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Germany Macro

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Swetha Nakshatri

on 8 October 2014

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Transcript of Germany Macro

Unemployment in Germany
Positives and Negatives of German Economy
Jessica Tao and Swetha Nakshatri

Germany's Future
Overall economic growth
Basis of the German Economy: Production
Motor Vehicles and Machinery
Complementary and Substitutes
Only natural resources: Coal and Salt, must import oil and food
France: Exports agricultural goods
Opportunity costs of producing machinery is less
Analysis of Motor Vehicle Production: Supply and Demand
Incomes in Germany and other countries increase --> quantities have increased and prices are indeterminate
GDP growth
Increased productivity
=> Increased output
=> Decreased GDP gap

Lack in labor force

Complements: Down P of cars -> Up Number of Cars demanded -> Up amount of gas demanded -> Up price and amount of gas
Substitutes: Up news on benefits of bicycles -> increased production and demand of bicycles-> lowered demand of German cars -> lower price level and output
Analysis of Germany's GDP
Expenditures Approach:
Personal Consumption Expenditures: $0.5958 trillion -> durable and nondurable consumer goods and services
Gross Private Domestic Investment: $1.0352 trillion -> Capital is a major investment
Government: $1.757 trillion -> :argest percentage (52%) of the GDP
Xn: $0.213 trillion -> More exports than imports this year
= $3.601 Trillion GDP
Income Approach:
Compensation of Employees: $0.6145 trillion
Rents: $0.319 trillion
Interest: $0.521 trillion

Corporate Profits: $0.495 trillion
Proprietor's Income: $0.4505 trillion
= $2.4 trillion National Income

Impressive trade performance:
Labor-friendly employment system
Constant 5.4% unemployment rate
Huge exporter: 2nd to China

- Net Foreign Factor Income and Statistical Discrepancy
+ Consumption of Fixed Capital
= $3.601 Trillion
Analysis of Net Exports
Net Exports= Exports - Imports
Lag in GDP growth:
German reunification
Vulnerable to continent-wide slowdown
Large disparity between poor and rich: lack of “social safety nets”

Exports: $1.492 trillion
Imports: $1.276 trillion
Xn = $1.492 trillion - $1.279 trillion
= $0.213 trillion Net Exports
Hypothetical Analysis
Increase in Foreign Income -> Increase in Exports of Luxury cars -> Increase in Net Exports -> Increase in Aggregate Demand
Nominal Vs. Real GDP in Germany
Nominal GDP: $3.601 Trillion
GDP Price Index: 105.1
Real GDP = 3.601 trillion

= $3.426 Trillion
Employed People: 41.05 million
Unemployed People: 2.96 million
Labor Force: 44.01 million
100 x 2.96 million
----------------- = 6.7%
44.01 million

Now: 5.4%
German Recession and Unemployment
Demand Pull Inflation
Decrease in German Taxes -> Increased income for households -> increased consumer spending -> increased demand for goods -> demand pull inflation
Role in the World Economy
Imports a lot of agricultural goods from countries like France -> How does this affect international trade?
Poor soil -> very low supply of potatoes -> high price of potatoes -> lower world price than domestic -> therefore, there is a shortage of potatoes and they must import to make traditional German dishes
Similar Example with Coal:
Balance of Payments and Foreign Exchange Rate
Processed Foods

= $2.4 Trillion
Full transcript