International Relation & Global Economy

International relation & global economy 1
International relation & global economy
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International relation & global economy
PART A
Question 2
a) Discuss the relationship between real GDP growth rate and the unemployment rate over these
years.
Fig 1: Line plot of GDP growth Vs. Unemployment
Mar-1980
Oct-1981
May-1983
Dec-1984
Jul-1986
Feb-1988
Sep-1989
Apr-1991
Nov-1992
Jun-1994
Jan-1996
Aug-1997
Mar-1999
Oct-2000
May-2002
Dec-2003
Jul-2005
Feb-2007
Sep-2008
Apr-2010
Nov-2011
Jun-2013
Jan-2015
Aug-2016
Mar-2018
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Real GDP vs unemployment
Real GDP growth rate Unemployment rate
Fig 1 shows the relationship between Real GDP growth rate and the unemployment rate. It can be
noticed from the trends that the Real GDP has been fluctuating from one year to the next (Sinclair,
2009). This means that they have been no constant increase or decrease of the rate. The Real GDP had
the highest growth rate in July 1993 then it started decreasing gradually until 2008. Since then it has
opted to maintain a growth rate of 6 %. Similarly, the rate of unemployment has been increasing and
decreasing. It had th highest increase in 1997. There is no linear relationship between the two but once
can notice that have been maintaining certain level.
b) Do you think that the nominal GDP growth rate and inflation rate are moving together? Explain.
Fig 2: The line plot of nominal GDP growth rate VS. Inflation rate

Mar-1980
Oct-1981
May-1983
Dec-1984
Jul-1986
Feb-1988
Sep-1989
Apr-1991
Nov-1992
Jun-1994
Jan-1996
Aug-1997
Mar-1999
Oct-2000
May-2002
Dec-2003
Jul-2005
Feb-2007
Sep-2008
Apr-2010
Nov-2011
Jun-2013
Jan-2015
Aug-2016
Mar-2018
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Nominal GDP vs Inflation rate
nominal GDP growth rate inflation rate
Fig 2 shows the line plot showing the trends of nominal GDP growth rate and the Inflation rate. It can be
noticed that both the nominal GDP growth rate and Inflation rate have been increasing and decreasing
at the same time. The growth might not be perfect as in the case of linear growth but it can be noticed
that the change in the rate if the nominal GDP and the Inflation is simultaneous except for few scenarios
where there was an overlap. Thus, we can deduce that the nominal GDP growth rate and inflation rate
are moving together (Doğrul and Soytas, 2010).
c) Discuss the pattern between the inflation rate and the unemployment rate in Australia
Fig 3: Pattern of the Inflation and unemployment rate
Mar-1980
Jun-1981
Sep-1982
Dec-1983
Mar-1985
Jun-1986
Sep-1987
Dec-1988
Mar-1990
Jun-1991
Sep-1992
Dec-1993
Mar-1995
Jun-1996
Sep-1997
Dec-1998
Mar-2000
Jun-2001
Sep-2002
Dec-2003
Mar-2005
Jun-2006
Sep-2007
Dec-2008
Mar-2010
Jun-2011
Sep-2012
Dec-2013
Mar-2015
Jun-2016
Sep-2017
Dec-2018
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Inflation vs unemployment
inflation rate Unemployment rate
Fig 3 shows the pattern of the inflation and unemployment rate in Australia. It can be noticed that the
inflation rate increased from March 1980 to Dec 1983. It later declined until March 1990 after which it