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Economic Growth And Inflation

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Economic growth and inflation is one of the big issues that study in macroeconomics while economic growth is calculating by measure the changes in the real Gross Domestic Product (GDP), however inflation refers to the increase in the overall price level. During economic expansion, economic is growth with increasing rate from year to year but this do not means that inflation is increasing too. Recession is a period where the demand for the products of most businesses declines, causing a fall in sales, production and employment for 2 consecutive quarters. Investment also one of the component in GDP that will affect the most during recession or expansion of economy. When economy is facing recession, where aggregate output declines will cause to …show more content…

This means the overall price level is low, but still no improves in their economies. During recession, there are 2 solutions that government will implement which is expansionary monetary policy and expansionary fiscal policy. For expansionary monetary policy, central bank will increase money supply where interest rate will decrease then the credit is easier to be obtained. Government will increase their spending and decrease the tax when implementing expansionary fiscal policy. So when the great recession happened in 2008, both countries are able to handle it by implement this 2 policy and quickly recover back to the normal. In addition, Austria and Canada have economic freedom which enables them to generate income by involve in exporting activities yet the economic growth after 2008 seems growing slowly. By comparing with the economic growth rate in 2009, Austria is listed at -3.80% while Canada is -2.71%. This shows that Canada does not fall in recession as much as Austria because in 2010, economic growth rate of Canada is increase 6.08% which is 3.37%. In the following years, Canada able to maintain the economic growth rate around 2% while economic growth of Austria has increase 6.87% which is 3.07% from 2009-2011 but then drop back to nearly 0% in …show more content…

Although Austria has a small economy but the openness of its economic allowed the country to compete with others big nation. Austria also one of the member in European Union (EU) and its agriculture structure has been change to meet with the common policy among EU country. Membership in EU has brought many benefits into the economy of Austria in increasing it international competitiveness by inflow of foreign investor. This is best explained why Austria can bring back their economies from recession and keep enjoy the international trade activities with the member in EU. Whereas Canada is one of the wealthiest country in this world despite the population is small. Although their population is small yet Canada is world’s largest manufacturer of natural resources and also world’s largest exporters of agriculture services. Infrastructure in Canada was ranked best among the world. Every section of economy in Canada is distributed well so the workers can get higher wages with relatively higher skills. Well growth economic in Canada from past decades enable it to pay off debt during recession by using the surplus of the government’s budget. The strong capital of Canada could be used on government spending to increase economy welfare and then will increase the economic growth

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