Question

Using the India as the subject Country, Answer the following 1 paragraph each. 2. In your essay, you will consider and address the following questions and points:

a. What is the current state of the economy that you have chosen?

Collect the latest available data on nominal GDP, real GDP, per capita real GDP, unemployment rate, inflation rate, interest rates, exchange rate(s), and any other important macroeconomic data.

b. Is the country experiencing an inflationary gap or a recessionary gap?

c. What kind of macroeconomic policy should this country follow?

d. Is the real GDP growing and at what rate?

e. What is the per capita real GDP on Purchasing Power Parity basis? What is the trend in this variable? Is the per capita real GDP increasing? Can you find the relevant data for the last couple of years or more? f. Is the current unemployment rate close to NAIRU? Higher or lower? g. At what stage of the Business Cycle is this country presently in? Is there an inflationary or recessionary gap? h. What kind of fiscal and monetary policies is this country presently following? Expansionary or contractionary? i. What kind of exchange rate policy is this country presently following? Fixed exchange rate or flexible exchange rate? j. How is this country’s economy going to perform in the coming years? What does the future look like? Will the unemployment rate and inflation rate change? Why or why not?

Answer 1

( a ) Covid-19 pandemic and measures taken to contain the spread of it has plunged the global economy into an unprecendented recession. India is also going through an unprecedented downturn in economic activities in the country. Sudden fall in aggregate demand, and supply has hit most of the businesses and industries in the country, thereby leading to a high unemployment level.

Nominal GDP in 2020 is estimated to be around $3.3 trillion whereas real GDP is $3 trillion. Per capita real GDP in 2020 was around $2,200. Unemployment rate was around 8% whereas inflation rate in the country in 2019 was 4.54%. The benchmark interest rate, also known as repo rate was 6% in 2019. The exchange rate was 75.75 INR for 1 $ US.

( b ). Currently country is going through a recessionary gap due to Covid-19.

( c ) Country should follow an expansionary fiscal and monetary policy to come out current recessionary gap.

( d ) Current real GDP is decreasing due to recession. It is expected to be around -5.5% in this year.

( e ) Per capita Real GDP based on PPP terms is around $8,000. It is consistently increasing