Assignment 01

Q1. Define Recession in your own words and during Recession what are the
Macroeconomic variables are going to be affected. Explain considering Bangladesh context.
(Unemployment, CPI, etc)
Answer:
In economics, Recession is a general slowdown in economic activity in a country over a
sustained period or a business cycle contraction. During recessions, many macroeconomic
indicators vary similarly. Production as assumed by Gross Domestic Product (GDP),
employment, investment spending, capacity utilization, household incomes, and business profits
all fall during recessions.

Usually, the Government responds to recessions by adopting an expansionary macroeconomic

policy, such as increasing money supply, increasing government spending, and decreasing
taxation. It might not directly affect, but indirectly as the whole of the economy is affected by
Recession due to low incomes and an increase in unemployment, the whole economy suffers.

The effect of macroeconomic variables on Bangladesh's economic growth by considering GDP

growth (GDP) as the symbol of economic development. Also, inflation (INF), real interest rate
(INT), an exchange rate (EXR), and growth in household consumption expenditure (HCE) is
chosen to reflect macroeconomic variables for the period. For evaluation of the results,
correlation and multiple regression analyses are carried out. It is noted, in the correlation
analysis, that GDP has a positive association with all variables except INT. GDP is used in the
dependent variable in regression analysis and INF, INT, EXR, and HCE are known as
independent variables. In addition to the pre-pandemic stock of unemployed people, economists
apprehend the newly unemployed resulting from firms severely scaling back on their activities as
part of 'lockdown' measures can lead to severe social headwinds on the country's economy
during the post-COVID era. Growing the price point and Inflation-triggered fall in the value of
money affects the growth of Economics. Higher inflation triggers high-interest rates and bond
levels as well. Rate, generally, drives contrary to GDP; interest rate rise leads to a decrease in a
country's economic growth.

Bangladeshi employees have undergone strict shutdown measures, with remittances forecast to
fall to $14 billion this year, which is around 25 % lower than last year. That is far from the only
crisis Bangladesh's economy is currently facing. Bangladesh has as many people as 53.4 living
below the poverty line. In reality, the BRAC million and the rising GDP over the past few years
have helped many people get out of poverty. Yet, as the Covid-19 crisis made it very hard for the
economy to develop, it has been a very challenging time for citizens with this very socio-
economic background.
Q2.a) Do you think: Living standards growth is defined as increases in the level of
production in a country or region. Explain.

Answer: Yes! I think living standards growth is defined as increases in the level of production in
a country or region.

Labor productivity is a measure of the sum of goods and services produced in an hour's labor by
the average worker. Level of productivity most crucial determinant of a country's living
standards, with higher productivity growth contributing to an ever-increasing standard of living.
Living conditions can be measured in many ways. Still, the annual average rise One good
measure for estimating the national living standards is the inflation-adjusted income of the
average American family. Ideally, growth in annual revenue will reflect productivity growth in
an economy where workers share the fruit of their labor.

Q2.b) In order to analyse growth rate which one you prefer nominal GDP or real GDP
why?
Answer: I prefer real GDP because Real GDP gives a better outlook than nominal GDP when
measuring economic performance over time. When people use GDP numbers, they often speak
of nominal GDP, which can be defined as a country's total economic output. An index called the
GDP deflator can be obtained by dividing the nominal GDP by the actual GDP for each year.
This shows the overall degree. Real GDP is used. The rate of GDP growth is the percentage
change in actual GDP. We need to use actual GDP so that we can be sure that measure real
inflation, not just an increase in prices and wages. Here is how to measure the rate of growth in
GDP.

Q2.c) Do you think Recession has an inverse impact on GDP growth rate? Explain
considering Bangladesh Context

Answer: Yes! I think the Recession has an inverse impact on the GDP growth rate. It would
seem doubtful that many employees returning to Bangladesh would be able to return to work in
foreign countries. In Bangladesh, the qualified remittance workers should be provided a job.
Nevertheless, since a large proportion of remittance employees are unqualified, they need to be
educated in relevant fields to be useful in post-crisis economic reconstruction. The IMF forecasts
Bangladesh's GDP growth of 9.5 percent in 2021. This indicates that while this crisis struck
Bangladesh even harder than the financial crisis of 2008, nothing can be recovered from.
However, given the current circumstances, Bangladesh should be primarily concerned not with
reviving the economy but with containing the virus. If this is likely over the next few months,
there will be no cause for concern in the marketplace.

Nonetheless, the situation in the Coronavirus Depression in 2020 is a lot different. Bangladesh's
GDP growth has slowed at a pace comparable to its contemporary economies.

As is well known, Bangladesh's economy went through a heightened rate of global integration in
the 1990s. Bangladesh's degree of openness is now higher than most LDCs and other developing
countries – exports and imports of products and services account for approximately a third of the
country's GDP. By definition, The condition of the global economy is likely to have a more
pronounced impact on Bangladesh's economy than ever. The macroeconomic performance of the
world, the effect of the state of the global economy will continue.

Impact on RMG:
Buyers of Bangladesh's RMG goods, including UK-based Woolworth, have recently become
bankrupt, signaling the sector's impending tough times. In reality, Bangladesh's apparel industry
has barely faced such a serious challenge in three decades of its existence.

BGMEA demanded a 10 percent cash reward from the Government for ready-made garment
( RMG) exporters and VAT removal from the sector to help them cope with the global economic
downturn. It also demanded that bank loans are rescheduled, and that bank interest rate be
lowered on loans. Commenting on the adverse effect on the foreign exchange earnings of the
country, which will ultimately hit the economic backbone,

economists suggest urgent measures to be initiated in Bangladesh by the current Government to

cope with the crisis.

Impact on GDP: The International Monetary Fund has warned that by the end of the fiscal year,
inflation could reach double digits.

The Bangladesh economy was well up against the global Recession, but this year GDP growth
will not surpass 5 percent despite this and bumper farm production. But our Government rejected
the last forecasts.

The situation but rather increase our investment in new sectors and raise new employment
opportunities. Agriculture sectors, we could have gained more. The measures that Bangladesh
Bank and Government have taken jointly to deal with this Recession.
 References:

1. https://databd.co/stories/the-2020-coronavirus-recession-how-comparable-is-it-to-the-2008-
financial-crisis-12086
2. https://thefinancialexpress.com.bd/views/ensuing-recession-and-major-economic-downturns-
1594402612