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Demand and supply macroeconomic

Assessment 3: Macroeconomics Group Report Guide

Overview

• Due: Monday October 29th, 3:00 pm (written portion) + presentation in your workshop
• 35% of final grade
• This is a group report
• Group members: form a group of 4
• Word limit: 3000 words
• Select 2 research papers
• Should cover 2 different countries
• Must be published in peer-reviewed refereed academic journals
• Topic: should be based in the macroeconomic content covered in class
  • GDP
  • Unemployment
  • Inflation
  • AD and AS model
  • Monetary Policy
  • Fiscal Policy
  • International Economics: (exchange rates)

Your sources must be academic

• The articles have to be published in academic journals only. Check the library if you need help or ask your workshop leader if you are unsure. Also try the database EconLit.

Your sources should be recent

• aim for publication dates not older than 2000
• both articles should focus on similar time periods (i.e. do not compare Japan in 1980 and the US in 2007)

The report should have a global perspective

• Your research articles should be based on two different countries:so you can compare and contrast, for example, monetary policy in Australia and Canada, or Japan and France
• Be sure to choose articles presenting similar issues to enable comparison. For example, if you compare government policies to reduce unemployment in Sweden and in the US you need two articles dealing with unemployment policies.

Report Structure

1. Short introduction
2. Critical review of first article
3. Critical review of second article
4. Comparative analysis of both articles, application of theory
5. Conclusions and recommendations
6. References

Aggregate demand and supply :Partial Solution

The macroeconomic indicators of the selected countries present a pure contrasting feature in recent years. While Venezuela has seen declining aggregate demand in recent years and GDP has reduced significantly along with higher inflation the same for the economy of Norway has been quite contrasting. Post 2014, when Venezuelan economy hugely suffered from the eventual cooling of oil prices and which affected the Venezuelan economy as government revenue declined b over 80% and other sectoral growth in the economy was grossly inadequate to compensate for the reduction in hydrocarbon economy. The same was quite different for the Norwegian economy since the Norway economy was much more balanced with oil revenue accounting for a little over 20% of the entire GDP and 30% of government revenue. Thus, as a result of the oil price the Norway economy was much better placed to grow and balance the way consumption demand was created. The same was not the case with Venezuela. Oil revenue accounted for more than 95% of the country’s Exports and there was pretty higher current account deficit and the country administration were complete failures as far as building foreign exchange reserves were concerned.

While the prices were on the higher side before 2014, the same acted as a boon for the economy of the Venezuelan economy. In 2015 the oil prices hovered between $100 to $125 per barrel and the government of Venezuela spent lots of budgeted amounts on creating infrastructure and employment. However as the oil went of the boil after 2014, Venezuelan government found it impossible to spend too much on the economy and reserves were emptied in two years leading to spiraling debts and higher inflation. Approximately 45% of the government revenue came from oil exports and as a result of which a slight dip in the oil prices made the government spending highly susceptible. As a result of which the overall demand for various goods and services in the Venezuelan economy declined radically. Significant loss of revenue by the government made it impossible for the government to spend money on the modernization of oil sector and which resulted in reduction in capacity and reduced export capacity further (VERA, 2015).

Venezuela also encountered a highly volatile oil production management in recent times. The government company which was in charge of oil production (PDVSA) failed to account for regular production estimates and ignored modernization programs. Financial results and productivity is unknown through it is expected that efficiency in production was highly irregular and lower than other countries like Norway. As a result of which the production costs rose more making it impossible for outside companies to invest in Venezuela.

As aggregate demand and aggregate supply in the economy (shown by GDP) is dipping by the year and supply too becoming erratic the country has become entirely dependent upon exports for most goods and essential commodities. The dip in the Venezuelan GDP or AD is being shown as follows :