Module Title: Introduction to Economics
Programme: Degree Foundation
Academic Year Period: August – November 2018
Lecturer: Ms Sandra
Date of Submission: 12 October 2018
Student names:Omer Elzahawi(0063mwymwy0418)
Moda Mane (0051efhefh0418)
Muhammad Tahir (0009kknkkn0818)
Allen Princia (0091seisei0818)
Table of Contents
1.0 Introduction 4
2.0 Gross Domestic Product (GDP) 4
3.0 Inflation 4
4.0 Unemployment 4
5.0 Conclusion 4
6.0 References 4
The United States of America
The United States of America is a country in the continental north America, sharing borders with Canada to the north and another border with Mexico to the south, with the capital being Washington D.C, it generates revenue by multiple way such as producing planes both domestic uses and for other countries, also the United States is the biggest buyer of oil in the world which causes them to control the price of petroleum which gives it the bargaining Superiority.The United States also is one of the largest producers of arms in the world ,besides Russia and China which makes a lot of national revenue with buyers such as Saudi Arabia, The United Arab Emirates and even Israel. (K.R.Pole,(2018),Britannia.Inc).
Its made up of 50 states in the which 48 states are in the mainlands and Alaska to the north, and Hawaii in the mid pacific. The United States is a federal state with two legislative houses and a house of representatives, it uses the united states dollar as its currency and covers a land mass of 3,671,649 square miles and a population of 325,940,000(2017 Est.), with the official language being English.(2018),(Infoplease.Inc.)
Meanwhile, Mexico is the third largest country in Latin America ,behind both Argentina and Brazil, the Mexican society is extremely lively with different foods and the great festivals, which makes it a great tourist destination. It shares borders with the United States to the north and shares borders with Guatemala and Belize to the south eastern parts, it relies mainly on oil as its main source of revenue and it also sales some agricultural goods as a secondary means of producing revenue.
Mexico is a federal republic with two legislative houses and a house of Disputes,
with Spanish being the official language and Mexico city as it’s capital, and uses the mexican Peso as its currency and has a population of 123,169,000(2017 Est) with a land mass of 1,964,375 square Km.(Howard F.Cline,(2018),Britannia.Inc.)
2.0 Gross Domestic Product (GDP)
US GDP GROWTH RATE
MEXICO GDP GROWTH RATE
As the main economic indicator for measuring economic output within a given country. GDP aims to quantify – for a given country and year – the total value of “wealth production” made by economic agents residing within this territory, GDP reflects the domestic economic activity of a country and the change in GDP from one period to another is supposed to measure its rate of economic growth. GDP is the most used indicator for measuring growth and making international comparisons. It even plays a particularly important role in measuring the deficits and public debts of states, which has a direct impact on the economic policies of governments and the decisions of central banks. The GDP growth rate is determined by the four components of GDP. GDP refers to the income of a country. This includes the critical area of retail sales. The second element is business investment, including levels of construction and inventory. Public spending is the third growth factor. Its main categories are social security benefits, defense and health insurance benefits. The government often jumps into the economy during a recession. Fourth, net trade. Exports add to GDP while imports are subtracted.
In the United States the main sector that contributes to the gross domestic production is the tertiary sector. Service providing cover 80.2% the GDP, followed by the Secondary Sector. Industrial Sector covers itself 18.9% of the GDP (GDP_ Composition by Sector of Origin. Central Intelligence Agency World Fact book, 2017).
In Mexico, The main sector that contributes to the Gross Domestic Production is also the Services which cover 59.8% of the GDP (The World Fact Book, 2013).
A service can be defined as a transaction in which no physical good is transferred from the seller to the buyer. Public services are those paid by society (nation-state, fiscal union, and region). The service economy in developing countries is most concentrated in hospitality, financial services, health, retail, human services, information technology and education. Countries with economies concentrated in service sector are considered more advanced than agricultural or industrial economies.
Based on the above diagram, GDP growth rate of the United States was around 2.9% in 2015 because of the Trans-Pacific Partnership which is a free trade agreement between the US and 11 other countries that border the Pacific Ocean and also the Iran Nuclear Deal who contributed also to the GDP. But the gross domestic production declined to 1.5% in 2016 because of the new government which comes with new economic policies. In 2017, the GDP growth rate is growing to 2.2% because of Trump Tax Act. There has been a clear impact on the stock market.
Mexico GDP growth Rate was around 3.3% in 2015 due to a faster growth in wholesale trade, retail trade, real estate activities, financial services, Insurance and transportation. In 2017, the GDP growth rate declined to 2.0% because of less industrial activity linked to the United States and also by the depreciation of the Peso (Mexican Money).
Inflation is an increase of price level of goods and services overtime.
Inflation is caused by mainly 2 factors: Demand pull factors or cost pull inflation.
demand pull inflation occurs when prices of goods and services rises because of high demand. If demand of goods and services in an economy, the government will tend to increase tax on the products of which will lead to an increase of prices.
These are some causes of demand-pull factors:
1.a developing economy: people are paid quiet well compared to other under developed countries, so they will try to spend a lot on their money trying to buy more of what they need in this way demand of goods or services will increase which will lead to an increase in price too.
2.Government purchase: when the government decides to concentrate on the purchasing of medical instruments like scanners; surgery instruments more foreign doctors this will increase prices of those new purchase.
3.Creation of more money in an economy or making more notes: the presence of much money than goods available this will increase or will make the prices going up because there is more money than the availability of goods.
cost-pull inflation: cost pull inflation is a situation where prices increase due to an increase of raw materials such as wood, land cost, machineries…etc. when these materials which they use to produce finished good increase in price finished goods are going to increase in price too.
One of the main cause of cost-pull inflation is natural disasters like earthquake; volcano these can cause a high cost-pull inflation.
types of inflation:
There are 2 types of inflation:1. creeping inflation and 2. Hyper- inflation.
1 creeping inflation: a creeping inflation is a situation where the inflation of an economy rises or increases overtime
2Hyper inflation is when prices of goods and services rises rapidly in a month. Example: 1kg of rice might be at 5 RM in the morning then the price goes up to 10 RM in the evening.
when a government decides to print more money than they are actually earning there will be presence of money in the pockets of citizens and this will cause the increase of prices of good and services. Since there is more money than goods; goods will increase the price anyhow at anytime.
Inflation rate can be measured using CPI(consumer price index).CPI is a way to measure changes in price of good and services of the consumers.
-Based on the graph above, Mexico’s inflation was9.0% in 2000 later in 2016 after 16 years the inflation decreased up to 3.0%.however in 2015 there was less inflation than in 2016 the percentage of inflation of 2015 was 2.0%.
The united states of America inflation rate of 2008-2018 was:
Here in USA the inflation rate is 3.84% in 2008 then declined in 2018 to 2.7.
In conclusion, Mexico has the highest inflation more than the USA’s. (CPI Inflation Calculator, n.d.)
Is a situation when people who don’t have a job, currently available for work and have actively looked for work in the past four weeks.
Unemployment Rate – is calculated as the percentage of labor force that is unemployment.
The labor force –is total number of workers. Labor Force Statistics is produced by Bureau of Labor Statistics (BLS) and it based on “adult population” (16 years or older). BLS divides population into 3 groups:
?Employed: paid employees, self-employed, and unpaid workers in a family business.
?Unemployed: people not working who have looked for work during previous four weeks.
?Not in the labor force: everyone else.
Types of unemployment:
?Frictional unemployment- occurs when workers take time to search for the right jobs that best suits their skills and tastes.
?Structural unemployment- occurs where there are fewer jobs than workers and usually it is longer-term.
?Cyclical unemployment – happens during recession, caused by a deficiency of aggregate spending.
?Seasonal unemployment – occurs when people become unemployed at particular times during the year when labor force is seasonally lower than usual.
Full Employment – the absence of demand deficient unemployment, so it is when the number of job vacancies equals the number of people actively seeking work.
COMPARISON OF UNEMPLOYEMENT RATE BETWEEN USA AND MEXICO: The chart above shows the unemployment rate of USA from the last five years. As in the start of 2013, the rate of jobless people was high as compared to the recent unemployed person’s ratio. It was 8 percent in the 2013 but slowly it reduced with the passage of time. It got decreased to 6.7 percent in the beginning of 2014. As persons of USA find a lot of opportunities in this year. Then, in 2015 it went the same way that the ratio gets down and people find a lot of works and jobs. In this time period, it get reduced to 4.9 percent in 2016. After 2016, Furthermore, it was slightly lessened, there was no major changes. The unemployment rate was less for a short time period than again increased but no more changed. It only decreased to 4.9 percent to 4.8 percent from 2016 to 2017. But it also changed to 3.9 percent in 2018.
This chart describes the unemployment rate of Mexico from the year 2013 to 2017. As in 2013, the average of unemployed was 5.3 percent. The rate decreased to 4.5 percent but again increased to 5.2 percent because of jobless people. Accordingly, it’s got downward but again went upward to 5.1 percent in 2014. After 2014, it slightly dropped but another time went higher up-to 5.5. Moreover, it lessened down with different changes and set off at 4.5 percent in 2015. Additionally it got changed, less for a few time but higher for most of the time. In 2016, the rate of unemployed became 4.2 percent. Besides all, in 2017, it was changed with the duration of time. It went down and upward with variations. In 2017, It settled down at 3.6 percent. In addition, in 2018, it is 3.5 percent nowadays.
Though The United states and Mexico are both great countries both can have there up’s and down’s as we can see in this report such as the example of the growing GDP in the United States due to trade a high production of revenue,meanwhile, Mexico the GDP is gradually growing never the less not with the same stability or rate as the United States, as even though the unemployment rate has decreased dramatically in the past years causing the inflation rate to gradually go down in recent years,this may indicate a growth in industry and or production in Mexico which in the long term would benefit it.
Nationsonline staff, (2018),Mexico,nationsonline.org
K.R.Pole,(2018), United States,Britannia.Inc.
US.states Maps and stats,(2018),Infoplease.Inc.