Economic Indicators: GDP, Inflation, and Unemployment in the UAE

ECONOMIC INDICATORS 1
MIDTERM TASK
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ECONOMIC INDICATORS 2
Introduction
The growth of a country is measured in terms of the economic activities taking place in that
country. Economic indicators are categorized into three namely the real sector, monetary and
financial sectors, and external sectors. The real sector embraces all the activities related to the
aggregate demand and aggregate supply. These include the gross domestic product,
unemployment, investment, industry, fiscal debt, consumption and GDP per capita. The
economy sector that supports commercial and retail consumers with financial services is called
the financial sector. This financial sector is comprised of financial industries such as insurance
companies, investment companies, and real estate firms. This sector measures the economy in
terms of inflation, interest rates, money, and exchange rate. The last category is on the interests
received when interacting with the economies of other countries. This is the external sector
which comprises the current account, exports and imports, external debt, trade balance and
international reserves (Joung et al 2013, p.148).
In the United Arab Emirates (UAE), the main economic indicators are the gross domestic
product, inflation, and unemployment. These are the key measures of the UAEs economy. For a
country to grow and develop economically then these three indicators should be positive in that
country. These indicators range from the daily activities which affect the common citizen either
directly or indirectly but make them feel how their economy is driving them. For example, the
inflation rate can be moderate for a country to grow. Inflation is experienced in terms of the
prices of the commodities in the country. The higher the price of a product, the higher the rate of
inflation. In the United Arab Emirates, the prices are moderate because of the oil sector. The
production sector depends majorly on the oil sector during the manufacturing, processing, and
distribution of the products produced. If the prices of the oil are low, then the prices of the

ECONOMIC INDICATORS 3
products will be low and this leads to the low inflation rate in the market. The unemployment
rate in a country is brought out by the lack of jobs in the market. The growth of the United Arab
Emirates is enhanced by a relatively lower rate of unemployment across the different groups of
the population. The gross domestic product of the UAE relatively greater than other developing
and developed countries in the world and this has made its economy to expand more. The GDP is
the main indicator for any economy of a country (Shahbaz et al 2014, p.622).
Literature review
Increase in prices of the products at a certain level is referred to as inflation. Various economists
have presented different theories of inflation. These theories of inflation have been categorized
into two labels; monetarists and structuralists. Monetarists’ theories argue about inflation in
terms of monetary (Totonchi 2011, p. 459). They associate inflation with the monetary cause and
it can also be controlled with monetary measures. The structuralists’ theories argue that inflation
is caused by the unbalanced economic system and to sort this economic problem, then monetary
and fiscal measures should be taken. The conventional demand-pull theory proves that when the
aggregate demand is over the aggregate supply is when inflation occurs. The economy reaches
its maximum production capacity during the full employment condition. At this point, the
demand for the products increases rapidly but the supply of the products can’t increase further.
This imbalance between supply and demand causes inflation to occur in the economy.
One of the theories related to unemployment is classical which is caused by the increase of
government regulations and interventions. The theory argues that when the minimum wage is
increased the labor costs increase more than the economic value of the actual labor. This majorly
increases the value of jobs that only require low skills to do the jobs. Most of the employers
respond to these minimum wage laws by hiring a low number of laborers in order to reduce their