Microeconomics, main concepts for an economy study: capital formation, production, consumption, employment, credit multiplier, money demand, money supply, prime rate, Keynesian transmission mechanism, exports, imports and government expenditures

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Presentation

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7 pages

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.doc

Published date :

01/16/2009

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Table of Contents Microeconomics, main concepts for an economy study: capital formation, production, consumption, employment, credit multiplier, money demand, money supply, prime rate, Keynesian transmission mechanism, exports, imports and government expenditures Table of Contents

 
  1. The capital formation (Investment).
    1. The negative relationship between investment and iInterest rates.
    2. The positive relationship between financial investment and interest rates.The impact of government borrowing on interest rates
  2. A reduction in the government expenditure.
  3. A reduction in the exports.
  4. Economic variables studies.
    1. The real GDP.
    2. The private sector capital formation.
    3. The private sector employment.
  5. The real sector: Production and expenditure.
    1. GDP and household consumption.
    2. GDP and government consumption.
    3. GDP and fixed capital formation.
  6. The money demand.
  7. The credit multiplier.
  8. The prime rate.
  9. Decrease in money demand.
  10. The demand for and supply of money.
    1. Increase in interest rate.
    2. Increase in interest rate.
  11. The Keynesian transmission mechanism.
  12. The impact of government borrowing on interest rates.
  13. Linkages between the monetary and the real sector.
  14. Bibliography.

Abstract

Financial investment and interest rates have a positive relationship. Financial investment represents investment in bonds or shares or money saving in the bank. If the interest rate increases, the return of investment will be better. You will get more return on shares (or bonds) and earn more money on savings. In conclusion, the higher the interest rate, the higher the financial investment. The South African economy continues to grow. The Gross Domestic Product has been on a steady increase on an annual basis, since 1998 (SARB, 2007: S-148). In 1998, the rate of growth was 0,5 % (the lowest in the last decade). In 2006, it was 5,0%. The private sector capital formation (investment) has increased gradually since 1998 (at 4,8%), except for the year 1999 when we observe a negative growth: -7,6%. In 2006, the growth exceeded 12% (SARB, 2007: S-148, S-114-120). The private sector employment declined until 2001. However, since this year, we can observe a change in the trend with a growth of employment rates to reach exceptional figures last year (SARB, 2007: S-132, S-152).

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