Economic Analysis

Economic Analysis1.0 AbstractIn this assignment I tried to determine what is fiscal and monetary policy carried out by a government and its positive and negative effects. Also some imperfections of using the real GDP in the evaluation of a country’s economy. The effects of unexpected inflation rate to the borrower or lenders. And finally the effect of falling gas price in the demand of large cars and increase of beef price to chicken price.

2.0 Fiscal and monetary policy in short-run stability of real GDP and prices2.1 IntroductionDuring the economic instability there are few negative impacts will be appeared in the economy of a country. For instance, a rise of unemployment, increase of government borrowing, decline in stock markets and share prices, high inflation and short of investment, increased price, fall of household income etc. Literally, down-turn is a decline in a country’s real GDP growth for two or more consecutive quarters of a year and is a phase where profits, employment, investment spending and household incomes experience a regular fall-down.

English: Detail from Government. Mural by Elihu Ve...

World map showing countries by nominal GDP per cap...

GDP (PPP) Per Capita based on 2008 estimates http:...

Real GDP is the number reached by valuing all the productive activity within the country at a specific year's prices. When economic activity of two or more time periods is valued at the same year's prices, the resulting figure allows comparison of purchasing power over time. To stabilize the country’s fall of real GDP the government can implement “short-run” using two main tools, such as fiscal policy or monetary policy. In economics concept, the “short-run” is a period of time in which the quantity of at least one input is fixed and the quantities of the other inputs can be varied whereas the long run is a period of time in which the quantities of all inputs can be varied. There is no fixed time that can be marked...