INDIVIDUAL PROBLEM SET 1

Problem Set 1
Individual Written Paper

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MACROECONOMICS 1 – ASSIGNMENT 1

Course Code ECON1192

Location & Campus RMIT VietNam, Sai Gon (SGS)

Name of Student Nguyen Le Ngoc Huy

Student ID s3878586

Name of Lecturer Pham Thi Thu Tra

Submission date 16/07/2021

Word count
(Main content without questions,
500 Words
references, cover page, table of contents,
quotes, etc)

Table of contents

QUESTION 1. HUNGARY: DEVELOPED COUNTRY...............................................3

i) Data for NGDP, RGDP and GDP Deflator................................................3
ii) Analysis of two components...................................................................4
QUESTION 2. CASE STUDY.....................................................................................6
i) The concepts of scarcity and opportunity cost/trade off.....................6
ii) Positive and normative statements........................................................6
REFERENCES...........................................................................................................8

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QUESTION 1. (320 words) HUNGARY: DEVELOPED COUNTRY

i) Data for NGDP, RGDP and GDP Deflator

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ii) Analysis of two components

 Investment (Gross Fixed Capital Formation)

The global financial crisis had significant impact on the desire to invest in the
public and private sectors, such as a decrease in investment in 2009.
Companies deferred investment choices because of global and domestic
uncertainties, decreasing domestic and international demand (GRH 2008).
Besides, in late 2008, the IMF and EU approved rescue package for Hungary
to restore financial stability and investor confidence. However, the uncertainty
of the crisis made banks give fewer loans, resulting in reduction in investment
in 2009 (Horvath 2009).
After the recovery period, due to the central location and high-quality
infrastructure, Hungary was an appealing destination for Foreign Direct
Investment. To promote investment and increase regional competitiveness,
government actively sought foreign investment and implemented tax reforms
from 2016. Consequently, the investment witnessed considerable rise in 2018
and 2019 (U.S.Department of State n.d.).
Nevertheless, due to the COVID-19 outbreak, a significant decline in
investment was seen in most sub-sectors, which made investment decrease in
2020 (China-CEE 2020).

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 Net exports (External balance on goods and services)

In the global crisis, multinational corporations abruptly curtailed capacity

utilization, resulting in significant slowing in export dynamics (GRH 2008).
Besides, the crisis pushed economic growth into negative territory during 2009.
Export demand, which was heavily reliant on German market, decreased
(Rabobank 2010). Moreover, in 2009, the volume of exports and imports
dropped because of unfavorable external conditions and sharp global
downturn, while the contribution of net exports rose significantly due to
considerable drop in import need.
From 2017, exports accelerated as activity among Hungary’s trade partners
increased and as new production capacity in export-oriented companies,
whereas imports increased even faster, indicating the strong growth in domestic
consumption. That made net exports dropped sharply in 2018. However, export
activity stumbled in the pandemic outbreak, so net exports continuously
decreased in 2019 (OECD 2019).

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In COVID-19 period, exports fell substantially because Hungarian exporters

specialize in highly cyclical items, tourism and travel services, which continued
to be restricted by social distancing (ECFIN n.d.).

QUESTION 2. (180 words) CASE STUDY

i) The concepts of scarcity and opportunity cost/trade off

 Scarcity: Budget
 Opportunity cost/Trade off: Public health versus Economic growth

 The COVID-19 pandemic is putting tremendous budget pressure on the

government led to the scarcity of budget. Therefore, they addressed first
goal, which is Public health through lockdowns, quarantines, and social
distancing. At first, they focused much on providing medical equipment,
drugs and then preparing for vaccines. These regulations were essential in
limiting the virus's spread and relieving burden on healthcare system, but
that led to a decline in economic activities. Thus, to tackle the second
objective known as Economic growth, they implemented various fiscal and
regulatory policies. To conclude, at the initial stage of COVID-19, protecting
public health has been the most crucial role, so the benefit is an increase in
public health, and the cost is a reduction in economic growth. However, it is
necessary to redirect budget to financial solutions in the post-pandemic
scenario to revive economic activities.
ii) Positive and normative statements
 Positive statements:
o “The-COVID-19 global recession is the deepest since the end of World
War II.” (Yeyati & Filippini 2021)
o “The global economy is recovering slowly from the lockdowns.” (Yeyati
& Filippini 2021)

 Show the impact of the pandemic and lockdowns, which are the fact
describing the world as it is.

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 Normative statements:
o “Globally minded governments and multilateral institutions should
anticipate, internalize, and address these risks before they are realized.”
(Yeyati & Filippini 2021)
o “Investments in training and connectivity (to facilitate telework) should
help contain job loss and reduce the economy’s exposure to new COVID
waves.” (Yeyati & Filippini 2021)

 Show expectations the world should be in COVID-19.

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REFERENCES

1. China-CEE 2020, ‘Hungary economy briefing: The Hungarian Economy in

2020’, China-CEE, viewed 12 July 2021, <https://china-
cee.eu/2020/12/27/hungary-economy-briefing-the-hungarian-economy-in-
2020-2/>.
2. ECFIN n.d., ‘Hungary’, ECFIN, viewed 12 July 2021,
<https://ec.europa.eu/economy_finance/forecasts/2020/summer/ecfin_forecas
t_summer_2020_hu_en.pdf>.
3. GRH 2008, ‘Updated convergence programme of Hungary 2008-2011’, GRH,
viewed 12 July 2021,
<https://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/20_sc
ps/2008-09/01_programme/hu_2008-12-19_cp_en.pdf>.
4. Horvath, J 2009, ‘2008 Hungarian Financial Crisis’, CASE, viewed 12 July
2021, <https://www.files.ethz.ch/isn/137987/01_2009.pdf>.
5. IFS n.d., Gross Domestic Product and Component Selected Indicators |
Hungary, IMF, viewed 12 July 2021,
<https://data.imf.org/regular.aspx?key=61545852>.
6. OECD 2019, ‘OECD Economic Surveys: Hungary’, OECD, viewed 12 July
2021, <https://www.oecd.org/economy/surveys/Hungary-2019-OECD-
economic-survey-overview.pdf>.
7. Rabobank 2010, ‘Country Report: Hungary’, Rabobank, viewed 12 July 2021,
<https://economics.rabobank.com/contentassets/d3ebd2f1ef624b038e888cff2
1f731fb/hungary-201002.pdf/>.
8. The World Bank n.d., ‘Exports of goods and services (% of GDP) – Hungary’,
The World Bank, viewed 12 July 2021,
<https://data.worldbank.org/indicator/NE.EXP.GNFS.ZS?locations=HU>.
9. The World Bank n.d., ‘Exports of goods and services (current US$) – Hungary’,
The World Bank, viewed 12 July 2021,
<https://data.worldbank.org/indicator/NE.EXP.GNFS.CD?locations=HU>.
10. The World Bank n.d., ‘External balance on goods and services (% of GDP) –
Hungary’, The World Bank, viewed 12 July 2021,
<https://data.worldbank.org/indicator/NE.RSB.GNFS.ZS?locations=HU>.

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11. The World Bank n.d., ‘External balance on goods and services (current US$) –
Hungary’, The World Bank, viewed 12 July 2021,
<https://data.worldbank.org/indicator/NE.RSB.GNFS.CD?locations=HU>.
12. The World Bank n.d., ‘Gross fixed capital formation (% of GDP) – Hungary’,
The World Bank, viewed 12 July 2021,
<https://data.worldbank.org/indicator/NE.GDI.FTOT.ZS?locations=HU>.
13. The World Bank n.d., ‘Gross fixed capital formation (current US$) – Hungary’,
The World Bank, viewed 12 July 2021,
<https://data.worldbank.org/indicator/NE.GDI.FTOT.CD?locations=HU>.
14. The World Bank n.d., ‘Imports of goods and services (% of GDP) – Hungary’,
The World Bank, viewed 12 July 2021,
<https://data.worldbank.org/indicator/NE.IMP.GNFS.ZS?locations=HU>.
15. The World Bank n.d., ‘Imports of goods and services (current US$) – Hungary’,
The World Bank, viewed 12 July 2021,
<https://data.worldbank.org/indicator/NE.IMP.GNFS.CD?locations=HU>.
16. U.S.Department of State n.d., ‘2020 Investment Climate Statements: Hungary’,
U.S.Department of State, viewed 12 July 2021,
<https://www.state.gov/reports/2020-investment-climate-
statements/hungary/>.
17. Yeyati, E & Filippini, F 2021, ‘Social and economic impact of COVID-19’,
Brookings, viewed 12 July 2021, <https://www.brookings.edu/wp-
content/uploads/2021/06/Social-and-economic-impact-COVID.pdf>.