The Economic Goals.docx

The Economic Goals.docx

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TheEconomicGoals

Pagecontent

i…………………………………………………………..Tableofcontent

1~2…………………………………………………………..Introduction

3~5……………………………………Economicgoals（howtomeasure）

3~4………………………………………………………………a:

Growth

4….……………………………………………………b:

FullEmployment

4~5....……………………………………………………..c:

PriceStability

6~9……………………………………AnalysisofCanada（10yearsdata）

6~7………………………………………………………………a:

Growth

8~9……………………………………………………b:

FullEmployment

10~11…………………….………………………………….c:

PriceStability

11~12………………..…………………………………………Conclusion

ii……………………………………………………………….References

Threeeconomicgoals

Introduction

Nowadays,theworld'seconomyisneveridletimetochange.Sincefactorsofproduction（labor,capital,land,technology,andentrepreneurship）arenotavailableinunlimitedamounts,individualsandleadersofcountriesareforcedtomakechoicesastotheuseofexistingfactors.Asaresult,therearemanygoalsthatcanbeusedtoguidedecisionmakers.Formacroeconomic,threeconditionsofthemixedeconomy,includingeconomicgrowth,fullemployment,pricestabilitywhicharethemostrelevanttotheaggregateeconomy.

EconomicgrowthisdefinedaspositiverateofchangeinrealGDP.Economicgrowthisachievedbyincreasingtheeconomy'sabilitytoproducegoodsandservices.Witheconomicgrowth,societygetsmoregoodsthatcanbeusedtosatisfymorewantsandneeds.Aspereconomicanalysisinworldinrecentyears,growthratehasdeclinedinnationsbasedmainlyonindustries.Itisbecauseoftheuncertaintiesinfinancialmarketsthatgrowthratesgotloweredinmostofdevelopingnations.Confidenceofconsumershasalsodepreciatedtoasignificantextent.

Thefullemploymentgoalcanbedescribedconceptuallyasasituationwhereanyonewhowishestoworkcanfindajob,anyonewhoownslandcanputittouseandreceiveafairreturn.Theeconomybenefitsfromfullemploymentbecauseresourcesproducethegoodsthatsatisfythewandsandneedsthatlessenthescarcityproblem.Themeasureusedtoassesscompliancewiththiseconomicgoalforlaboristheunemploymentrate.Theunemploymentrateisaratiowiththenumeratorbeingthenumberofpeopleseekingwork,butnotfindingit（unsuccessfuljobseekers）.Theeconomyexpands,unemploymentfall,andfullemploymentisachieved,butinflationemergesfromtheoverstimulatedeconomy.Theunemploymentrateaswasfoundbyglobaleconomicanalysiswasfoundtobe30%,whichcombinesunemploymentandunderemployment.

Pricestabilityisdefinedastheabsenceof“excessive”inflationwhichdefinedasanincreaseinaveragepricesinaneconomy.Maintainingstabilityisbeneficialbecauseitmeansconsumersandbusinesscansafetypursuelong-termconsumptionandproductionplans?

Somecountrieshavespecificallystatedtargetsforinflationtoachievethesegoals,butnotcatholicallyinfluenced.[1]

AsforCanada,thisisabigdevelopedcountrywiththe12thaverageGDPintheworld.Itistypicalandsignificant.Itseconomyischangingallthetime.ItsGDPwentdowninthefollowingyears.ItcannotachievetheGDPgoals.Asitisfortheemploymentrate,itdecreasesrecently.Howevertheunemploymentratewillcontinuetoriseappreciably,butthedomesticresidentswillalsobeoverthenextfewyearsinCanada,sufferingfromweaknessinthelabormarketimpact.Through2007,Canadaexperiencedstronggrowth,pricestability,fiscalandcurrentaccountsurpluses,historicallylowunemployment,andfinancialstability.Whereastherateofpricestabilityisbeinglowerandlower.

Ourobjectiveistomakesuretheeconomicgoalswhetherit’sachievedornotthroughanalyzingthedataofthechosencountry.Andrelatetotheworldeconomy.Asaresult,wemaytakeactiontoachievetheeconomicgoals.

Economicgoals（howtomeasure）

Accordingtothethreegoals:

growth,fullemployment,pricestability.Economistsusemanymethodstomeasurehowfasttheeconomicgrowingis.Therearethreemainmethods…

Onewaytomeasuretheeconomicgrowthismeasuredbygrossdomesticproduct（GDP）.EconomicgrowthisdefinedaspositiverateofchangeinrealGDP.GDPrefertogrossdomesticproductandtheword"real"meansthatthetotalhasbeenadjustedtoremovetheeffectsofinflation.AsatisfactoryrateofeconomicgrowthisonewherepositivepercapitaratesofgrowthinrealGDPtakeplace.Thatis,theeconomygrowsfasterthanthepopulation,increasingstandardsoflivingforindividualsinaneconomy.Inpracticalterms,percapitaeconomicgrowthshouldbearound1to1.5%forasatisfactorygrowthrate,mosteconomistssaid.Inmanycases,populationgrowthisignoredtosomeextent.Inthosecases,asatisfactoryrateofgrowthmightbearound3%-arateofgrowththattheUnitedStateshasremarkablyaveragedforover200years

Inmanyimportantwaysthatcandetermineeconomicgrowth.First,economicgrowthdependsonincreasesinlabor（quantityandquality,especiallyquality）,stockofcapital,availabilityofnaturalresourcesandtechnology.Notmentionedinmanydiscussionsofeconomicgrowthistheneedforatleastsomefreemarketsandprivateproperty.ThetremendousproblemsintheoldSovietUnioncountriesdemonstratesthisneed.Finally,yourinstructorwillsuggestthateffortstominimizegraftandcorruptionamonggovernmentalofficialswhichisaveryimportantpartofpromotingandmaintainingeconomicgrowth.

ThereareatleastthreedifferentwaystomeasuregrowthofrealGDP.Itisimportanttoknowwhichisbeingused,andtounderstandthedifferencesamongthem.ThethreemostcommonwaystomeasurerealGDPare:

∙Quarterlygrowthatanannualrate

∙Thefour-quarteror"year-over-year"growthrate

∙Theannualaveragegrowthrate

Andtheothereconomicgoalisfullemployment.Thisgoalcanbedescribedconceptuallyasasituationwhereanyonewhowishestoworkcanfindajob,anyonethatownsapieceofcapitalcanputittoworkata“fair”returnandanyonewhoownslandcanputittouseandreceiveafairreturn.

Althoughmanydevelopedcountrieseconomichaveleastandleastunemployed.Butatanytime,someindividualsaremovingfromjobtojob.Thissituationiscalledfrictionalunemployment.But,thefrictionalunemploymentrateisassociatedwithafullemploymentrateofunemployment.Wedenoteitasu*.Theestimatesofthisnumbervary,butitisprobablyaround4%intheUnitedStates.Clearly,alowuisdesirableinanyeconomy.Ahighuisundesirable.InthedepthsoftheGreatDepressionoftheUnitedStates,uwas25%fortwoyears.

Sowecansayitisfullemploymentwhentheunemploymentlessthan5percent.

ThethirdeconomicgoalisPriceStability.Pricestabilityisdefinedastheabsenceof“excessive”inflation.IntheUnitedStatesandmostothercountries,aConsumerPriceIndex（CPI）isusedasameasureofinflation.Thisgoalisindicatedbymonth-to-monthandyear-to-yearchangesinvariouseconomicmeasures.Iftheseremainunchanged,thenstabilityisathand.Maintainingstabilityisbeneficialbecauseitmeansuncertaintyanddisruptionsintheeconomyareavoided.Itmeansconsumersandbusinessescansafelypursuelong-termconsumptionandproductionplans.Policymakersareusuallymostconcernedwithpricestabilityandtheinflationrate.Pricestabilityisdefinedastheabsenceof“excessive”inflation.Letusdefineinflationfirst.Inflationisdefinedasanincreaseinaveragepricesinaneconomy.Theactualmeasureofinflationistheinflationrateasdeterminedbyapriceindex.IntheUnitedStatesandmostothercountries,aConsumerPriceIndex（CPI）isusedasameasureofinflation.TheCPIinanygivenperiodshowstheaveragepricesofa“typical”setofgoodsboughtbyconsumersrelativetosomebaseperiod.TherateofchangeoftheCPIfromperiodtoperiodisusedtomeasuretherateofinflation.Changesmaybepositive（thetypicalcase）orzeroornegative.OtherpriceindexesintheU.S.aretheproducers’priceindex（PPI）andtheGDPdeflator.

Considertherangeofpossibleinflationrates.Onecouldhavenegativeinflationor“deflation.”ThishasoccurredrecentlyintheUnitedStatesforseveralmonthlyperiods.DuringtheGreatDepressionintheUnitedStatesinthe1930’s,adeflationofover20%intheCPIoccurredfrom1929to1932.Azerorateofinflationisapossibility.Mildinflation（intheUnitedStates）wouldbe0to4%.Moderateinflationwouldbeupto10%.Gallopinginflationisprobablyupto25%intheUS,butmightbeupto100%insomecountrieswithhighinflationrates.Hyperinflationwouldbeatgreaterthan100%andintothousands%.Somecountriesoftheworldarenowexperiencinghyperinflations.Argentina,BrazilandIsraelhaveexperiencedinflationratesofgreaterthan400%atdifferenttimesrecently.Considertheconceptof“excessive”regardinginflation.Ifinflationisatx%,butincomegrowsatx%,theninflationisnotcausingtheindividual’spurchasingpowertochange.Xcouldbeaverylargenumbersuchas100%andanindividualmightnotthinkitwasexcessive.However,thereareadverseoverallmacroeconomiceffectswhenhighinflationtakesplace.Highinflationcreatesuncertaintytobusinessfirms.Thus,theyarereluctanttocarryoutcapitalpurchasesinsuchcases.Thisadverselyaffectsaneconomybyreducingeconomicgrowth.[2][3]

AnalysisofCanada（10yearsdata）

Canadaisabigdevelopedcountrywiththe12thaverageGDPintheworld.

ForitsGDP

InthesamewayaccordingtotheGDPchartanalysis,wecouldgetthatin1999GDPishighest.Butinthefollowingtwoyearsitwentdownyet.Stillin2001itstartedtogoup.Andfrom2005totodayitgotdownever.

“Theperiodaheadwillbechallenginginlightofthesharpdet