Economic Policy and Global Environment on desklib

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ECONOMIC POLICY AND GLOBAL ENVIRONMENT

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Table of contents
1.0 Introduction..........................................................................................................................3
2.0 Discussion............................................................................................................................3
2.1 key macroeconomic challenges faced by the country..........................................................3
2.2 The reasons of the problem..................................................................................................5
2.3 Impacts of the problem on the economy and the society.....................................................6
2.4 Policies undertaken by the government to solve the problem..............................................7
3.0 Conclusion............................................................................................................................8
Reference....................................................................................................................................9

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1.0 Introduction
The article that is discussed in the study is related to the economy of Spain which has
experienced impressive reduction joblessness or the unemployment rate in the economy. The
figure of unemployment has reached all-time low since the year 2008 amidst the political
turbulence due to the separatist movement from the side of Catalonia. The movement is
creating a great problem for the economic performance of the country as this region’s
economic product contributes importantly to the overall national product of the country. The
investment decisions of the country has been postponed and other decisions are being
affected due to the political turbulence that needs to be solved in order to have a better impact
from the reducing unemployment rate in the economy. The objective of this paper is to shed
light on the details of this problem which is faced by the economy of France. The discussion
includes the impact of the problem on the economy at aggregate level. Apart from that the
study also includes the intervention that has been initiated by the government to get rid of the
problem.
2.0 Discussion
2.1 key macroeconomic challenges faced by the country
There are many factors that can impact an economy at the macroeconomic level. Among
them, one of the biggest problems is the political turbulence. Political turbulence not only
reflects the lack of control of the government but it also is a potential threat for the stability of
the economy. The instability arising from the political turbulence can hamper the activities,
ruin the infrastructure and trouble the administrative processes of the government. Apart from
that, political turmoil can also reduce the intensities of the economic gains as well.
For example, economy is going through a phase of continuous reduction in the
unemployment rate. This reducing unemployment rate can have a lot in store for the Spanish
economy. However, the existing political turmoil is marring the positive gains of the
economy. Littleboy, Taylor and Weerapana (2016) highlighted that Spanish economy has
been performing very average since it was struck by the global financial crisis of the year
2007. The credit crunch and lack of investable capital stalled the infrastructure development
and new business creation. The Spanish unemployment rate started immediately after the
global crisis and hit the peak around 2012.

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Figure 1: The Spanish unemployment rate over the years
(Source: Den Hoed, 2016)
Apart from that, the government of Spain also had to reduce the growth projection of the
future years due to the existing trouble of the Catalonia. The projection of the government
and the political situation plays a key role in the investment inflow. Among the number of
factor that influences the return of the investor are the support from the government and the
political stability in the destination country. Therefore the economy of Spain has failed to
retrieve the pre-crisis GDP growth. Many of the other European countries have rebounded
from the lack of aggregate demand due to the global crisis. The political unrest within the
economy also affected the external and the internal debt of the government. Terra (2015)
noted that, government had to inject capital from the external sources to keep the aggregate
demand high. This kept on increasing with the increasing political unrest of the Catalonia
area. This challenge further amplified with the rise in the interest rate that reached 10%
during the year 2016. Therefore the political unrest in one part of the country created a lot of
challenged for the government of Spain.
In the terminology of economics, post-financial crisis of 2007, the economy of Spain
experienced lower aggregate demand. That means, the Aggregate demand curve shifted to the
rise as a consequence of credit crunch following the crisis. While on one hand it reduced
aggregate price level of the economy it reduced the opportunities of the economy putting the
economy into a recessionary phase (McCrickard, Raymond, Raymond and Song, 2018). The
separatist movement in Catalonia hampered the improvement of the Spanish economy from
this vicious cycle.