Question

Please assist ; what are the key macroeconomic variables. Also how do I put these factors in CONTEXT with a country that is exeperiencing an econoc downtown. Are there any polices that can be implemented by the goverment to revive the economy of a country..

Answer 1

The key macroeconomic variables include

1) GDP or Gross Domestic Product

2) Unemployment

3) Inflation

4) Interest Rates

Consider a country experiencing economic downturn and as far as the macroeconomic variables are concerned with the GDP decreases for minimum two quarters where the GDP that has to be taken into account here is real GDP and as far as unemployment is concerned, the unemployment level increases during an economic downturn because all the businesses apply cost-cutting because of which employees are relieved apart from that during a recession,what happens is that many companies demand for liquidity as a result of which the demand more loanable funds with which the interest rates increase, according to Phillips curve inflation and unemployment are inversely related and result of which unemployment increases during an economic downturn inflation level decreases on the whole.

The central government of our country has to take role during an economic downturn and it has to use contractionary fiscal policy in order to get out of the economic recession and this include increasing the tax revenues by increasing the tax rates and decreasing the government spending so that proper liquidity is established with the government such that it can then start funding for expansion on the whole.