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Macroeconomic Analysis of China and India

Info: 1860 words (7 pages) Essay
Published: 22nd Mar 2021 in Economics

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Macroeconomics is part of whole economics. It studies the behavior and performance of the entire economic market. The macroeconomic variables such as unemployment, inflation, GDP(Gross Domestic Product), and growth rates are important components of macroeconomics. Macroeconomists can use macroeconomic variables to describe and analyze the general outline of macroeconomic changes. Macroeconomics holds that the level of national income reflects the level of production and employment in the entire society. The role of macroeconomics is to help governments and enterprises formulate economic strategies by using macroeconomic models. Macroeconomics can analyze the microeconomic factors that affect the whole economy. Basically, these data are calculated based on the total population of a country. China, India and the United States are the three most populous countries in the world. The macroeconomic variables of these countries can be clearly analyzed and compared.

The business cycle refers to the cyclical phenomenon of economic expansion and economic contraction that occurs periodically in economic operations. The stages in the business cycle include expansion, peak, recession or contraction, depression, trough, and recovery. It also known as the economic cycle or trade cycle. A recession will lead to rising unemployment. The rising unemployment rate has led to a downturn in other economically changing factors, such as GDP, production, income, and tax rates. However, during the period of economic expansion, these economic

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variability factors will increase with GDP growth. There are 13 economic recessions in the United States that last longer than the Great Depression after the 1850s. According to the National Bureau of Economic Research, July 1st witnessed the longest economic expansion cycle in the history of the United States (121 months since the end of the 2009 recession), and the 34th expansion since 1854, the last time the US economy expanded It was from March 1991 to March 2001. During the 2007-2009 economic expansion of the United States, GDP grew at about the same percentage each year. During the recession period, GDP has decreased by an average of 2.8% per year. A decrease in aggregate demand will lead to an economic recession, and an increase in aggregate demand will cause economic expansion.

2019

China

USA

India

Real GDP growth

6.1%

2.4%

6.1%

Inflation(average consumer prices)

2.3%

1.8%

3.4%

Unemployment

3.8%

3.73%

3.5%

Analyzing the changes in macroeconomic variables and making corresponding macroeconomic policies can solve problems such as unemployment, inflation, economic fluctuations (such as interest rates), and the balance of payments (exchange rates). This can help a country achieve long-term stable and sustainable development. Real GDP refers to the total monetary value of the final products and services produced by the country's residents in a year at market prices in a given year. Real GDP reflects the true change in the actual output volume of GDP during this period, which is convenient for comparison between different years of GDP. In 2019, the global economy is facing continuous downward pressure. The IMF has lowered its global economic growth forecast for 2019 four times a year, from 3% at the beginning of the year to 3.9%. In 2019, most countries in the world will experience

slower economic growth than in previous years. In developed countries, although the economic growth rate of the United States has also fallen a lot, it is still relatively high, with GDP increasing by 2.4% throughout the year. Among developing countries, India's economic downturn has been relatively large. Data show that in 2018, the actual economic growth rate of India in each quarter often exceeds 7%. As India's manufacturing, exports, investment, and credit environment continue to deteriorate, India's total GDP in 2019 is close to $ 3 trillion, and the actual economic growth rate is 6.1%. In 2019, India's GDP totaled 10.51 trillion US dollars, which even surpassed Japan and Germany. The reason for India's rapid economic development is that India's economic liberalization began in the early 1990s, including deregulation of industries, reduced control of foreign trade and investment, and privatization of state-owned enterprises. India's service industry is the fastest growing industry in the world because it accounts for 60% of India's total economy and 28% of its employment. As a developing country, China's actual economic growth rate in 2019 is about 6.1%, which is consistent with India.

Unemployment rate refers to the number of unemployed laborers who have met all employment conditions in a certain period of time. It is the main indicator of the unemployment situation in a country or region. The decline in the unemployment rate represents the positive development of the overall economy, which is conducive to the appreciation of the currency. The rise in the unemployment rate represents a slowdown in economic development, which is not conducive to currency appreciation. The 3.8% unemployment rate does indicate that China's employment situation is deteriorating. If you count a large number of migrant workers, China's true unemployment rate data should be higher than the official unemployment rate. The employment situation in China is grim in 2019. The phenomenon of large numbers of corporate layoffs and the rapid disappearance of hiring positions has a negative impact on China's economic growth rate and the downward trend in employment is likely to be the beginning of a long-term situation in China. The United States and India also have similar unemployment rates compared to China.

Compared to China, the United States and India also have similar unemployment rates. The continued decline in India's economic growth is the main reason for the increase in India's unemployment rate. As domestic and international market demand slowed sharply, Indian companies had to reduce output. This has exacerbated unemployment in India. At the same time, Indian agricultural exports face competition from neighboring countries. This has increased unemployment in rural India. The unemployment rate in the United States in 2019 remains at 3.73%, which is the same as the lowest point in 50 years.

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Inflation refers to the depreciation of a country's currency and the rise in prices. The most direct effect of inflation is the decline in purchasing power. Inflation increases the prices of goods and services, as well as the decline in purchasing power of cash, and the redistribution of wealth is unbalanced. India's inflation rate is the highest in the three countries is 3.4%. The most stable and low country is the United States. As a developed country, the United States has a more stable advantage in controlling inflation than developing countries. As a developing developing country, India is still less stable and mature in controlling inflation.

In conclusion, Since China and India opened up, their economies have developed rapidly. Currently, they are the two countries with the fastest economic growth in the world. The national conditions of the two countries have many similarities, but their economic development has different characteristics. China is facing difficulties such as increasing downward pressure on the economy and rapid price rises. This has slowed China's economic growth. India is developing too fast in the service industry and weak in industrial development. This has caused imbalances in different aspects of India's economic development. By comparing the macroeconomics of the three countries, the economic growth of the United States has declined significantly this year, but it is still growing.

Reference List:

  1. THE ECONOMIC TIMES

Available from: https://economictimes.indiatimes.com/definition/macroeconomics (Accessed on 15-FEB-2019)

  1. MACRO   01/14/19

“This Is The Second Longest U.S. Expansion In History”

Available from: https://app.hedgeye.com/insights/72666-this-is-the-second-longest-u-s-expansion-in-history?type=macro  (Accessed on 18-FEB-2019)

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 “Information on Recessions and Recoveries, the NBER Business Cycle Dating Committee, and related topics”

Available from: https://www.nber.org/cycles/main.html

(Accessed on 18-FEB-2019)

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 “IMF DataMapper”

Available from: https://www.imf.org/external/datamapper/PCPIPCH@WEO/WEOWORLD/IND/IDN/JPN/CHN/USA  (Accessed on 20-FEB-2019)

  1. International Monetary Fund (IMF)

“Unemployment rate forecast - Country rankings”

Available from: https://www.theglobaleconomy.com/rankings/unemployment_outlook/  (Accessed on 20-FEB-2019)

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Available from: https://www.inflation.eu/inflation-rates/cpi-inflation-2019.aspx  (Accessed on 20-FEB-2019)

  1. Kimberly Amadeo      The Balance

“3 Ways to Compare GDP Between Countries,”

Available from: https://www.thebalance.com/gdp-by-country-3-ways-to-compare-3306012 (Accessed on 20-FEB-2019)

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    “United States Real GDP Growth [1948 - 2020] [Data & Charts]”

Available from: https://www.ceicdata.com/en/indicator/united-states/real-gdp-growth. (Accessed on 25-FEB-2019)

  1. TRADING ECONOMICS

 “India GDP1960-2019 Data | 2020-2022 Forecast”

Available from: https://tradingeconomics.com/india/gdp  

(Accessed on 25-FEB-2019)

 

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