Sample Business Essay on The Global Economy

Part A

There is need for an organization to monitor the economic activities globally. The organization is charged with monitoring economic trends in the member countries to ensure global economic stability and growth. The international monetary fund (IMF) is an organization comprising of 188 countries worldwide (Acemoglu, 2009). It works to foster global monetary cooperation and secure financial stability among the countries. The international monetary fund champions for international trade among the countries and promotes high employment in member countries. Poverty eradication is always the major goal for the organization and also ensuring there is sustainable economic growth among the countries (Acemoglu, 2009).

The IMF plays three chief parts in the international financial system. The organization monitors and surveys economic and financial developments globally and also among the member countries (Acemoglu, 2009). The international monetary fund lends finances to nations that have balance of payment deficits (Acemoglu, 2009). The organization lastly offers technical support and guidance for countries appealing for such help (Acemoglu, 2009).

Economist Role Chosen

The position chosen is that of a Research Assistant at the international monetary fund. An IMF Research Assistant uses quantitative and qualitative analytical skills in carrying out duties (Damodaran, 2012). A Research Assistant should be well conversant with information systems at the organization and a clear knowledge of the current technology used at the organization (Damodaran, 2012). The roles of a Research Assistant at the international monetary fund are;

  • Research, collecting and compilation of information
  • Analyzing economic time series data
  • Evaluating economic, financial or statistical relationships in the databases
  • Maintaining and updating quantitative and qualitative economic and financial data

Research Assistants should be constantly updated with economic conditions in the member countries. They should be aware of matters such as inflation tendencies, recession, and depreciation or appreciation of currency. Technically, the Research Assistants are the people who determine the success or failure of the International Monetary fund. This is because they are the ones observing and analyzing all factors and relay suggestions to the senior employees of the organization. The major economic skills needed in this field are problem-solving, analytical skills, time management, and numeracy. Problem-solving comes handy where the Research Assistants extract information from a given set of data, draw conclusions and make recommendations to the organization. Analytical skills come in handy when analyzing the data obtained critically to come up with a good recommendation. Time management skills come in handy when completing the tasks given at the stipulated time with no delays. Numeracy skills come in handy for the Research Assistants when handling complex economic data.

Question asked to the economist

  1. What are the economic conditions that should be observed in the world for IMF to have achieved its role and mission?

I would be interested in the answer to this question because there are very big economic disparities between countries in the world and harmonizing the disparities is a very difficult matter.



Part B

                               Australia                                             Greece                                                        USA
years Real GDP CF UR          IR CPI Real GDP CF IR UR CPI Real GDP CF UR CPI IR
2001 1.9 -7.8 6.8 4.7 77.7 3.7 1.7 3.4 10.2 74.6 1 -4.2 4.8 81.2 2.3
2002 3.9 8.1 6.4 2.9 80.0 3.2 0.3 3.5 10.3 77.3 1.8 0.7 5.9 82.5 1.5
2003 3.1 11.2 5.9 3.1 82.2 6.6 20.1 3.2 9.7 80.1 2.8 3.9 6.1 84.4 2
2004 4.2 12.0 5.4 3.3 84.1 5.0 -0.0 3 10.5 82.4 3.8 7.3 5.6 86.6 2.7
2005 3.2 6.8 5.0 3.7 86.4 0.9 -15.0 2.3 9.8 85.3 3.3 5.2 5.2 89.6 3.2
2006 3.0 5.2 4.8 5.1 89.4 5.8 27.2 3.4 8.9 88.0 2.7 2.3 4.7 92.4 3.1
2007 3.8 6.9 4.4 5.0 91.5 3.5 10.9 3.2 8.3 90.6 1.8 -2.2 4.7 95.1 2.7
2008 3.7 10.2 4.2 4.5 95.5 -0.4 -7.0 4.4 7.7 94.4 -0.3 -6.8 5.9 98.7 1.9
2009 1.7 -0.6 5.6 4.9 97.2 -4.4 -27.7 2.6 9.5 95.5 -2.8 -21.8 9.4 98.4 0.8
2010 2.0 3.2 5.2 1.0 100.0 -5.4 -11.0 0.8 12.5 100.0 2.5 16.3 9.7 100.0 1.2
2011 2.3 5.5 5.1 6.2 103.4 -8.9 -16.4 0.8 17.7 103.3 1.6 2.9 9.0 103.2 2.1
2012 3.7 11.2 5.2 1.9 105.2 -6.6 -20.8 0.1 24.2 104.9 2.3 6.1 8.2 105.3 1.8
2013 2.5 1.5 5.7 -0.3 107.8 -3.3 -12.3 -2.8 27.3 103.9 2.2 3.0 7.4 106.8 1.5


UR- Unemployment Rate

CPI- Consumer price Index

CF-real gross fixed capital formation growth rate

IR- Inflation rates

Real GDP Growth Rate- this is the measure of economic growth from one period to another expressed as a percentage and adjusted for inflation. It is expressed in real as opposed to nominal terms (McLean, 2013).

Unemployment Rate- unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force (Layard, 2005).

Consumer Price Index- this is a measure that scrutinizes the weighted mean of the cost of a basket of buyer prodcts and services, including transportation, foodstuff, and healthcare. Its calculation involves considering price changes for every item in the set basket of products and obtaining a mean figure. Products are weighted based on their significance (Tiffen, 2004).

Real gross fixed capital formation growth rate- this is the net increase in physical assets within the measurement period. It does not account for the consumption of fixed capital. It is a component of expenditure approach to calculating GDP


GDP Growth Rate in the three countries


Consumer Price Index in the three countries


Unemployment rate in the three countries

Real Gross fixed Capital formation growth Rate

  1. The monthly interest rates summed up to give the annual interest rates. The values were collected and calculated and the breakdown is as follows;

Australia                       Greece                              USA

July 2000- June 2001        5.8                               4.6                                           5.6

July 2001- June 2002        4.5                               3.5                                     2.25

July 2002- June 2003        4.75                             2.8                                     1.39

July 2003- June 2004        5.1                               2                                        1.02

July 2004- June 2005        5.3                               2                                        2.25

July 2005- June 2006        5.54                             2.25                                   4.27

July 2006- June 2007        6.14                             3.4                                     5.25

July 2007- June 2008        6.8                               4                                              3.5

July 2008- June 2009        4.7                               2.6                                     0.74

July 2009- June 2010        3.7                               1                                        0.13

July 2010- June 2011        4.7                               1.1                                     0.13

July 2011- June 2012        4.3                               1.2                                     0.13

July 2012- June 2013        3.1                               0.7                                     0.13

July 2013- June 2014         2.5                               0.3                                           0.13


The values are the annual averages from the data obtained from each and every month. The annual average was obtained by dividing the summation of months that make the year by 12. From June to July. The values have been tabulated above.

Interest rates Chart


  1. Separate charts for the three countries with all the variables in one chart







Terms used in the graphs

GDP- the real GDP growth rate

CPI- Consumer price index

UR- Unemployment rate

CF- Real Gross fixed capital formation growth rate

IR- Interest rates

IR2- Inflation rates

Conclusions From the charts

From the charts, it is clear that the GDP growth rate is directly affected by the interest rates. In Australia,the GDP growth rate is highest in 2002 with a value of 3.9.The interest rate during this year is 4.5 a value relative small than the other years. In Greece, the GDP growth rate is highest in 2003 with a value of 6.6. The interest rate during this year is 2.8 which is relatively small compared to the other years. United States follows the same trend as Greece and Australia where the GDP growth rate is highest in 2004 with a value of 3.8 and the interest rate during this year is 1.02. High interest rates constrain economic growth because when interest rates are high, consumers have less money to spend and less motivation to borrow. In all the countries, rise in interest rates leads to less investment which slows down the rate of investment growth. High interest rates translate to high levels of unemployment in all the three countries. The inflation rates fall with increasing interest rates.

  1. Process through which monetary authority seek to implement the official interest rate

The monetary authority uses many tools in determining the official interest rates in the country. The monetary authorities set the official interest rates depending on the money supply in the economy (Sylla, 2013).

Open Market Operations

The Reserve bank buys and sells securities and bonds. This buying influences the quantity of surplus reserves that the banks have on hand to avail loans and generate money (McLean, 2013). If the Reserve bank sells securities, banks will have fewer reserves which will lead to fewer loans at very high interest rates. When the Reserve bank buys securities banks will have more reserves which will increase the amount of loans at restricted interest rates (McLean, 2013). The banks will use open market operations in setting and implementing the official interest rates.

Discount Rates

The Reserve bank alters the interest rates it applies for banks’ borrowing reserves. If the Reserve bank reduces the discount charges, the banks are free to borrow further reserves that will reduce the interest rates (McLean, 2013). If the Reserve bank increases the interest rates, then banks will borrow fewer reserves which will increase the interest rates. The Reserve bank uses the discount rates in implementing official interest rate of the country.

  1. Relationships between interest and the other variables

Interest rate and GDP Growth

A rise in the interest slows down the GDP growth. This is because when interest rates are high, there are a few people willing to borrow loans from banks. The economic activities will be low due to the high interest rates and this will slow the economic growth of the country which can be referred to as the GDP growth. Low interest rates leads to high and increasing GDP growth (World Bank, 2012). This is because there will be more people willing to borrow loans from banks that they will use in economic growing activities in the country. Interest rates directly affect the GDP growth rate of any country.

Interest rate and Investment growth

High interest rates slow the rate of investment growth. When the interest rates are high, there will be few people ready to invest in the economy because the returns they will receive will be negligible. This will cause many people to hoard their money without any economic investment.  Low interest rates lead to high investment growth because with low interest rates the investors will reap maximum profits (World Bank, 2012). This will encourage many people to invest thus increasing the investment growth.

Interest rate and unemployment

High interest rates leads to a high levels of unemployment. When the interest rates are high, there are low investment rates in the country. The low investmentrates cause many potential job creators to avoid participating in the economy. With a few number of job creators in the economy, the unemployment rates will increase (World Bank, 2012). Low interest rates lead to a reduction in the unemployment rates. Low interest rates attract many investors in the economy who create job opportunities reducing unemployment rates.

Interest rates and inflation

High interest rates cause inflation rates to reduce. High inflation rates causes banks to lend little loans to the people. This reduces the quantity of money that is in supply in the economy. Inflation is reduced with high interest rates and increased with low interest rates (Acemoglu, 2009).

The relationship between the interest rates and all other variables discussed is clearly depicted in the individual country charts above.

All the three countries use interest rates in regulation of the economy. They all adjust the interest rates using their central banks in order to manage and control the economy in cases of high inflation and unemployment rates. United States majorly uses discount rates also in controlling the economy while Greece and Australia do not use the method of discount rates in controlling the economy of the countries.Open market operations are the common form of monetary policy used in all the three countries where the Central banks buys and sells securities depending on the economic conditions.

Monetary policy is effective in all the economies because we see that it helps to stabilize the economy of all the three countries.




Acemoglu, D. (2009). Introduction to modern economic growth. Princeton: Princeton University Press.

Damodaran, A. (2012). Investment valuation: Tools and techniques for determining the value of any asset. Hoboken, N.J: Wiley.

Hall, R. E. (2011). Inflation. Chicago: University of Chicago Press.

Layard, P. R. G., Nickell, S. J., & Jackman, R. (2005). Unemployment: Macroeconomic performance and the labour market. Oxford [u.a.: Oxford Univ. Press.

McLean, I. W. (2013). Why Australia prospered: The shifting sources of economic growth. Princeton, NJ: Princeton University Press.

Sylla, R., & Homer, S. (2013). A history of interest rates. Hoboken, N.J: Wiley.

Tiffen, R., & Gittins, R. (2004). How Australia compares. Cambridge: Cambridge University Press.

World Bank Group (Ed.). (2012). World Development Indicators 2012. World Bank Publications.