Question

Topic: exchange rate regime in developing countries (Russia and Kazakhstan)

Is it possible that analysis of country’s macroeconomics can be limited only at one country’s level? Why?

Who are effected by your selected country’s macroeconomic indicator’s changes? How?

Answer 1

Dear Student,

Please find below answer to your question

Abstract

A) Let us understand the factors of Macroeconomics with respect to limitation of specific country.

Macroeconomic factors tend to impact wide swaths of populations, rather than just a few select individuals. Examples of macroeconomic factors include economic outputs, unemployment rates, and inflation.

These indicators of economic performance are closely monitored by governments, businesses and consumers.

A macroeconomic factor may include anything that influences the direction of a particular large-scale market.

For example, fiscal policy and various regulations can impact state and national economies, while potentially triggering broader international implications.

Real World Example

Diseases can also be defined as macroeconomic factors. Case in point: after the 2014 Ebola virus struck West Africa, the World Bank Group’s Macroeconomics and Fiscal Policy Global Practice (MFM) stepped in to help support local governments in combating the virus.

Therefore yes it is possible that analysis of country’s macroeconomics can be limited only at one country’s level

B) Effects of selected Country's macroeconomic indicator’s on Economy

Some of the most important macroeconomic indicators can be listed as below, Also we will see the effects of this macroeconomic indicators on various factors.

1) Consumer Price Index (CPI)

When the price of these goods and services are increasing we refer to it as inflation. When the costs are decreasing we refer to it as disinflation.

CPI numbers can fluctuate a lot due to things like energy and food costs which can be volatile. For this reason, most central banks prefer Core CPI as their gauge of inflation and it has direct impact on consumer purchasing decisions.

2) Decisions on interest rates

Normally rise in the real interest rate increases the unemployment rate, raises the share of long-term unemployed, and reduces the employment rate.

Also an increase in interest rates can affect a business in two ways: Customers with debts have less income to spend because they are paying more interest to lenders. Sales fall as a result. Firms with overdrafts will have higher costs because they must now pay more interest.

3) Retail Sales

An increase in retail sales has a positive effect on the value of a currency. An increase in housing sales has a positive effect on the value of a currency. A negative trade balance is likely to reduce the value of a currency.

4) Industrial Production

Industrial processes can have negative environmental impacts, causing climate change, loss of natural resources, air and water pollution and extinction of species. These threaten the global environment as well as economic and social welfare.

5) Gross Domestic Product (GDP)

GDP is divided by the total number of workers, the GDP per capita very closely reflects the 'average' revenue per person in the economy.

As GDP grows it is assumed that everyone in the chain will benefit and the growth will have a trickle down effect on the population, thus improving standard of living.

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