BUSINESS ECONOMICS

WORD LIMIT: 2,500 words (exclude referencing & appendix)

Purpose of the Task

The purpose of the task is to develop an understanding of key macroeconomic concepts and ability to apply these concepts to the real world situation.

Description of the Task

Question 1

Choose one country from each of the following continents:

- Asia: Singapure
- Europe: England
- North America: USA
- South America: Brazil
- Africa: South Africa

Collect data for the following macroeconomic variables from 2008 to 2014 for the FIVE (5) countries of your choice from the United Nations Statistics Database website (http://data.un.org/Explorer.aspx).

• Gross Domestic Product by expenditure (at current prices) in USD.
• Exports of goods and services (at current prices)
• Imports of goods and services (at current prices)
• GDP growth rate (annual percentage)

a) Present the collected data for each variable using a separate table with clear headers and legends as appropriate.

b) Compare and comment on the differences in the four variables between each country and over time. Discuss possible economic reasons that contributed to those differences.

c) What does trade openness index measure? Calculate trade openness index for any TWO (2) of the chosen countries from the years 2008 to 2014 based on the data collected in part (a). Determine the relationship between trade openness and economic growth for both countries.

Question 2

a) With reference to the article in the appendix, explain why Nordea economist Holger Sandte mentioned "Deflation would be a disaster for the euro area as the burden of high debt would increase." Identify TWO (2) more economic problems associated with deflation.

b) "The ECB is expected to cut its deposit rate by 10 basis points to -0.4 percent in March, charging banks even more to park their cash overnight..."

Using AD-AS diagram, explain how the use of negative deposit rate policy helps European Central Bank on achieving its inflation target (Assume that the economy is initially in short-run equilibrium).

Question 3

As of February 2016, the global oil prices have declined by more than /0 percent compared to June 2014.

a) Identify ONE demand side reason and ONE (1) supply side reason that have caused oil prices to fall sharply.

b) Using a demand and supply diagram, illustrate and explain the impact for any ONE of the reasons identified in part (a) on the oil market.