow from the private sector to meet its spending * Foreign debt: borrowing by domestic residents from foreign countries, influenced by economy’s current account deficits | 5. Balancing current and future consumption | * The relationship between investments and saving in an economy | 6. Full Employment | * Providing employment for all individuals seeking work * Does not mean zero unemployment | Measuring national or aggregate output/Production: Gross Domestic Product (GDP) * The market value of final G&S (G&S at its last stage of production and ready to be consumed) produced in a country during a given period of time. * The most important and most......

Words: 5901 - Pages: 24


...Macroeconomics. Macroeconomics is the part of economics concerned with large scale of general economic factors, such as interest rate & national productivity. Simply, macroeconomics is the study of behavior of the economy as a whole. Broadly, macroeconomics is the field of economy that studies the behavior of the aggregate economy. Macroeconomics is the branch of economics that studies the entire economy. O. M. Amos Macroeconomics, which is the study of broad aggregates such as total employment & national income. Henderson & Quanat Macroeconomics deals with large scal economic activities of environment. G. Akle Macroeconomics examines economy in wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation & price level. Finally, macroeconomics is the study of broad economic activities & trends, is possibly the largest subfield in economy which consider the performance of the economy as a whole. Microeconomics | Macroeconomics | Microeconomics is the study of the individuals economy of a person, a company or a country. | Macroeconomics is the study of the economy as a whole. | Microeconomics is also known as price theory. | Macroeconomics is also known as income theory. | All kinds of requirements of an individual or a company can be identified. | All kinds of forces that affect the firms, consumers, or......

Words: 447 - Pages: 2


...Weekly Reflection Ruben I. Torres, Jr., Cheyenne Blue, Marsha Scott, Catherine Caughrean ECO 365 2-20-13 Dr. Lin Weekly Reflection In week one on ECO 365 our team discussed the many different areas which create economics in the modern world. The objectives were clearly outlined in the syllabus which Dr. Lin provided to Team A. Differentiate between Macroeconomics and Microeconomics The first objective we discussed was the difference between Macro and Micro economics. Since both studies deal with the economic decision making process, the one aspect which separates them would be that Microeconomics is the study of economics from the view point of a firm or individuals. Macroeconomics is the study of economics from the view point of a society or nation. This aspect would study the budget or a government or GDP of a nation. Supply and Demand The second area which we discussed was the effects of supply and demand. It was nice to get a better idea on how the costs of goods are affected by the amount of goods available for distribution at any given period. By studying the buying trends of individuals, companies are able to control the price and the supply of goods for consumers. If a company wishes to charge an outrages price for a product and have consumers pay the amount, they simply produce a low quantity of the product. A good example of this would be the way Sony released the new Playstation 3 (PS3). When the PS3 system first......

Words: 495 - Pages: 2


...Definition of 'Macroeconomics' The term Macro has been taken from the Latin word Macros which means big. The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels. Macroeconomics Concerns | Production | Prices | Income | Employment | NationalProduction/OutputTotal Industrial OutputGross Domestic ProductGrowth of Output | Aggregate Price LevelConsumer pricesProducer PricesRate of Inflation | National IncomeTotal wages and salariesTotal corporate profits | Employment andUnemployment in theEconomyTotal number of jobsUnemployment rate | Therefore, as is clear from the above, the following issues/subjects define the scope of Macro Economics: 1. Aggregates of national income and its determination 2. Theories of Income and Employment. 3. Theory of Money and Banking. 4. Fiscal Theory. 5. Balance of Payment. Scope and Importance of Macro Economics Macro Economics is of much theoretical and practical importance. Let us see what are the importance and the scope where macro economics are being used. 1. To Understand the working of the Economy The study of macro economics variables is requisite for considerate the operation of the financial system. Our main economic complexities are associated with the performance of total income, irredundant and the normal price scale in......

Words: 651 - Pages: 3


...Chris Macros: (Fat/carb/pro) is 50/300/225 2,451 total calories - 54.6/304.7/229.2 Current cardio done THROUGHOUT THE 3 sessions of slow-medium cardio, 400 calories burned in each 2 sessions of HIIT treadmill sprints (10 rounds, 15seconds on 45 off) _____________________________________________________ Meal 1:: (Fat/carb/pro) 80g fat free bisquick pancake mix (285 cals - 5/54/6) 1 (organic) whole egg (72cals - 5/0.4/6.3) 110g blueberries (63cals - 0.4/15.9/0.8) 160g fat free milk / skim milk (56cals - 0.3/7.8/5.5) 230g egg whites (120cals - 0.4/1.7/25.1) Totals: 676cals - 19.1g Fat, 79.8g Carbs, 43.7g protein Extras: tapatio sauce, cinnamon , stevia, sugar free vanilla, calorie free chocolate syrup, calorie free maple syrup, multivitamin and other vitamins. INSTANT COFFEE (with stevia, and sugar free vanilla) __________________________________________________________ Meal 3: (post workout meal) (Fat/carb/pro) One pound strawberries (145cals - 1.4/34.8/3) 2scoop whey (240cals - 2/6/48) 75g oats (288cals - 4.7/50.2/12) totals:673 cals - Extras: stevia (two 40mg scoops in oats), cinnamon , __________________________________________________________ Meal 4: back to the basics, chicken n ric(Fat/carb/pro) 65g long grain brown rice (weighed when raw) (240cals – 1.9/50.4/5.2) 8oz baked chicken (287 cals - 7.3/0/52) 10g almonds (58cals - 5.1/2.0/2.1) totals: 585 cals - 14.3/52.2/59.3 Extras:......

Words: 319 - Pages: 2

Macro Economy Systems

...Macro Economy Systems Macroeconomics AIU Online Abstract In the following paper, I will be discussing the open and closed system of the two circular diagram presented in my textbook. I will explain what a closed system and open system is and provide examples for the both. Next, I will discuss the inner and outer flows of both systems. Then I will define the leakage and injections in an open system. Lastly, I will provide personal examples of the leakage and injection and describe and explain them both. Following the end of this paper, the reader should have a better understanding of and open and closed flows in the macro-economy. Macro Economy Systems It is very imperative that one understands the flows in the macro-economy. There are two flows: an open and a closed flow. In this paper I will be discussing and explain the two types of flows and how they affect the business world. By having this valuable information, consumers will now be aware of how their money is affecting the economic system in a certain way. Closed System A closed system is an economic system model that counts only domestic exchanges but not the foreign agents . This means that in a closed system, the money is built up inside a circular flow. In a closed system, there aren’t any leaks because there aren’t any foreign agents, governments, investments, or system of savings. Also there are not taxes, savings, or extra expenses that aren’t generated back into the economy. An example of a......

Words: 985 - Pages: 4

Challenge Development and Managing Macro-Economy

...Table of contents Introduction in Macro-economy………………………………………..3. Unemployment………………………………………………………….5. Labor, Land ,Capital…………………………………………………6,7,8. Currency&Inflation……………………………………………………. .9. Hyperinflation…………………………………………………………..10. Demand and Supply…………………………………………………….11. Conclusion………………………………………………………………12 Introduction of Macro-economy It is perhaps mostly for this reason that macroeconomics, the study of these economy-wide phenomena, is so exciting. Macroeconomics is more than just headlines, however; it is a fascinating intellectual adventure. The breadth of issues it covers is evidence enough of its inherent complexity. All the same, we will see that simple economic reasoning can take us a long way. And it is often surprising how well a few simple ideas fit complex situations. Macroeconomics can also be useful. The economic well-being of all consumers, rich or poor, is afected by movements in interest rates, exchange rates, and the rate of inflation. Businesses stand to gain or lose considerable amounts of money when their economic environment changes, regardless of how well they are managed. Being prepared for such changes in fortunes can have considerable value; more generally, it makes us all better citizens able to grasp the complex challenges that our societies face. Macroeconomics is relevant to voters who wonder what their governments are up to, and can also help governments avoid the worst economic crises that have a7icted modern......

Words: 3953 - Pages: 16


...R-Z Essay Topics Plagiarism Donate a Paper View Cart / Checkout Differences in Macro and Micro Level Theories Rate This Paper: 1 2 3 4 5 Submit Length: 317 words (0.9 double-spaced pages) Rating: Red (FREE) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - There are many differences between macro and micro-level theories. Micro-level focuses on individuals and their interactions. For example the relationship between adult children and their parents, or the effect of negative attitudes on older people. Some criticize on micro-level theories becuase they focus on what older people do rather than on social conditionsand policies that cuase them to act the way they do. Macro-level focuses more upon social structure, social processes and problems, and their interrelationships. For example the effects of industrialization on older people's status, or how gender and income affect older people's well being. This approach tends to minimize people's ability to act and overcome the limits of social structures. Both micro and macro-leve theories can take one of three perspectives which include: interpretive perspective, normative, and conflict. Normative perspective says rules and status exist in society to provide socail control or social order. Social order is necessary for survival. This perspective focuses upon macro-level. For example structural-functionalism, role theory, modernization theory, and......

Words: 840 - Pages: 4

Macro Economic Indicators of Bangladesh Economy

...Macro economic indicators of Bangladesh economy Introduction The Bangladesh economy has experienced both macro-economic stability and robust economic growth following the transition to a democratic rule in the early of 1990s. In the backdrop of the deep macro-economic crisis of the late 1980s, a series of stabilization measures were introduced in the Bangladesh economy which largely restored macro-economic stability in the early 1990s. Economic growth in Bangladesh averaged 6.3 percent during financial year (FY) 04-07. The economy has once again proved its resilience in achieving stronger than expected growth despite having to contend with the adverse effects of unfavorable weather conditions in financial year (FY) 04, the subsequent sharp price increase in oil and other essential imported commodities and periods of political unrest and uncertainty. Sustained gross domestic production (GDP) growth coupled with strong growth in exports and remittance has led to a marked improvement in the fiscal and balance of payments position and substantial improvements in the economic fundamentals necessary for macroeconomic stability. However, the rise in the inflation rate and further evidence of income inequality have tempered growth's direct impact on the quality of life. Macro Economic indicators In the past decade, Bangladesh enjoyed a positive growth rate in GDP and other macro economic indicators. As the most densely populated country in the world, Bangladesh is facing......

Words: 3102 - Pages: 13


...MACRO ENVIRONMENT The Coca Cola Company and other organizations have their own weaknesses and strengths that can both affect the future performance of their respective business. Analyzing the future constraints is an advantage for the companies since they can identify the possible factors that tend to leave an impact on their business. PESTLE analysis is a popular method that focuses in the external factors of the business and the environment where it operates. PESTLE stands for Political, Economic, Sociological, Technological, Legal, and Environmental. All of them examine the changes in the marketplace. Political Analysis Political analysis examines the current and potential influences from political pressures. The non-alcoholic beverages falls in the category under the FDA and the government plays a role within the operation of manufacturing these products. In terms of regulations, the government has the power to set potential fines for the companies that did not meet their standard law requirement.  The changes in laws and regulations, such as accounting standards, taxation requirements and environmental laws and foreign jurisdictions might affect the book of the company as well as their entry in foreign country. Other than that, the changes in the nature of business as non-alcoholic beverages can gain competitive product and pricing pressures and the ability to improve or maintain the share in sales in global market as a result of action by competitors. The......

Words: 687 - Pages: 3


...- e.g. on new technology (2) Government (G), Government expenditure - e.g. on the NHS or defense (3) Export (X), e.g. Overseas consumers buying goods and service Leakages: The three leakages -- saving, taxes, and imports. These leakages, like consumption, are how the household sector divides up or uses its income. Most importantly, leakages subtract from the total volume of the basic circular flow. That is, they "leak" income away from the product markets, making less available for factor payments and household income. An economy is in equilibrium when the rate of injections equal to the rate of withdrawals from the circular flow. (1) Savings (S), Put aside for future spending – e.g. saving in banks accounts and other types of deposit (2) Tax (T), Paid to the government in taxation - e.g. income tax and national insurance (3) Import (I), Spent on foreign-made goods and services - e.g. imports (M) which flow into the economy Question 2 CPI stands for consumer price index, which is a measure of the services that consumers normally purchase like medicals, clothing, food etc and changes in the average price of goods. A change in the general price level from the base year to the current year is also a measure consumer price index indicates. The relationship among the value of money and the general price level is inverse relationship. The value of money is the ability of consumer to buy goods and services, or the purchasing power of the consumer. When......

Words: 971 - Pages: 4


...accurately describe or predict human behaviour, and too restrictive to apply to developing economies (, 2013) Neo classical model limitations; 1. Narrow in scope: The approach of neo classical theory of economic growth is narrow and inadequate. This theory assumes that the will to develop, strong habits of thrift, given tastes, supply of trained labour and managerial skill, free flow of knowledge between different countries is ok for adequate growth. Assumptions like this have narrowed down the scope of analysis. The main determinants of economic development are changes in the size of population, natural resources, technology etc. They have not taken into account of non-economic factors as the degree of political stability, attitude of population, social and legal institutions etc (Suman, 2015). 2. Economic development is not continuous process: Since the neo-classical theory believes that development in gradual, harmonious process, it could not correctly analyse the possibilities of fluctuations in the process of development. They also could not visualise the possibility of disharmony of interest at least in the initial stages of development (Suman, 2015). 3. Unrealistic assumptions: In neo-classical analysis, its assumption of full employment is very unrealistic which was another drawback. Because of this, they could not analyse how an economy can be maintained at full employment level. Also in capital formation they tend to......

Words: 2574 - Pages: 11

What Combination of Non-Medical and Medical Goods and Services Should Be Produced in the Macro-Economy?

...A) What combination of non-medical and medical goods and services should be produced in the macro-economy? Since resources are limited, decision making process is involves trade offs of which services are to be given. A PPC model can be used to see what services will be produced. It includes: Scarcity, Significance of economic choices, cost of inefficiency and growth. (Santerre & Neun 2010) Marginal utility from basket of medical goods / Price of basket of medical goods = Marginal utility from basket of non-medical goods / Price of basket of non-medical goods B) What particular medical goods and services should be produced in the health economy? Medical care services Should be produced in medical care sectors. It includes medical insurance, hospitalization, and diagnosis of patients’ illness, laboratory test, and medicines. Medical insurance, Hospitalization, Diagnosis, Laboratory test, Medication In each and every service facility company, there should be a research and development team for product innovation and growth. C) What specific health care resources should be used to produce the final medical goods and services Access to Health Care The degree to which individuals are inhibited or facilitated in their ability to gain entry to and to receive care and services from the health care system. Factors influencing this ability include geographic, architectural, transportational, and financial considerations, among others. Entry is dependent...

Words: 463 - Pages: 2

Macro Economy

...y STUDY QUESTıONS CHAPTER 1 1) If a good is scarce, does that imply that there is a shortage of it? What are sunk costs? 2) What are sunk costs? 3) What is meant by the phrase, "There is no such thing as a free lunch" 4)For each of the following, list whether the topic is microeconomic or macroeconomic innature: a. The price of gasoline. b. The national unemployment rate. c. The quantity of new cars sold each year. d. The wage rate paid to steel workers. e. The amount of national output in an economy. 5) For each of the following, note whether the statement is an example of positive economic analysis or an example of normative economic analysis: a. An increase in the minimum wage will lead to a higher rate of teenage unemployment. b. If the government reduces the tax on tobacco, more individuals will start smoking. c. The government should lower taxes because tax rates are too high for the average U.S. family. d. Wealthy senior citizens can afford to buy their own health insurance and therefore should not be given Medicare coverage. e. If the price of apples increases, people will buy more bananas 6) Explain what the fallacy of composition is and give an example 7) Explain what is meant by allocative efficiency. 8) Explain the difference between economic growth and stability. Can a country experience both at the same time? Why or why not 9) The......

Words: 897 - Pages: 4

Macro Economy Formulas

...1. Rule of 70: Used to determine how many years it takes for a value to double, given a particular annual growth rate. For example, if you put $20,000 in the bank and it earns yearly interest of 7%, then it will take 10 years (70/7) for your income to double. 70/x = # years to double where x equals growth rate. 2. Y = C + I + G + NX – the spending approach to calculating GDP. 3. S = I in a closed economy (no trade) and S = I + NX in an open economy 4. Calculating Nominal GDP: Multiple the number of each good produced times the price of each good: Photdog*Qhotdog + Phamburger*Qhamburger. 5. Calculating Real GDP: this proceeds just as calculating nominal GDP, but instead of current prices you use base prices: Photdog(base year)*Qhotdog(current year) + Phamburger (base year)*Qhamburger (current year). Side implications: In the base year Nominal GDP = Real GDP, with inflation Nominal GDP > Real GDP. 6. GDP deflator: A measure of the cost of living (substitute for the CPI). GDP deflator = (Nominal GDP/Real GDP)*100. Remember that this is an index. Side implication: In the base year the GDP Deflator = 100. 7. Constructing the CPI: step 1: compute the cost of a market basket in each year (prices times quantities), step 2: choose a base year. Step 3: Calculate the CPI for the current year by: (Cost current year)/(cost in base year)*100. Side implication: in the base year the CPI = 100. With inflation, CPI increases. 8. The inflation rate via the CPI: (CPI current year – CPI......

Words: 631 - Pages: 3