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CIA 1.1

Macroeconomics

Topic: Demonstrate

the understanding of macroeconomic aggregates and

measurement

Chander Maurya Kumbkarni 21211051

Rahul Balo 21211048

Konduru Kartik 21211090

Arth Aryan 21211041

Avni Agarwal 21211044

Submitted to: Dr Tapas Das

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Table of Contents

S. No Contents Page
Numbers

1 Introduction 3
2 Variables Selected 4
3 Countries Selected 6
4 Correlation between variables 7
and GDP
4.1 GNI per Capita and Real GDP 7
4.2 Inflation and Real GDP 9
4.3 Unemployment and Real GDP 11
4.4 Labour Force and Real GDP 13
4.5 IMR and Real GDP 15
5 Summary 17
6 Remarks 17
7 Works Cited 18
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INTRODUCTION:

The following project will help us in learning and understanding Macroeconomic aggregates and

their measurement. We have picked five macroeconomic variables:

● GNI Per Capita

● Unemployment

● Inflation

● Infant mortality rate

● Labour force

We will show the effect on the GDP of these variables for three countries.

The countries that have been selected by us after careful deliberation, are to be in the order of

economic development.

● Nigeria (161 on the HDI List)

● India (131 on the HDI List)

● Norway (1st on the HDI List)

(“HDI List by the UNDP”)

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VARIABLES SELECTED

GNI Per Capita :

Also known as Gross national income per capita. GNI is the sum of value added by all resident

producers plus any product taxes. GNI is calculated in national currency and then converted to

US Dollars at official exchange rates for comparisons across economies.

A country’s GNI per capita tends to be closely related to other indicators that measure the social

and environmental well-being of the country and its people.

Inflation :

It refers to the decrease in the purchasing power of money which is reflected in a general

increase in the prices of goods and services in an economy(Investopedia.com). Inflation is

typically a broad measure, such as an increase in the cost of living in a country. It can be

measured by the Consumer Price Index or by using the GDP Deflator.

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Unemployment :

Unemployment refers to the state in which individuals are employable and actively seeking a job

but are unable to find a job. It is measured by the unemployment rate which is dividing

unemployed people by the total number of people in the workforce.

Labour force :

Labour force refers to the total number of people who are eligible to work including employed

and unemployed people of a country. It consists of all the people who are able to work in a

country or area or all the people who work for a particular country.

Infant mortality rate :

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The infant mortality rate is the number of infant deaths of or under the age of 1 for every 1000

live births in a year. The infant mortality rate is an important marker of the overall health of

society in a country or a region.

COUNTRIES SELECTED :

Nigeria :

Nigeria was selected as a country that is underdeveloped. To date, around 40% of Nigerians live

in Poverty. Nigeria is also widely known as the poverty capital of the world. The reason for

Nigeria being in such a bad condition is due to economic mismanagement, corruption, social and

political instability.

India :

It is the country that has been selected on the criteria of a developing country. The Economy of

India is currently the worlds third-largest in terms of Real GDP after the United States of

America and the People's Republic of China. India has the second-highest population rate in the

world, which on one hand gives it access to a large talent pool but also is a large burden on its

economy.

Norway :

Norway is selected as a developed nation, it ranks number 1 on the Human Development Index.

Norway is also known for its sound economic condition and wealth per capita. Norway is
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currently the fourth richest country in the world according to GDP per capita(nominal, 2020).

The reason Norway is so rich is due to the advanced technology and large reserves of

hydropower, seafood, oil and petroleum. Which Norway has used reinvested into its economy

and created one of the world’s largest sovereign wealth funds of about $1.4 Trillion.

Correlation between variables and GDP

GNI per Capita and Real GDP

Chart 1
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Chart 2

Chart 3

From chart 1 it is clearly shown that as the Real GDP of India constantly increases from 2015 to

2019, the GNI per capita also increases constantly. There is a decline in the Real GDP in 2020,

the GNI per capita has also decreased.

It is seen that there is a fall in Real GDP and consequently a fall in GNI per capita in 2020, this

was due to the pandemic induced economic recession.

From looking at Chart 1 we can see that the movement of Real GDP and GNI per capita is

similar and somewhat correlated, as from 2015 to 2020 Real GDP and GNI per capita grew

19.26% and 15.62%.

Chart 2 is the case of Nigeria it can be noticed that the Real GDP, as well as GNI per capita, has

appeared to be constant over the period of 6 years from 2015 to 2020. The change in GDP or

GNI per capita is minute. Real GDP and GNI per capita changed by -5.30% and -0.22%.
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Chart 3 depicts the case of Norway which is a developed country. In Norway the change in GDP

in the first 3 years is minute so it appears to be constant, however in 2018 there is a huge rise in

the GDP of this country, this is because Norway’s Sovereign Wealth Fund returned $131 Billion

(Tappe). In the years 2019 and 2020, the Real GDP of the country has again decreased, due to

Covid lockdowns. The GNI per capita of the country started increasing in 2016 and rose till 2018

however by 2019 it started declining. The GNI per capita increased by 5.14% and Real GDP

decreased by -8.33%; this is due to the inflation during this period.

Inflation and Real GDP

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Chart 4

Chart 5
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Chart 6

According to Chart 4, it can be noticed that the Real GDP and Inflation follow a similar path,

that is because Real GDP is Inflation adjusted which makes it a better variable than Nominal

GDP. India’s Inflation went from 2.28% to 4.61%.

Chart 5 shows the Real GDP rate and the Inflation rate of Nigeria. The GDP of this country has

stayed consistent over the past 6 years from 2015 to 2020 however the inflation rate has been

inconsistent. This means that there has been output inflation in that country which is a positive

thing and that Nigeria is slowly developing.

Chart 6 depicts the case of Norway, which is particularly interesting, the Real GDP figures have

shown some growth initially from 2015-18 by 8.68%, but then a fall of 15.66% from 2018-20.

The Inflation data seems to be a magnified version of the Real GDP data, there seem to have

been a lot of market corrections during this period as inflation goes from -2.85% to 6.65%.

It does seem clear that both these variables are interlinked.

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Unemployment and Real GDP

Chart-7

Chart-8

Chart-9
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Chart 7 depicts the Real GDP of India with the unemployment for the years 2015 to 2020. It can

be noticed that even though there is an increase in the Real GDP of the country till the year 2019

the unemployment has been decreasing by -0.29% till 2019, which is a sign of development. But

due to Covid Real GDP decreased and unemployment increased by 1.84%.

Chart 8 depicts the case of Nigeria where it can be noticed that even though the GDP has been

consistent over the last 6 years the unemployment has increased each year, unemployment has

been slowly increasing by 2.75% in that time, this is due to rising inefficiencies and

concentration of wealth in a few industries and companies.

Chart 9 depicts the Real GDP and unemployment rate of Norway in the years 2015 to 2020.

Norway’s unemployment rate increased in 2016 due to a decrease in oil prices (which is its

primary export product) and moderate international demand. We can see after that

unemployment rates decreased and Real GDP increased, this can be partly explained by

increasing efficiency of capital allocation.

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Labour force and Real GDP

Chart-10

Chart-11

Chart-12

According to Chart 10, it can be noticed that in India Real GDP and Labour force both rise and

fall in a similar manner. Till the year 2019, both the GDP and the Labour force have increased
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simultaneously by 27.47% and 3.65%. In

the year 2020, we see that the Labour force

declined due to people being unavailable or

unwilling to work, the effect of which we

can see in 2020’s Real GDP numbers. India

also has the second-largest Labour Force in

the world, which stretches out any public welfare system that might be implemented.

Chart 11 is the case of Nigeria showing the GDP and the Labour force in the years 2015 to 2020.

The GDP of this country has been stagnated over the past 6 years however its Labour force

showed a slow but constant increase till the year 2019 which is normally a good sign for an

economy, at the same time it can be observed that Nigeria’s unemployment is also increasing;

which suggests that there is a surplus of workers which also means that wage rates will decrease

which will further degrade the economic conditions of Nigeria.

Chart 12 depicts the Real GDP and Labour force of Norway it can be seen that the Labour force

has constantly increased by 14.09% from 2015 to 2020 and even though the pandemic affected

the Real GDP of the country negatively in the year 2020, the Labour force continued to increase.

This combined with the fact that Norway’s unemployment for 2020 also increased due to

business closures and lockdowns -tells us that there are many skilled workers available in the

economy, and although conditions aren’t good right now, Norway’s social welfare net will

ensure that poverty rates do not increase.

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Infant Mortality Rate and Real GDP

Chart-13

Chart-14

Chart-15
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The Infant Mortality data for 2020 is not shown because the World Bank did not publish any

information

Chart 13 shows the GDP and the infant mortality rate of India from the year 2015 to 2019. It can

be noticed that as the GDP of the country increased, the IMR (Infant Mortality Rate) constantly

decreased by 18.19% which is a very good sign for the economy as well as society. This and

other research articles eludes to that IMR and GDP growth are inversely related. (DaVanzo 581-

595)

Chart 14 depicts the case of Nigeria, it can be seen that even though the GDP of the country has

been consistent without any major changes, the IMR of this country has continued to decrease by

6.67% from 2015-19. This is a good sign, but Nigeria’s Infant Mortality Rate is still 96.82%

higher than the world average. (“World IMR Data”)

Chart 15 shows the case of Norway where even though there was an increase in the GDP of the

country till the year 2018, the IMR has decreased by 9.09% in the years and has been constant in

the year 2019 after the decrease in 2018. Norway has the best IMR in the world with its IMR

being 94.09% lower than the world average.

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Summary

From this analysis we have concluded that GDP (Gross Domestic Product) is the measure of

goods and services produced within a country in a given period. That there are lots of

macroeconomic variables that affect a country’s GDP and the prosperity of its people. Although

GDP is important, it is not perfect as it does not measure non-monetary transactions. The

correlation between these five variables to GDP has also made us understand the highly

interdependent nature of the economy and the significance of that dependance between various

economic stakeholders.

Our chosen macroeconomic variables which were inflation, unemployment, labour force, gross

national income, and infant mortality rate showed a close relationship with the GDP of the three

countries.

The Countries which represented the different stages of economic growth of a country also told

us about the nature of economies in different development phases.

Remarks

The Group has learned the significance of GDP in measuring any country or regions economic

performance as well as the value in comparing multiple variables to get the bigger picture. We

have also learned the importance of qualitative and quantitative analysis, which makes

economics much more interesting and understandable. The group put immense work into this

assignment, and all the members are proud of their work.

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Works Cited

DaVanzo, Julie. “Infant Mortality and Socioeconomic Development: Evidence from

Malaysian Household Data.” Demography, vol. 25, no. 4, 1988, pp. 581-95. JSTOR,

https://www.jstor.org/stable/2061323. Accessed Wednesday January 2022.

“GNI per capita, Atlas method (current US$) | Data.” World Bank Data,

https://data.worldbank.org/indicator/NY.GNP.PCAP.CD. Accessed 26 January 2022.

“India GDP.” Worldometer, https://www.worldometers.info/gdp/india-gdp/. Accessed 26

January 2022.

Investopedia.com. “Inflation Definition - Economy.” Investopedia, 2022,

https://www.investopedia.com/terms/i/inflation.asp. Accessed 21 January 2022.

“Latest Human Development Index Ranking | Human Development Reports.” Human

Development Reports, UNDP, 2020, http://hdr.undp.org/en/content/latest-human-

development-index-ranking. Accessed 21 January 2022.

“List of countries by infant and under-five mortality rates.” Wikipedia,

https://en.wikipedia.org/wiki/List_of_countries_by_infant_and_under-

five_mortality_rates. Accessed 26 January 2022.

Tappe, Anneken. “Norway's sovereign-wealth fund raked in a $131 billion return last

year — here's why.” MarketWatch, 28 February 2018,

https://www.marketwatch.com/story/norways-sovereign-wealth-fund-rakes-in-131-

billion-return-thanks-to-2017-stock-rally-2018-02-27. Accessed 24 January 2022.

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