I have an assignment to do comparing Thailand and Australia economically. I don't understand how the GDP, inflation, unemployment and currency rate are linked. For example if inflation is high, what is the expected GDP (low or high). Can someone please explain how they fit together? Thanks a heap.
3 answers
Economics help needed here.
GDP is the amount of goods and services produced in a country within a given year. Inflation means that the currency is worth less and that prices are higher. When prices are higher (inflation) the GDP also increases because you rare paying more money for the same amount of goods. The exception to this is when GDP is expressed in real dollars. That is when inflation is factored out of the figures.
Unemployment may have an effect on GDP. When there is a high rate of unemployment it means that production is less because fewer goods and services are produced. That means a lower GDP.
I am not sure is meant by the currency rate unless it is the value of your money as compared to that of other countries. Inflation probably would cause the rate of exchange of your currency to go down. In other words You would pay more of your money for the same amount off good. That could be an increase in inflation in your country since imported goods would be more expensive.
Unemployment may have an effect on GDP. When there is a high rate of unemployment it means that production is less because fewer goods and services are produced. That means a lower GDP.
I am not sure is meant by the currency rate unless it is the value of your money as compared to that of other countries. Inflation probably would cause the rate of exchange of your currency to go down. In other words You would pay more of your money for the same amount off good. That could be an increase in inflation in your country since imported goods would be more expensive.
Your question of how GDP and inflation are linked has two answers. GDP can increase either because of factors affecting aggregate supply or aggregate demand. If inflation were to increase, it would generally be caused be an overall increase in the demand for goods and services from that country. If inflation were to rise, however, the increase in price level could impact real GDP as compared to nominal GDP, real GDP being adjusted for the rate of inflation.
2 answers