hi everybody macroeconomics example is fundamental in your exams to help you make your points to help you evaluate in your judgment it's an expectation that no matter what you write you'll have examples to back it up for sure so make sure in this video you write everything down your job is to try and memorize as much as this as possible if you want more detail go and research is very easy to find that detail let's go guys by looking at real-life examples determinants and aggregate demand so let's start with determinants of consumption here with low interest rates countries with low interest rates or the UK even though we've recently raised rates to not 0.5% from nor point to 5% interest rates of no point five seven UK a very very low indeed in fact it's the same level we were back in oh nine back in ten 2010 when we're in the deep financial crisis so extremely low interest rates a decade of low rates here in the UK the eurozone at zero percent despite strong recovery there and Japan and negative interest rate territory whereas countries with high interest rates or we look at the USA no high at around 1.75 percent but high year we know that the USA been raising rates trying to normalize rates in the USA Argentina at forty percent a great recent example of a hike in interest rates in Argentina to control very very rampant inflationary pressure yes but also to control a big dive in the peso there try and create more demand for their currency and bring it back up countries with high consumer confidence we have the u.s. in the eurozone both growing economy to the US a booming the eurozone economy is recovering and with that you expect to for there to be higher consumer confidence as unemployment falls in both of those economies and the USA unemployment is very very low around four percent or is in the eurozone is coming down significantly both drivers of higher consumer confidence look at countries with low consumer confidence Japan and China come to mind why big uncertainty big concern with Trump's protectionist policies here and how that can hit these economies and that is leading to concern is leading to concerns with growth rates and unemployment rates holding back consumer confidence in the UK we know as well very low consumer confidence with braixen certainty countries with how high spouse prices we know that house prices being high can drive the wealth effect could drive consumption well look no further than the UK in the USA being house price increases their low indebtedness we know Germany is very much to save just spend the kind of economy whereas hi-def in this countries which can hold back consumer spending to an extent the UK US Japan heavily indebted countries in countries with high disposable income well the eurozone because of recovery Yap higher real disposable income there in the UK we know that this year real wages are expected to rise as inflation falls back towards target nominal wage growth at around 2.8 percent USA was strong economic growth and they're expecting wages to increase in real terms quite significantly going forward now and Australia as well with high GDP per capita rates countries with lower disposable income look at countries in recession right now all that have been in recession very recently you got Brazil Russia Venezuela come to mind low income taxes as big drivers of consumption and then ad well the UK we know in the UK that the tax-free allowance has been raised consistently over the last eight or so years here and in the USA as well Trump's tax cuts they're also helping the middle classes not just corporation tax cuts that have come with Trump he's also cut income taxes to help especially those are kind of middle income groups here what about determinants of investment well we have interest rates are a big driver for investment here is cost of borrowing reduces firms borrow and then spend on capital goods well the low interest rates high interest rates you've got one or two here high business confidence the u.s. because of strong economic growth the eurozone remember determinant the business confidence is very much expected demand expected profitability both countries expected demand growth is very high and low business confidence well exactly the same as what we said before China Japan UK uncertainty with the impact of protectionist policies from the US and back seventeen UK local bracing taxis we look at UK currently 19% plans to reduce that further to 17 percent by 2020 Ireland or the lowest in the world at 12 and a half percent and the USA yeah Trump's big cut in corporation tax from 35 percent to 20 percent quite a significant cut there very significant cut good for you to use high corporation tax why there I said the UK here well it's jeremy corbyn's proposed increase in corporation tax if he wins the next election in a few years time he said he would raise it from currently it's 19 but it's early raise it 26% to fund a lot of his government spending policies to fund his nationalization policies that's the idea here we look at examples of government spending out there so countries adopting fiscal expansion China Japan Hong Kong Japan and China as we just said you know growth concerns that especially in Japan at first quarter of this year going into negative growth territory recession on the cards in Japan not just yet only one quarter negative growth in Japan but very much on the card so fiscal expansion very much part of the abenomics and our base policies in Japan China as well not stagnating growth but growth below target for quite a few years now so both countries looking at fiscal expansion with infrastructure in particular to try and boost growth Hong Kong is well infrastructure related you guys say Trump looking at big government spending on infrastructure on roads in particular as fiscal expansion there or as countries go in the opposite way with austerity and spending cuts well the UK we know about Spain Greece Italy France Portugal lots of these eurozone economies trying to control national debt that countries if we look at weak exchange rates to dry net exports X minus em in the ad equation we have the US dollar a lot of what Trump does creates uncertainty in the US economy keeps the US dollar weak the pound is very very weaker as we speak into the euro in particular around the lira the royale the ruble a lot of these countries here primary commodity exporters and as commodity prices were falling back in 2014 1560 less demand for exports from these countries demand for the currency therefore has kept their exchange rates very weak and still weak as we talk whereas countries with strong exchange rates we have the Europe not great news for many exporting countries in the euro zone the yen very bad news for Japan especially as growth is in negative territory in the first quarter this year and the Australian dollar so let's now look at ISM SRS in particular looking at how SRS has been shifting left in many countries and why so key drivers are high commodity prices why are we seeing that well we've seen that with the price of oil going up and therefore the price of fuel like in the UK that's been shifting SRS left in causing inflation higher gas and electricity prices also in the UK driving cost push inflation through SRA shifting left and higher food prices - we look at wages being higher where have we seen that increase in cost of production shifting asourian's left we've kind of seen in the UK we're expecting to see that more as the year goes on in the eurozone as there is strong recovery there in the USA we're expecting big real wage increases there driving cost push inflation as well as later demand pull inflation in the US look at higher sales taxes the UAE is a great example the UAE so Dubai etc those kind of cities in the UAE implementing v80 as of the 1st of January this year had 5% of big increase in cost of production they're stoking inflation but if we go back in time the UK in 2010 with that v80 increase from 17 and a half percent through 20% and Japan in 2014 that increase in the sales tax actually led to a recession in 2014 in Japan countries with weak exchange rates we know the weak exchange rates imports become more expensive so importing inputs of raw materials semi finished goods becomes more expensive increasing costs of production shifting SRS left where do you see we can exchange rates right now well yeah the US dollar but that's not really stoking inflation there it is in the UK it is in South Africa it is in Turkey and many other countries too but some good examples there a very common example is for you to explain different causes of recession and you need good examples there to back up whatever you're saying so let's look at some key causes of recession and realize examples so take financial banking crisis we should all know about this quite significantly you know obviously we have the u.s. in the UK going back to 2008 2009 significantly but also eurozone countries that succumbed in exactly the same way with banking crisis in particular Spain Italy Greece are the three big ones that really suffered with significant banking crisis but countries that actually went bust and in Greece has gone bust relying on bailouts but Cyprus properly went bust you can also bring Iceland into that mix as well countries who raised interest rates and that then led to a recession or we had Russia this is back in like 2014 territory raising rates of try and control inflation but caused a recession as a result in Africa back in 2016 again very high rates of inflation they increased rates around the seven and a half percent territory to try and control that inflationary pressure but recession was the end result and I said UK here in brackets you know who knows we know that in the UK there are plans to raise interest rates get them back to normal levels but what if we do that dangerously too quickly to higher level who knows that could cause a recession in the UK especially when there is lots of brexit insanity at the moment what about housing market crash as a driver of recession a cause of recession the UK and the USA back to 2008 local oil shops orders high commodity prices leading to a recession or worsening the recession we have the UK we were already in recession of both of these times here but inflation was skyrocketing of both of these times too so this was not good news for us it kind of deepened our recession but also stoking inflation stagflation in both of these times here countries with weak exchange rates okay so the very very high import prices here shifting asteroids left and actually causing inflation even though all these countries really are our export driven the weak exchange rates stoking the very high inflation rate shifting asteroids left was a driver of recession here so that freaking Russia Brazil Turkey Nigeria higher sales tax with what he mentioned Japan here in 2014 falling commodity prices now four countries are reliant on the export of primary commodities if demand for them Falls and they're reliant on the export of these four X minus seven merely equated increasing in ad shifting right growth increasing and each time you see falling commodity prices that means less export revenue they're in big trouble here so Nigeria Angola Venezuela Russia well these three have big oil export is here so falling oil prices means less export revenues it led to big recessions than all of these three countries in fact the various way they're still in deep deep recession as we talk Russia big exporter of natural gas as well as many other primary commodities falling commodity prices back in 2014 2015 2016 really hit the Russian economy Brazil a big primary commodity exporters Zambia big exporter of copper falling prices of these commodities bad news for export revenues bad news for any bad news for growth driver of recession here we look at countries currently experiencing stagflation what's a high rates of inflation with stagnant growth that could be just very very very little growth or negative growth good to know countries that are experiencing this so that forget Egypt Nigeria Turkey Venezuela Argentina all countries going through that phenomenon right now let's keep going guys more application so looking at countries where you can apply the benefits of economic growth we're clearly China and India's obvious to see the benefits of growth there to be honest any example of a Southeast Asian nation will be fine here so Thailand Vietnam a great examples Malaysia Singapore Japan or tons of examples down there which you can use in Africa you can use Botswana a great unique example for you you can even use an island if you want since Islander stop with their austerity policies rapid rapid economic growth leading to very high GDP per capita rates in Ireland as we speak here what about the cost of economic growth while again China in India I've seen all the major costs of economic growth as high rates of inflation that's income inequality that's the negative X and T's the environmental issues that come with with economic growth Nigeria and Angola big income inequality problems there and true and why you can argue corrupt a government of one sector dominance demand pull inflation where have we seen that while in China back in their heyday early 2000s with rapid growth rates double-digit growth rates demand pull inflation was a side effect for sure the UK and the USA were expecting both countries to show some demand inflation as this year progresses as real wages go up and that feeds through to high consumption and us drives demand pull inflation cost push inflation we've mentioned these countries many times now weak exchange rates have dried this here of cost-push inflation in case that for katoki Argentina if ever you want to mention good deflation - its deflation territory now but countries have experienced it in a good way are you really from the from the supply side and therefore we just see falling prices and the benefits of falling prices because deflation is not long term and short term it doesn't seep into expectations it's not anticipated so why aren't we seeing examples of good deflation while the UK the eurozone Switzerland this all goes back to 2015 end of 2015 early 2016 we saw very minor bouts of deflation in all of these places here and that was good news it was great we just got the benefit of falling prices for consumers and for producers there when it's real life examples of bad deflation of obviously Japan since that banking crisis in the early 1990s have had significant bouts of deflation all bad news deflation coming from the demand side becoming cyclical becoming anticipated becoming bad news spiraling deflation same with Greece not many people were mentioned Greece here that ever since the financial crisis Greece have had deflation so a decade of deflation in Greece the same thing spiraling deflation here what about the cost of inflation which countries have experienced many of the issues with high rates of inflation will Argentina massively every single year I talk about Argentina information just gets worse because it's spiraling it's become anticipated so it's seeing wage price spirals and consumer driven price spirals as well here but also in Brazil when they experience inflation not now inflation is under control more so in Brazil now but a couple years back when it peaked at more than 10 percent around the 12% mark here it was really a rolling purchasing power and affecting living standards even in the UK were only talking inflation of around three three point two percent in the UK recently but even that eroded living standards harm purchasing power massively and also wrote it savings as interest rates were so low so a good example that cyclical unemployment you have to talk about eurozone economy you do we're talking here Greece with unemployment rates around 21% we're talking Italy still with the under pulmonary around 11% we're talking Spain unemployment rates now at 16% clear cyclical unemployment even though I know plum is coming down it's still cyclical unemployment there South Africa with unemployment rates of 26% in recession structural unemployment you can look at again eurozone economies why a lot of the cyclical unemployment here has become structural a lot of the youth as of the main example becoming D skill losing their skills their skills no longer needed because they've been unemployed for such a long time it's a cyclical turning into structural unemployment that's called hysteresis right there but also look at India majority of India's population in fact 50% in use population is a 25 or less incredible stat there and then one of these youngsters going to university going to college getting degrees in similar areas there are not enough jobs for all of these graduates with very similar degrees leaving to structural unemployment issues the skills of people have are not necessarily needed to that level in India similarly you can argue in the UK a lot of graduates now with very similar degrees a decent degree but very similar not fulfilling the need for skills in the economy there are needs for skills in other areas but graduates ending up with a degrees and skills all in the same area competing for the same job is leave into large structural unemployment for those graduates they end up in non graduate jobs as a result we look at examples of real wage unemployment so countries where either minimum wages have risen or have been implemented but also whether a strong unions driving wages up beyond equilibrium in the labor market where in the UK increases in the national living wage through the Conservative Party here beyond the rate of inflation is driven real white unemployment many companies are looking to replace a low-wage workers with technology with capital instead in Germany 2014 implementation of minimum wage for the first time and eurozone economies with very strong trade unions in particular France Spain come to mind speaking wages beyond equilibrium driving with real wage unemployment yeah you want to apply the cost of unemployment while go no further than you economies in particular Greece Spain Italy you can apply pretty much every single cost of unemployment to these countries here what about income inequality let's look at countries with low d-nice of relatively equal distributions of income your Scandinavian nations are your go-to examples what about countries are the hygiene is relative relatively unequal distributions of income a lot of African nations here in Nigeria Angola Botswana South Africa but if you want a more developed economy context you bring in the USA if you want to feel free bring in China bringing in you also with quite high G's what about countries experiencing absolute poverty I've said African nations I'll give you some more precise one you want to mention is in Bob way Burundi Ethiopia Rwanda a little great examples with very high absolute poverty levels very high especially Ethiopia and Zimbabwe look at China in India even though there has been big increases in economic growth large income inequality is a very extreme lots of people in rural areas in particular living an absolute poverty what about countries obviously large right it's a poverty obviously we can apply to the UK and the USA and we know those very well let's keep going guys looking at examples of macro policy let's start by looking at expansionary monetary policy in the form of lower interest rates of countries that have cut their interest rate here we've got Brazil South Africa and Russia all of these three nations have been coming out of recession inflation is now more under control in each of these countries allowing these countries the chance to cut rates and try and stimulate aggregate demand stimulate growth here we've also got India throw that into the mix here in your cutting rates to try and stimulate growth there's always this nice competition between India and China with growth rates India's been dominating China for the past few years and keeping rates lower lower helps to keep a the up helps to keep growth up in here what about countries that are pushing up interest rates we can group these into two categories countries looking to normalize their interest rates countries looking to raise rates in order to control inflation so we have the US Canada and the UK all countries looking to raise rates in order to normalize them the US and Han that I've already kind of done it and they're planning to continue doing it u.s. interest rates around 1.75 percent Canada interest rates at 1.25% plants of both those countries to keep going both central banks to keep going a pushup rate back to normal levels in the UK we know interest rates are still at naught point 5 percent sir the rate as they were during the crisis here but we know that there are plants have raised them as the years go on Turkey and Argentina are raising interest rates quite significantly to control excessive inflationary pressure interest rates in Turkey at 8 percent right now in Argentina 40 percent to control almost like hyperinflation in Argentina quantitative easing so central banks here countries where they're going the extreme way where they have gone the extreme way to boost aggregate demand expansionary monetary policy in a non-conventional way these are all countries of a planet USA UK eurozone Japan important for you to know that the u.s. is pulling back is tapering their quantitative easing and that pumped money is now coming out of the economy in the USA what about countries using negative interest rates or remember this is only the interest rate that central banks will lend to commercial banks it's not the interest rate that we would get from a high street bank in these countries okay so don't go making that mistake it's just that central bank interest rate which applies for commercial banks who want to borrow from the central bank here but Japan Sweden Switzerland all have got negative central bank interest rates here barely negative territory but interesting to know I heard that it's the case and interesting to know that interest rates can be extreme even going to subtle negative territory here let's move into fiscal policy we'll look at fiscal expansion so expansionary fiscal policy in the form of an increase in government spending we know about these countries Japan China USA and mention them already but I've also got UK to this category remember that Philip Hammond has left three billion pounds of money spare just in case we need it as fiscal expansion if there is a brexit shock so when we leave the EU there is a big shock to the economy a big recession three billion pounds spare ready to pump into the economy through government spending it needed what about countries using or have used austerity policy you can't Ireland Portugal Greece's France okay the UK and all of these eurozone countries are still using austerity policies as we speak the Ireland example here used austerity policies stopped around three years ago very successful use of austerity huge budget surpluses run and now Ireland have being very very successful with fiscal with fiscal roomin and space to spend in the economy to grow now in the economy government finance is much more under control so I haven't know normally using it they used it very successfully it's a good example for you to use all the other countries are still using austerity austerity policies right now if we look at expansionary fiscal policy in the other way so tax cuts now the other side of fiscal policy we know about the UK in the US with both income tax and corporation tax cuts and what about tax rises any countries using contractionary fiscal policies in the form of tax rises it's hard to get really good examples of big tax rises very recent examples but once you can go to Australia increasing the marginal rate of income tax for the highest pay good to research that and see what the idea was the idea was to raise more revenue to fund spending on health care there so you can talk about that as your example here it wasn't really to control the economy or to reduce ad or anything like that but still a good example of a big direct tax rise there the UK were talking about v80 going way back to 2010 year Japan were talking about an increase in sales tax in 2014 there the best examples you can use if you have to that's one to talk about supply-side policies I've already covered major UK supply-side policies in my UK key stats video I'll put that little section in now very good to know such an amazing application with UK supply-side policies these should be your go-to let's now look at the winners from globalization your Asian Tigers China India yes but also countries like Japan South Korea Thailand Vietnam Malaysia Singapore all of these countries are significantly benefit from globalization how do we know rapid increases in HDI rapid increases in GDP per capita rapid increases in incomes and reduction in poverty all great signs globalization is really benefit in these countries you've also got your European exporters seeing growth from exports seeing increases of incomes from that you've also got your Gulf states UAE Qatar Saudi Arabia oil exporters FDI increases as well seeing that driving growth seeing that driving higher incomes what about your losses from globalization while you're sub-saharan African nations it's a real shame but it's true why you could argue primary commodity dependence holding them back you could argue corrupt governments a big issue you can argue protectionism both at home so within Africa and abroad really holding back gains from globalization here South America similar issues primary commodity dependence you can argue corrupt governments yes but you can also argue import substitution and all of these countries didn't want globalization import substitution they went for never proven to it worked and you can also argue that these countries have opened up their markets that capital markets to speculative flows of finance destabilizing their economies Argentina is a great example of that hasn't really recovered from their banking crisis in the 1990s opening up markets like that that type of globalization hasn't worked for South American Nations you can also put in North America here we're looking at America Canada put UK to this as what I was in on North America but a similar group of countries that have lost from globalization especially your lower middle classes who have lost as Asian countries have found comparative advantages in manufacturing decimating industries in North America in the UK and workers in those industries have lost their jobs have seen big Falls in their incomes as a result nice example that if you want to look at examples of protectionism obviously we can talk about recent Trump Terrace here so US tariffs on the imports of Chinese and Japanese steel and aluminium they're the big ones but also the imported Chinese pork and poultry the imports of Japanese washing machines of Japanese cars all have seen tariffs recently imposed 25 percent on steel and aluminium key staff you to know we can also not talk about retaliation right a retaliatory tariffs from China India back on the US China already announced their a retaliation their terrorist back on us group they've targeted very sensitive US exports soybeans is a huge US export but also things are highly Davis and bikes bourbon whiskey Levi's jeans they're gone through this very sensitive exports Japan have also very recently announced their retaliatory tariffs on US goods as well we learn it's one level we don't know what goods yet but they just announced those two so great examples are there let's not forget the EU the EU is very protectionist as well when it comes to standards on the imports of primary commodities from Africa but also on this big form anti-dumping tariffs on the imports of Chinese solar panels and on the imports of Chinese steel so being anti-dumping tariffs China retaliated back a few years ago now this is imposing their own tariffs on euy and is a good example of new cars as well but you have most have very recently been found to illegally subsidized Airbus 22 billion dollars of illegal subsidies going to Airbus in the EU found to be illegal by the World Trade Organization here and that's open up the door for legal terrorists for the u.s. to impose on EU goods or who knows what goods the US will choose to impose tariffs on here where this will be legal and this is a big thing for the u.s. because Boeing is a major competitor about us here so for illegal subsidies that the EU of imposed on Airbus to have been found is quite a big deal and a great example here for you to use the countries with large current account deficits we know about the UK we know about the USA great examples here but also throw India into the mix ever since in 1990s India have had large current account deficits that they found very difficult to manage in finance countries with current account surpluses your big exporting nations here trade dominant countries like China Germany Netherlands Norway annoy a big oil exporting here but also Singapore with a large current account surplus many EU nations like Greece like Italy like Spain like Portugal all run current account services countries with fixed exchange rates great to mention UAE not just the UAE but other Gulf nations like Saudi Arabia Qatar all with fixed exchange rates to the dollar here UAE is great as as is Sally because they would discussing whether they should move towards a floating exchange rate couple years ago so interesting case put Bolivia in there as well countries with managed exchange rates of periodic interventions in their exchange rate market we all know about China and how they intervene Donald Trump famously calling them a currency manipulator countries with weak exchange rates already mentioned the US dollar the pound lira and Iran strongly exchange rates the euro yen Australian dollar we mentioned before let's look at development now and look at countries who have used different approaches different strategies for growth and development so we look at market-based approaches first countries have used market-based approaches very successfully well in year through attracting FDI very successful for them China and trade we all know about that but we can also argue all in your Southeast Asian Nations trade heavy approaches for growth and development very successful stories there we can argue Botswana in Africa through the export of diamonds Tanzania the Mauritius here attracting FDI very successfully boosting growth and development what about countries with failed market-based approaches well Nigeria and Angola oil export is here very very successful of growth rates but because of corrupt government that's not really translated into big development gains still lagging behind in their HDI scores here we can also talk about God I put Ghana in brackets here big primary commodity exporter wide variety of primary commodity exports that Ghana have here but have fallen foul of protectionist measures abroad from the EU and from the US it's held back growth and development in Ghana unfortunately what about interventionist approaches I've said ranted success and failure in truth all of these countries you could argue have failed if you look at that HDI scores there are way way way behind interventionism doesn't work where it has worked slightly in Iran in Ethiopia it's why government spending in aid money has been directed into health improvements into education improvements both countries have seen that to an extent but the biggest problem intervention is strategies as proven is that income growth is very low job creation is almost non-existent the big problems there of interventionist strategies and that's why HDI progress is often held back quite significantly that's what this stats prove with all of these countries but if you know the failure Zimbabwe in Burundi in particular authoritarianism mass corruption have met we haven't seen many gains in any of these areas income health education nothing really and as how their API scores told to me back some of the worst in the world here but look at zombie zombies an interesting case recent interventionism from 2010 interventionism in Zambia when there used to be more market-based since interventionism their economy really has stalled and development progress is certainly storm there so a good example for you to use as well so that covers all the stats all the application everything you need guys to smash any of your macro exams anytime a macro question comes you've got everything you need to apply now and get the highest mark so take all that down try and memorize it all if you want to research more of these examples to get more detail feel free to it's very simple to and hopefully now this is going to be your road to AIDS and a stars in your final exams thank you so much for watching guys I'll see you all in the next video