Intermediate macroeconomics

Topics: Inflation, Monetary policy, United States public debt Pages: 9 (1378 words) Published: April 7, 2014
ECS2730 ASSIGNMENT
Question one
a) Different sources had varying figures in terms of acquiring the macroeconomic variables. b) The following graph show the GDP growth rate, GDP per capita growth rate and the inflation rate of Nigeria. From the graph it is not easy to see the changes (in terms of figures) in the variables therefore, the table below shows how the above variables have changed over time.

Year
Real GDP growth rate (annual %)
GDP per capita growth (annual %)
Inflation rate (annual %)
Lending interest rate/nominal interest rate (%)
1990
12.8
9.9
7.4
25.3
1991
-0.6
-3.1
13.0
20.0
1992
0.4
-2.1
44.6
24.8
1993
2.1
-0.4
57.2
31.7
1994
0.9
-1.6
57.0
20.5
1995
-0.3
-2.8
72.8
20.2
1996
5.0
2.4
29.3
19.8
1997
2.8
0.3
8.5
17.8
1998
2.7
0.2
10.0
18.2
1999
0.5
-2.0
6.6
20.3
2000
5.3
2.7
6.9
21.3
2001
4.4
1.8
18.9
23.4
2002
3.8
1.2
12.9
24.8
2003
10.4
7.6
14.0
20.7
2004
33.7
30.3
15.0
19.2
2005
3.4
0.8
17.9
17.9
2006
8.2
5.4
8.2
16.9
2007
6.8
4.0
5.4
16.9
2008
6.3
3.4
11.6
15.5
2009
6.9
4.1
11.5
18.4
2010
7.8
4.9
13.7
17.6
2011
6.8
3.9
10.8
16.0
2012
6.5
3.6
12.2
16.8

Annual Real GDP growth rate
In 1990 the real GDP growth rate was fairly high but in the following years it decreased and increased only slightly through the years until 2004 where there was a large increase in the growth rate of GDP. In 2005 the growth rate declined sharply and fluctuated steadily until 2012. The GDP is based on the spending patterns from 1990. GDP per capita growth rate

The GDP per capita growth rate moved similar to the GDP the difference is in the figures. Inflation rate
From 1990 the inflation rate increased by more each year up to 1994 when it decreased slightly and rose sharply thereafter (1995). It then decreased in 1996 and began to fluctuate in the years that follow until 2012. Lending interest rate (nominal interest rate)

The lending or nominal interest rate varies within the range of 15% to 32%. Increasing and decreasing slightly over the years. Unemployment rate

Country
1992
2005
2006
2007
2011
Nigeria
28
2.9
5.8
4.9
21

Country
1999
2000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Australia
7.5
6.4
6.3
6
5.1
5.1
4.9
4.4
4.2
5.6
5.1
5.1

c) Unemployment
On average, Australia’s unemployment rate is much lower compared to that of Nigeria. Inflation
In the given time period, the inflation rate in Nigeria is higher as compared to Australian inflation rate. GDP per capita growth rate
Australia’s GDP per capita growth rate is lower than that of Nigeria. Real GDP growth rate
Nigeria’s GDP growth rate is relatively steady and is higher as compared to Australia’s GDP growth rate. Inflation rate
Nigeria
In 2013 to 2016 the inflation rate is likely to be moderate or downward moving provided that the authorities keep the monetary policy tightened and lower prices. Considering the increase in food productivity in the economy food prices should be lower. Keeping the fuel prices stable will have an influence on the inflation rate. Australia

The inflation rate is likely to rise only slightly based on the trends and observations and an increase in the economy’s consumer expenditure. Unemployment
Australian unemployment is likely to increase slightly and then decrease steadily over the years to 2016. On the other hand Nigeria’s unemployment rate is expected to keep rising in the next few years. Interest rate

The Australian interest rate is likely to keep rising from 2013 to 2016. Economic implications on the future trends.
Provided that inflation does rise in Australia, there might be an effect on the costs of inflation for example the cost of changing prices (menu costs). When inflation distorts relative prices in the economy, consumer decisions are distorted and markets are less able to allocate resources to their best users in other words...

References: Ball, L., & Mankiw, G. N. (1995). WHATDO BUDGET DEnCrrS DO? NBER WORKING PAPER SERIES, 2-38.
Central Bank Nigeria. (2011, march 1). Data and Statistics. Retrieved from Central bank of Nigeria website: http://www.cenbank.org/Rates/
Central Intelligence agency. (2013, January 1). The world factbook. Retrieved from Central intelligence agency: http://www.cia.gov/library/publications/the-world-factbook/geos/ni.html
Index mundi. (2011, January 1). Index mundi unemployment rate. Retrieved from Index mundi: http://www.indexmundi.com/g/g.aspx?v=74&c=as&l=en
Reserve bank of Australia. (2013, January 1). statistics. Retrieved from Reserve Bank Australia: http://www.rba.gov.au/
The world bank. (2011, January 1). World Bank Open Data. Retrieved from World bank website: http://data.worldbank.org/
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