Reference no: EM131373013

Global Service Economic Written assignment

Question 1:

Below you find a table showing GDP growth in % in some rich industrial countries.

Year	Iceland	Australia	Portugal
2006	4.2	2.7	1.6
2007	9.7	4.5	2.5
2008	1.1	2.7	0.2
2009	-5.1	1.6	-3.0
2010	-3.1	2.3	1.9
2011	2.1	2.7	-1.8
2012	1.1	3.6	-4.0
22013	3.4	2.1	-1.6
2014	1.8	2.7	0.9
2015	3.5	2.9	1.6

1.1 For each of the three countries describe the development in GDP in relation to boom times, recession etc.  

1.2 Below you will find a chart showing the employment rate in % of the labour force (2006-2015). Continuing question 1.1 describe and argue which unemployment rate graph you believe relates to each of the three countries Iceland, Australia and Portugal.

1.3 During a period of "boom times" (high economic growth) how does import and unemployment normally develop?

Question 2:

Below you find two tables showing development in GDP in Denmark in index and in percent.

2.1 Describe the development in economic growth in Denmark over time and explain how the increase over time has affected the Danish welfare in general.

2.2 Why is the "balance of payments" normally improved (lower import than export) when unemployment is increasing?

Question 3:

3.1 Explain the term "interest weapon" and in which situations the National Bank can/will be forced to use this mechanism.

3.2 If the Swedish government agree to devaluate the Swedish currency by 10%, in the short run who will then have a benefit of this; A) the Swedish net-exporting companies or B) the Swedish net-importing companies? Please explain your answer.

3.3 If the Swedish government agree to devaluate the Swedish currency by 5% and the exchange rate before the devaluation against Danish kroner (DKK/SEK) is 1,37 (equal to a SEK/DKK exchange rate of 0,73) what will the new SEK/DKK exchange rate be after the devaluation?

Question 4:

4.1 Explain the term "output gap"

4.2 If the government in the short runs wants to close an "output gab" in the economic by using Fiscal Policy, explain which specific Fiscal Policy tools the government can use to close this gap.

4.3 If the Danish government has decided next year to use expansionary fiscal policy, what will then give the best short run net-effect upon GDP and unemployment; A) hire more people into the public sector (e.g. more nurses, policemen, teachers), or B) to increase public procurement in general?

4.4 If the Danish government as above has decided next year to use expansionary fiscal policy of e.g. 2/1000 of GDP (equal to approx. DKK 3,6 billion), what will then be the short run effect in % of GDP and employment.

4.5 In relation to use expansionary fiscal policy, what is effect in the long term? Please explain the consequences in relation to "financial crowding out"

4.6 Besides expansionary fiscal policy expansionary monetary policy can also be used to increase growth in a country. Explain and give examples of how expansionary monetary policy can be used to increase growth (GDP). 

Question 5:

Below find an overview of the demographic situation in Denmark as at 2014

5.1 In relation to above shown figure discuss the challenges the Danish government is facing over the coming 20 - 30 years in relation to the "the following overall socio-economic goals", when people in general are living longer, more elder people are on public pension, less people to work and to pay taxes etc.;

1) Economic growth

2) Full employment

3) Public finances