Economic growth in Germany: changes in inflation, unemployment

Part of the syllabus: Macroeconomics Article
Source: Yahoo News / Deutsche Welle
Date of the article: 2017-06-26 / 2017-06-20
Link to article: German business sentiment ‘jubilant’: IfoIfo projects stronger German economic growth
Any other similar article, no matter the date, would fit the suggested talking points. Articles which talk about the Ifo report are great because there’s a little bit of analysis and a bunch of figures/facts you can use. So, Germany’s expectations of the future are better than ever before, unemployment is low and falling, inflation might start picking up as well. Can we use economic concepts to explain what is happening in the country? How are the main economic variables connected?

Talking points for your Macroeconomics Internal Assessment:

  • Define and explain what is economic growth. You might want to think about if it’s increasing GDP or growing potential output or both?


  • You might jump right into explaining why GDP is increasing: AD shifting to the right due to several reasons which are mentioned in the macroeconomics article. Those include higher consumption, possibly increasing investment, also growing exports. Draw a diagram – choose either the Keynesian or the Neo-Classical approach and stick with that for now.


  • Remember to mention the multiplier and the accelerator effects! Define both concepts and explain how do they affect GDP growth.


  • Both articles mention growing inflation and falling unemployment. This should trigger your memory right away – Phillips curve. The relationship between unemployment and inflation. That could be a good point for discussion. Maybe even a diagram?


  • To evaluate, does the relationship between unemployment and inflation described in the macroeconomic article is the same as the one described by the Phillips curve? Why or why not? What does the future for German economy look like if the theoretical relationship holds? You could evaluate at this point by “simulating” different scenarios of what might take place.


  • To evaluate further, look back at your choice of the diagram and the conclusions drawn from it. Would they change if you chose a different school of economic thought? If you chose the Keynesian diagram before and let’s say wages increased because AD reached the bottleneck… what were the long term implications/predictions for/of the economy? What if you had chosen Neo Classical view?


  • Continuing with evaluation: one of the articles mentions Germany’s government budget and current account surplus.  These are ideal to score a few more points on your IA. Define and explain what both of them are and how do they relate to AD, inflows and outflows of the business cycle (government spending and taxes, think about how do taxation revenues change when GDP increases?). What could possibly happen to government budget and/or Germany’s current account if one of your described scenarios happen? Is it good/bad for the economy? You could think about macroeconomic objectives.


  • Remember to include quotations! From actual data to possible future scenarios mentioned in the articles…
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