MACROECONOMICS CIA-1 A

Topic: Demonstrate the understanding of macroeconomic

aggregates and measurement.

2 BBA FIB A
RIDDHIMA ANAND 2123568
School of Business and Management
CHRIST (Deemed to be University)

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Table of Contents

INTRODUCTION.......................................................................................................................................3
1) What is Gross Domestic Product?...................................................................................................3
2) Chosen Countries for comparison....................................................................................................3
INDIA.................................................................................................................................................3
SOUTH KOREA.................................................................................................................................4
FRANCE.............................................................................................................................................4
EMPLOYMENT RATE..............................................................................................................................5
INDIA.................................................................................................................................................5
SOUTH KOREA.................................................................................................................................6
FRANCE.............................................................................................................................................6
MILITARY EXPENDITURE.....................................................................................................................8
INDIA.................................................................................................................................................8
SOUTH KOREA.................................................................................................................................8
FRANCE.............................................................................................................................................8
IMPORTS...................................................................................................................................................9
INDIA.................................................................................................................................................9
SOUTH KOREA.................................................................................................................................9
FRANCE.............................................................................................................................................9
LIFE EXPECTANCY...............................................................................................................................10
INDIA................................................................................................................................................10
SOUTH KOREA...............................................................................................................................10
FRANCE...........................................................................................................................................10
INFLATION..............................................................................................................................................11
INDIA................................................................................................................................................11
SOUTH KOREA...............................................................................................................................12
FRANCE...........................................................................................................................................12
CONCLUSION.....................................................................................................................................13
References.................................................................................................................................................14

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 INTRODUCTION

1) What is Gross Domestic Product?

The total monetary or market worth of all finished goods and services produced within a
country's borders in a certain time period is known as GDP. It serves as a comprehensive
evaluation of a country's economic health because it is a wide measure of entire domestic
production. GDP can be calculated in three different ways: expenditures, production, and
income. GDP is an important tool for policymakers, investors, and corporations to use when
making strategic decisions.

2) Chosen Countries for comparison

INDIA
India is a country in South Asia. According to the International Monetary Fund (IMF), India's
GDP would be valued $2.7 trillion in nominal terms in 2020, making it the sixth-largest by
market exchange rates and the third-largest by purchasing power parity (PPP). India is one of the
world's fastest-growing economies, with an average annual GDP growth rate of 5.8% over the
last two decades.

SOUTH KOREA
South Korea is a country in East Asia. South Korea is a developed country that is placed eighth
in the Asia and Oceania area on the Human Development Index (HDI). By nominal GDP, it has

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 the tenth-largest economy in the world. Its residents have access to one of the world's fastest
Internet connections and the world's most dense high-speed rail network. Despite being severely
hit by the Asian financial crisis of 1997, the South Korean economy recovered quickly and
tripled its GDP.

FRANCE
France is a developed country with the world's seventh-largest economy by nominal GDP and
ninth-largest economy by PPP; in terms of aggregate household wealth, it ranks fourth in the
world. It came in 23rd place in the Human Development Index, suggesting that it has a high level
of human development. The French economy is diverse, but services dominate, accounting for
two-thirds of both employment and GDP. According to the IMF, France ranks 30th in the world
in terms of GDP per capita, with an average of $45,000 per inhabitant.

EMPLOYMENT RATE
(in the service sector in this case)

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 Economic growth is positively associated with employment creation, according to empirical
studies. While positive employment rate is beneficial to economic growth, it is essential that it
occurs in sectors with the capacity to absorb significant amounts of labour. At the global level,
Steven Kapsos 2005 study on the employment intensity of growth, estimates that between 1991
and 2003, total employment increased by 0.3 to 0.38 percentage points for every one percentage
point of additional GDP growth.

INDIA
employment and GDP in service sector

YEAR GDP EMPLOYMENT

2007 10.3 25.7
2008 10 26.13
2009 10.5 26.3
GDP in the service industry decreased between 2011
2010 9.8 26.68
2011 8.2 27.75 and 2013, however employment possibilities have been
2012 9.7 28.64 steadily expanding and have seen a significant increase
2013 7.6 29.55 from 2013 to 2017. It can be concluded that there is a
2014 8.3 30.54 significant link between employment and GDP. This
2015 9.4 31.74 depicts how employment affects the service sector's
2016 9.7 32.84 GDP contribution, along with other aspects such as
2017 9.9 33.48
technological innovation, advanced processes, quality
parameters, rapid expansion, and growth, all of which lead to an increase in the sector's GDP in a
country.
SOUTH KOREA

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 In the third quarter of 2021, South Korea's GDP from services climbed to 268973.70 KRW
billion, higher from 267864.30 KRW billion in the second quarter. South Korea's employment
rate improved to 61.30 percent in September 2021, higher from 61.20 percent in August.

line graph of GDP from service sector in south Korea

line graph of employment rate in south Korea in 2021

FRANCE
Employment in the Service sector is currently the most important contributor to the country's
economy, accounting for more than 70% of GDP. In the third quarter of 2021, France's

employment rate improved to 67.50 percent, rising from 66.90 percent in the second quarter. In
the fourth quarter of 2021, France's GDP from services climbed to 303365 EUR million, higher
compared to 299412 EUR million from the third quarter.
As we can observe in the charts below, the employment rate as well as GDP from the service
sector have increased in a similar manner over a span of 10 years. A similar trend in the growth

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 can be seen in both the graphs. We can hence conclude that the GDP is affected from the
employment rate.

line graph of the employment rate in France

line graph of GDP from the service sector in France

MILITARY EXPENDITURE
Military spending cannot be considered a constructive activity that directly contributes to GDP;
yet, it does reduce risk and offer stability indirectly. The NATO definition of military

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 expenditures includes all current and capital expenditures of armed forces, including
peacekeeping troops, defence ministries, and other government organisations participating in
defence initiatives; paramilitary forces.

INDIA
Military expenditure or defence spending accounts for 15.5 percent of the central government
budget and 2.1 percent of India's projected GDP in 2020-21. India globally ranks 3rd among the
countries that spend the most on military power.
SOUTH KOREA
Military spending in South Korea was estimated to be around 2.85 percent of GDP in 2020.
Which was also the highest among all three countries and higher than the world average of 1.97
%.
FRANCE
In 2020, military expenditure in France amounted to about 2.07% of gross domestic product
which is higher than the 1.86% in 2019. Although, Over the years France has decreased the
spending on defence.

IMPORTS
When a country imports commodities, it is indicating that there is an outflow of wealth of the
country. Assuming that the majority of these imports are productive assets, such as machinery

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 and equipment. In that instance, a country's productive assets will boost the economy's
productivity in the long run, making it even more beneficial. Both exports and imports are
experience growth in a thriving economy. The economy is deemed relatively closed if imports
account for less than 15% of GDP. Which for instance, applies to the united states.   Many small
European countries, on the other hand, import more than 40% of the things they consume. They
are thought to be more open to international trade.

INDIA
India’s imports of goods and services as percentage of GDP is about 20.96%. India major
imports include mineral fuels, oils and waxes; pearls, precious, semi-precious stones and
jewelry; electrical machinery and equipment; nuclear reactors, boilers, machinery and
mechanical appliances; and organic chemicals. In December 2021, India's imports increased by
38.55 percent year on year to a new high of USD 59.48 billion.
SOUTH KOREA
South Korea's imports grew to 61321 USD million in December 2021, rising from 57357 USD
million in November. Imports as a percentage of GDP are at 33.18 percent as of 2020.
FRANCE
Machinery, automobiles, crude oil, and aircraft are among France's most significant imports.
Transportation and travel services are the most common services imported into France. Imports
of goods and services account for 32.75 percent of GDP in France.

LIFE EXPECTANCY

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There is a significant correlation between GDP and life expectancy, implying that more wealth is
better. Economists agree that when a country's economic performance - its GDP, is greater than
what is anticipated, mortality rates often exceed the expected rate. Although there is a

connection, the impact is minimal.

INDIA
According to the most recent WHO data published in 2018, India's life expectancy of males is
around 67.4 and females is about 70.3, and overall life expectancy is 68.8, giving India a ranking
of 125 in the world.
SOUTH KOREA
Between 1960- 2019, average value for South Korea during that period was 70.59 years with a
minimum of 55.42 years in 1960 and a maximum of 83.23 years in 2019. The value of life
expectancy in south Korea is higher as compared to the world average in 2019 based on 190
countries is 72.86 years.
FRANCE
The Standard of living in France has been very high, its life expectancy is among the highest
globally. Between 1960 to 2019, the average value for France during that period was 76.47 years
with a minimum of 69.87 years in 1960 and a maximum of 82.72 years in 2014. The latest value
from 2019 is 82.58 years.

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 INFLATION

Inflation is adjusted for the reported gross domestic product. Unadjusted GDP growth indicates
that an economy has gone through one of five scenarios. Produced more at lower prices,
Produced the same amount at higher prices, produced more at higher prices, produced much
more at lower prices, Produced much less at much higher prices. Four of these scenarios result in
increasing prices or inflation, either immediately or gradually.
People will spend more money in a society where inflation is rising because they know it will be
less valuable in the future. In the short run, this leads to higher GDP, which in turn leads to
higher prices. The link between inflation and GDP is quite delicately balanced. It doesn't take
much to throw this equilibrium off. The general consensus is that a little inflation is beneficial.
Annual GDP growth is critical for stock market investors. Companies will raise their earnings
only if economic output increases, which is the primary driver of stock performance. Too much
GDP growth, on the other hand, is risky since it increases inflation.

Inflation, GDP deflator (annual %) - India, France, S. Korea

INDIA
In December, consumer prices declined 0.36 percent from the previous month, reversing
November's 0.73 percent increase. The reading in December was the lowest since January.
Falling food and beverage prices, as well as easing pricing pressures in clothes and footwear,

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 contributed to the reading. Inflation rose to 5.6 percent in December from 4.9 percent in
November. The rate of inflation in December was the highest since June. In December, annual
average inflation increased to 5.1 percent.

SOUTH KOREA
In December, consumer prices rose 0.16 percent over the previous month, falling short of the
0.50 percent gain seen in November. The reading in December was the lowest since June.
Looking at the specifics of the report, the change in housing and utility prices remained
essentially stable in December, however transportation expenses fell after rising the previous
month.  Inflation came in at 3.7 percent in December, down from 3.8 percent in November. In
December, the annual average rate of inflation increased to 2.5 percent.  Finally, core inflation
increased to 2.7 percent in December, higher from 2.4 percent the prior month.

FRANCE
In December, consumer prices grew 0.22 percent over the previous month, compared to 0.36
percent in November. The reading in December was the lowest since September. The December
outcome was mostly due to lower energy prices, which more than offset increasing food and
non-alcoholic beverage prices, as well as service prices.
In December, harmonized inflation was unchanged from November's figure of 3.4 percent. The
rate of inflation in December was the highest since August 2008. Meanwhile, the trend was
upward, with annual average harmonized inflation in December coming in at 2.1 percent.
Finally, consumer price inflation remained stable in December, at 2.8 percent, unchanged from
November.

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 CONCLUSION

In this study 5 macroeconomics variables have been considered in order to explain their effect on
GDP and three different countries namely India, South Korea and France have been chosen and a
comparison among the three has been made on the basis of these macroeconomic variables
which are employment rate, military expenditure, imports, life expectancy and inflation.
GDP is significant because it provides information on the size and performance of an economy.
The pace of increase in real GDP is frequently used as an indicator of the economy's overall
health.
When real GDP grows rapidly, employers are more willing to hire additional workers for their
factories, and people have more money in their purses. When GDP falls, as it happened in many
nations during the recent global economic crisis, employment usually falls.
Individual investors must develop a level of understanding of GDP and inflation that will aid
their decision-making without overwhelming them with unneeded information. Most companies
will not be able to expand their earnings (which is the key driver of stock performance) if overall
economic activity is dropping or simply holding steady; nevertheless, too much GDP growth is
also risky. Inflation is caused by GDP growth over time, and if allowed unchecked, inflation can
turn into hyperinflation.
Military investment has a number of beneficial effects on capital, labour, growth, and the
efficient use of available resources across the economy.
When the total value of products and services sold by local producers to foreign countries
(exports) surpasses the total value of foreign goods and services purchased by domestic
consumers(imports), a country's GDP rises.
Through increased economic growth and development in a country, GDP per capita raises life
expectancy at birth, resulting in a longer lifespan. The majority of academics think that
increasing life expectancy has an impact on economic growth via increasing human capital
investment. Longer life expectancy means higher human capital returns, which drives more
education investment and, in turn, stimulates economic growth.

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 References

France Employment Rate . (n.d.). Retrieved from Trading economics :

https://tradingeconomics.com/france/employment-rate

France GDP From Tradable Services. (n.d.). Retrieved from trading economics :
https://tradingeconomics.com/france/gdp-from-services

Gupta, D. (2019, march ). Impact of Employment on GDP Contribution of Various Sectors in India.
Retrieved from research gate:
https://www.researchgate.net/publication/346495863_Impact_of_Employment_on_GDP_Contr
ibution_of_Various_Sectors_in_India#:~:text=Findings%3A%20it%20was%20concluded
%20that,GDP%20contribution%20of%20the%20sector.

Inflation in france. (n.d.). Retrieved from focus economics: https://www.focus-economics.com/country-

indicator/france/harmonized-inflation-eop

Kapos, S. (2005 , 12 ). The employment intensity of growth: Trends and Macroeconomic Determinants .
Retrieved from oit.org:
http://www.oit.org/wcmsp5/groups/public/---ed_emp/---emp_elm/documents/publication/
wcms_143163.pdf

producer prices in india . (n.d.). Retrieved from Focus Economics :

https://www.focus-economics.com/country-indicator/india/producer-prices

Shah, D. (2020, june 13). Life Expectancy vs Gross Domestic Product using Data Analytics! Retrieved from
towards data science : https://towardsdatascience.com/life-expectancy-vs-gross-domestic-
product-using-data-analytics-bc0d5c78043f

South Korea GDP From Services. (n.d.). Retrieved from trading economics :
https://tradingeconomics.com/south-korea/gdp-from-services

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