Maintaining Stable Economic Conditions

This assignment examines how countries can achieve and sustain stable economic conditions. It delves into the use of various economic policies aimed at controlling inflation and unemployment rates. The analysis draws on data and research from different economies, such as Australia, China, and the United States, to illustrate effective strategies for maintaining macroeconomic stability.

Running head: BUSINESS ECONOMICS
Business Economics
Name of the University
Name of the student
Author Note

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Executive Summary:
Market equilibrium is a microeconomic phenomenon. Under market equilibrium, some
economic forces remain equal. There are chiefly three types of market equilibrium. However,
in this report, long-run stable equilibrium will be analysed. Moreover, economic condition of
U.S, Australia and China will also be discussed. To discuss the economic condition of these
three countries, GDP growth rate, inflation rate and unemployment level will be analysed,
based on previous year data. After analysing those economic conditions, it will be analysed
that whether the economy is stable or not.

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Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
Country Analysis:.......................................................................................................................6
United States:.........................................................................................................................6
Australia:................................................................................................................................9
China:...................................................................................................................................11
Conclusion:..............................................................................................................................13
References:...............................................................................................................................14

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Introduction:
Economic equilibrium means a market condition when aggregate demand and
aggregate supply of an economy remain in balance. There are chiefly three types of
equilibrium condition can be seen in an economy. These are stable, unstable and neutral
equilibrium condition (Chahrour & Gaballo, 2015). Stable equilibrium is a long-term
concept. On the other hand, unstable equilibrium is a short-run concept. In this report, a basic
concept of stable equilibrium condition will be discussed. After that, economic conditions of
United States, Australia and China will discussed. To analyse the equilibrium condition of a
country, some macroeconomic factors should be analysed to understand the situation. These
macroeconomic factors are gross domestic product (GDP), unemployment rate and inflation
rate.
Discussion:
Stable market equilibrium is a long-run situation, where total demand and total supply
of a country equate with each other. Moreover, they always remain in balance. If any external
force affects the demand side or supply side of this economy, an automatic mechanism will
be occur. Hence, the demand and supply side will be automatically reached to its initial
equilibrium condition (Quadrini, 2015). Here, an equilibrium level of price and output will be
determined. Under a stable market equilibrium condition, a downward slopping demand
curve and an upward rising supply curve will be drawn.

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Price
Total Output
Supply Curve
Demand curve
O
P0
Q0
Figure 1: Long-run stable market equilibrium
Source: (Created by author)
In the above figure, a stable equilibrium condition has occurred. Here, the equilibrium
price level is P0 and the equilibrium level of quantity is Q0. If supply curve and demand curve
shits from its initial position, then an automatic adjustment will be seen. Excess demand will
increase the price level. On the other hand, excess supply will decrease the price level.
Hence, by this price adjustment procedure, the market will reach to its initial equilibrium
position.
However, it is a microeconomic concept. To analyse the stable equilibrium condition
of a country, macroeconomic concept is needed to understand. Here, equilibrium level of
aggregate gross domestic product (GDP) and price level will be generated (Franke, 2017).
The aggregate demand curve of a country is shown by a negatively sloped demand curve.
Similarly, the aggregate supply curve is shown by an upward rising supply curve.

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Price
GDP
Supply Curve
Demand curve
O
P0
Q0
Figure 2: Long-run stable market equilibrium of a country
Source: (created by author)
In the above figure, a stable market equilibrium condition of a country is shown.
Here, stable equilibrium level of output is shown by Q0. Moreover, the equilibrium price level
is P0.
After analysing stable microeconomic and macroeconomic concept of equilibrium,
the economic conditions of U.S, Australia and China will be discussed. To analyse economic
stability of these three countries, GDP, inflation rate and unemployment rate are taken under
consideration.

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Country Analysis:
United States:
Figure 3: GDP growth rate of U.S
Source: (data.worldbank.org, 2018)
In this world, one of the most developed countries is U.S. If GDP growth rate of this
country is seen then an outcome can be drawn. On the above figure, GDP of U.S is measured
from the year 2002 to 2016. From this above diagram, it can be said that this growth rate has
followed almost a stable increasing rate (Quadrini, 2015). However, after 2014, the country
has faced a stable but decreasing rate of growth trend.

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Figure 4: Inflation Rate of U.S.A
Source: (tradingeconomics.com, 2018)
In the above figure, inflation rate of U.S.A is shown. This inflation rate of this country
has fluctuated for the last few years. However, the magnitude of changing GDP growth rate is
not large (Schabert & Van Wijnbergen, 2014). Hence from 2012, the country is facing almost
a stable inflation rate.

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Figure 5: Unemployment Rate of U.S.A
Source: (tradingeconomics.com, 2018)
In figure 5, unemployment rate of U.S.A is shown. The country has been facing a
decreasing rate of inflation since 2010. It is good an economy. This decreasing rate of
inflation indicates an increasing growth rate of the country. From the above figure it is seen
that this decreasing inflation rate is almost stable. This rate has been maintaining almost a
stable rate.

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Australia:
Figure 6: GDP growth rate of Australia
Source: (data.worldbank.org, 2018)
In figure 6, GDP growth rate of Australia is shown. From the above diagram it can be
said that this trend decreased in 2009. However, after this year, this GDP growth rate
increased constantly up to 2013. After this year, the GDP growth trend has been starting to
decrease. Though the country is facing a decreasing rate of GDP, the economic condition of
this country is stable (Quadrini, 2015). This is because the fluctuation rate is almost zero.

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Figure 7: Inflation Rate of Australia
Source: (tradingeconomics.com, 2018)
Inflation rate of Australia faced some drastic changes since 2008. However, this
inflation rate has been facing almost a stable condition since 2015. Hence, this situation is
indicating a stable economic condition.
Figure 8: Unemployment Rate of Australia
Source: (tradingeconomics.com, 2018)

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Unemployment rate of Australia is shown in figure 8. This rate was increased and
then decreased to a large extend from 2008. However, after 2015, the country is facing almost
a stable rate of unemployment. Moreover, this unemployment rate has been decreasing since
2015. This indicates a good and stable economic condition of Australia.
China:
Figure 9: GDP growth rate of China
Source: (data.worldbank.org, 2018)
China’s GDP growth rate is shown in the above diagram. This rate has been
increasing since 2002. It implies that the country is developing continuously (Quadrini,
2015). Within this growth trend, no such fluctuation can be seen. Hence, the country is facing
a stable economic condition.

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Figure 10: Inflation Rate of China
Source: (tradingeconomics.com, 2018)
China’s inflation rate was had fluctuated to a large extend from the year 2008 to 2012.
However, after this year, the country has been facing a stable inflation rate. This rate has not
increased or decreased to a large extend (Schabert & Van Wijnbergen, 2014). Hence, this
economic situation can be said as stable.
Figure 11: Unemployment Rate of China
Source: (tradingeconomics.com, 2018)

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China’s economic growth and inflation rate has been remaining almost stable for last
few years. Hence, the economic condition of China can be said as stable. However,
unemployment rate of this country is not stable. This unemployment rate has been increased
and decreased to a large extend, over the last few years. However, in recent years, this
unemployment rate is facing a stable economic condition.
Conclusion:
After analysing all macroeconomic factors, a conclusion can be drawn. Economic
conditions of U.S and Australia are facing almost a stable equilibrium conditions. However,
the economic condition of China is not stable. The country is facing an unstable
unemployment conditions. However, each country tries to maintain a stable economic
condition as it helps this country to develop its economy. Stable equilibrium is a long-term
process. Hence, the government of a country can maintain its stable economic conditions by
applying various economic policies.

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References:
Australia Inflation Rate | 1951-2018 | Data | Chart | Calendar | Forecast.
(2018). Tradingeconomics.com. Retrieved 13 January 2018, from
https://tradingeconomics.com/australia/inflation-cpi
Australia Unemployment Rate | 1978-2018 | Data | Chart | Calendar.
(2018). Tradingeconomics.com. Retrieved 13 January 2018, from
https://tradingeconomics.com/australia/unemployment-rate
Chahrour, R., & Gaballo, G. (2015). On the nature and stability of sentiments (No. 873).
Boston College Department of Economics.
China Inflation Rate | 1986-2018 | Data | Chart | Calendar | Forecast.
(2018). Tradingeconomics.com. Retrieved 13 January 2018, from
https://tradingeconomics.com/china/inflation-cpi
China Unemployment Rate | 2002-2018 | Data | Chart | Calendar | Forecast.
(2018). Tradingeconomics.com. Retrieved 13 January 2018, from
https://tradingeconomics.com/china/unemployment-rate
Franke, R. (2017). A simple approach to overcome the problems arising from the Keynesian
stability condition. European Journal of Economics and Economic Policies, 14(1),
48-69.
GDP (current US$) | Data. (2018). Data.worldbank.org., from
https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?
end=2016&locations=CN&start=2002

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GDP growth (annual %) | Data. (2018). Data.worldbank.org. from
https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?
end=2016&locations=US&start=2002
GDP growth (annual %) | Data. (2018). Data.worldbank.org., from
https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?
end=2016&locations=AU&start=2002&year_high_desc=false
Quadrini, V. (2015). The growth of emerging economies and global macroeconomic stability.
Mimeo. University of Southern California.
Schabert, A., & Van Wijnbergen, S. J. (2014). Sovereign default and the stability of inflation-
targeting regimes. IMF Economic Review, 62(2), 261-287.
United States Inflation Rate | 1914-2018 | Data | Chart | Calendar.
(2018). Tradingeconomics.com. Retrieved 13 January 2018, from
https://tradingeconomics.com/united-states/inflation-cpi
United States Unemployment Rate | 1948-2018 | Data | Chart | Calendar.
(2018). Tradingeconomics.com. Retrieved 13 January 2018, from
https://tradingeconomics.com/united-states/unemployment-rate