German Economy

Topics: Monetary policy, Inflation, Macroeconomics Pages: 3 (1363 words) Published: October 28, 2014

German Economy
Macroeconomics in Global Context

Germany is known as Europe's industrial powerhouse and the world's second largest exporter. In reviewing the German economy we will consider GDP, unemployment, inflation, interest and exchange rates, the business cycle, macroeconomic policy, and future perspectives for the German economy. Economic Overview

GDP (purchasing power parity) $3.194 trillion (2012 est.) 
GDP (official exchange rate) $3.367 trillion (2012 est.)
GDP - real growth rate 0.9% (2012 est.) 
GDP - per capita (PPP) $39,100 (2012 est.) 
Unemployment rate 6.5% (2012 est.) 
Unemployment, youth ages 15-24
Total: 11% male: 12% female: 9.8% (2009)
Exchange rates Euros (EUR) per US dollar - 0.7838 (2012 est.)  Interest Rate 0.75 %
(The World Factbook, 2012) Note: data is in 2012 US dollars Business Cycle and Unemployment
Fluctuations of national income around its trend value that follow a more or less wavelike pattern refer to the business cycle (Ragan, 2011 p. 477). Germany remains in the recessionary phase of the business cycle, but gradual improvement of the export and consumer sectors may be setting the stage for recovery (Hofschire, 2013). Although unemployment rates for both older and younger workers in Germany are now lower than they were when the United States slipped into a recession at the end of 2007, they are still not at full employment and experiencing a recessionary gap (Norris, 2013). A recessionary gap occurs when an economy operates below full employment in the short term. When real GDP is equal to Y*, the unemployment rate is said to be equal to the NAIRU, which stands for the non-accelerating inflation rate of unemployment, this is also known as the natural rate of employment (Ragan, 2011 p. 765). By any measure, simple or complex, the NAIRU is very hard to determine and this holds especially for Germany. Research suggests that the NAIRU in Germany is currently around 7 percent (Kajuth, F. 2010). Macroeconomic Policy...

References: Ragan, Christopher T.S., & Lipsey, Richard G. (2011). Macroeconomics. (13th ed.). Pearson Education Canada.
Detailed economic analysis, economic indicators, and forecasts for Germany. (2013).
Germany Economy Profile 2013. (2013). Retrieved from
Burns, S. (2010). Soros Highly Critical of German Monetary Policy. Retrieved from
Hofschire, D. (2013, March 1). business cycle update: Global risks recede, Retrieved from
Kajuth, F
Norris, F. (2013, May 10). Recovery in germany is faster than elsewhere. The New York Times. Retrieved from
Euro Exchange Rate
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