West Indies ECON 1000 - The Three Pillars Unemployment

ECON1000 Open Campus
Macro Paper – contributes 20% [DUE: December 7th @ 11:55pm]
The Three Pillars: Unemployment, Inflation and Economic Growth This Macro paper covers Units 7 to 9 and is designed to apply the theories and
principles of Macroeconomics to the real world. The paper is marked out of 50
and contributes 20% to your final course grade.
Instructions:
• Your response should be typed, with at least 1 ½ line-spacing, and a 12point font size.
• Where necessary, graphs can be drawn by hand and scanned into
document.
• A list of all references must be provided at the end of the document using
APA format.
• Plagiarising your colleagues’ work or allowing your work to be plagiarised
will be penalized with a score of zero. 1 (a) Examine the data for the developed country and the developing Caribbean
country from 2004 to 2009. What relationship (if any) do you observe
between economic growth, unemployment and inflation over the period?
(10 marks) Unemployment, In5lation and Economic Growth 2000-2014 12.00 (Developed Country) 10.00 Percentage (%) 8.00 6.00 4.00 2.00 0.00 -2.00 -4.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Unemployment 4.10 4.80 5.90 6.10 5.60 5.20 4.70 4.70 5.90 9.40 9.70 9.00 8.20 7.40 6.20 In7lation 3.38 2.83 1.59 2.27 2.68 3.39 3.23 2.85 3.84 -0.36 1.64 3.16 2.07 1.46 1.62 Economic Growth 4.09 0.98 1.79 2.81 3.79 3.35 2.67 1.78 -0.29 -2.78 2.53 1.60 2.32 2.22 2.39 Unemployment, In5lation and Economic Growth 2000-2014 (Developing Caribbean Country) 20.00 Percentage (%) 15.00 10.00 5.00 0.00 -5.00 -10.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Unemployment 12.10 10.80 10.40 10.50 8.30 8.00 6.30 5.50 4.60 5.30 5.90 4.70 5.00 3.60 4.00 In7lation 3.56 5.54 4.14 3.81 3.72 6.89 8.32 7.89 12.05 6.97 10.55 5.10 9.27 5.20 5.68 Economic Growth 7.56 4.17 7.94 14.44 7.95 6.21 13.21 4.75 3.39 -4.39 -0.09 0.01 1.37 1.74 0.82 Source: World Bank Indicators 2 (b) “Prolonged inflation never ‘stimulates’ the economy. On the contrary, it
unbalances, disrupts and misdirects production and employment.” - Henry
Hazlitt
Can an economy achieve low unemployment, low inflation and economic
growth at the same time? Discuss.
(15 marks)
Use the following articles as a starting point for your discussion.
Kolovson, E. (2014, May 27). What is the relationship between growth,
inflation and unemployment? Retrieved from
https://www.quora.com/What-is-the-relationship-between-growth-inflationand-unemployment
Pettinger, T. (2011, November 21). Trade Off Between Unemployment
and Inflation. Retrieved from
http://www.economicshelp.org/blog/571/unemployment/trade-off-betweenunemployment-and-inflation/
(c) How does the relationship observed in the data from part (a) compare with
the economic theory from part (b)? Explain.
(5 marks)
(d) The Ministry of Finance and Central Bank for your country are faced with
the decision of setting targets for inflation, unemployment and economic
growth for the next fiscal year.
(i)
Which of the variable(s) should they target? Justify your response.
(5 marks)
(ii)
What policy/policies should they implement to ensure that your
target is met? Carefully explain.
(15 marks)
(Use references to support your response.) 3