Independent University Bangladesh

ECN202: Principles of Macroeconomics

Group Project

Submitted By: Group Z

Names ID
Md Shadman Sakib 1931257
Kaspia Imtiaz 1721507

Submitted To:
Dr. Md. Shahnawaz Karim
Associate Professor, Department of Economics
School of Business and Entrepreneurship (SBE)
Independent University, Bangladesh (IUB)

Submission Date: 17 August 2023

Table of Content
s
Introduction.................................................................................................................3

Macroeconomics Factors............................................................................................4

Gross Domestic Product................................................................................................................5

GDP Growth Rate.........................................................................................................................6

Consumer Price Index (CPI).........................................................................................................6

CPI Inflation Rate.........................................................................................................................7

Unemployment Rate.....................................................................................................................7

Data Analysis..............................................................................................................8

GDP Growth Rate.........................................................................................................................8

CPI Inflation Rate.......................................................................................................................10

Unemployment Rate...................................................................................................................12

Trade Balance % of GDP............................................................................................................14

Discussion.................................................................................................................15

Conclusion.................................................................................................................17

Reference...................................................................................................................18
 Macroeconomics Factors Comparison of Countries

Introduction

Macroeconomics is a field of economics that studies the overall structure,

behaviour, and decision-making of an entire economy, rather than focusing on
individual actors. The two main areas of macroeconomic research are long-term
economic growth and shorter-term business cycles. It originated with John
Maynard Keynes and his theories about market behaviour and government policies
in the 1930s. Since then, several schools of thought have developed in
macroeconomics. In contrast, microeconomics is more focused on the behaviour
and decision-making of individual actors, such as people, companies, and
industries, and how they influence the economy.

Bangladesh has experienced significant economic growth over the past decade,
with an average annual GDP growth rate of around 7%. However, it still lags some
of its neighbors in terms of overall economic performance. For example, India's
GDP per capita in 2020 was $6,417, while Pakistan's was $1,534.

The economic growth rate typically tracks changes in a country's gross domestic
product (GDP). Bangladesh has a relatively low inflation rate of around 5%, and its
current account balance has improved significantly in recent years. While both
unemployment and inflation are causing frustration among people, I believe that
unemployment is the more serious issue. The negative effects of unemployment
extend beyond individuals and can harm society.
This report will conduct a comparative analysis of GDP growth rate, CPI inflation,
and unemployment across Bangladesh, India, and Pakistan. The economic data of
these countries from 1960 to 2022 has been taken into consideration for this
analysis.

Macroeconomics Factors
Macroeconomics is a branch of economics that deals with the performance,
structure, behaviour, and decision-making of an economy. It deals with overall
income of a nation, gross consumption, gross investment, export revenue, export
revenue, import expenditure, government expenditure. Macroeconomic study falls
into two categories: long-term growth and short-term business cycles. While short-
term macroeconomics examines factors affecting the economy on a shorter time
horizon known as business cycles, long-term macroeconomics focuses on issues
over many years such as national income and overall changes in employment.
Macroeconomics tries to understand the connection between these variables and
how much each variable influences the economy overall. Microeconomics, which
focuses on tiny aspects that influence decisions made by people and businesses,
differs from macroeconomics. Microeconomic and macroeconomic factors
frequently interact with one another. The fact that macroeconomic aggregates may
react very differently from or even the reverse of comparable microeconomic
variables is a key contrast between microeconomics and macroeconomics.
Microeconomics examines economic trends, or what can occur when people do
actions. Subgroups of people, like consumers, sellers, and business owners, are
often defined. Utilizing money and interest rates as price mechanisms for
coordination, these players communicate with one another in accordance with the
rules of supply and demand for resources.
 Gross Domestic Product

The total monetary or market worth of all the finished goods and services produced
within a nation's boundaries during a certain time is known as the gross domestic
product (GDP). It serves as a thorough assessment of the state of the economy in a
particular nation because it is a wide indicator of total domestic production. Even
while GDP is frequently estimated on a yearly basis, it can also be calculated
quarterly. The total private and public consumption, government expenditures,
investments, increases in private inventories, paid-in building expenses, and the
foreign balance of trade are all included in the computation of a nation's GDP. The
foreign trade balance is one of the factors that contributes most to a nation's GDP.
There are various ways to report GDP, and each one offers a little bit of
information differently. Three types of approaches are available; expenditure
approach, income approach, value added approach.

Expenditure approach = C +G+I+NX

where:
 C = Consumption
 G = Government spending
 I = Investment
 NX = Net exports

Income approach = Compensation of employees + Mixed income + Other

taxes less subsidies on production + Gross operating surplus.

Value added approach consists of calculating an industry or sector's output

and subtracting its intermediate consumption (the goods and services used to
produce the output) to derive its value added.
  Formula of nGDP = Σ (Price * Quantity)
 Formula of rGDP = Σ (Price (base year) * Quantity)

GDP Growth Rate

To gauge how quickly an economy is expanding, the GDP growth rate analyses the
annual (or quarterly) change in a nation's economic production. This indicator,
which is frequently expressed as a percentage rate, is well-liked by those who set
economic policy since it is believed to be strongly related to important policy
objectives like inflation and unemployment rates. The economic growth rate
typically tracks changes in a country's gross domestic product (GDP). Gross
national product (GNP) may be utilized in countries whose economy rely
substantially on foreign earnings. In the latter, net income from foreign
investments is included. An increase in economic growth is typically viewed
favourably. A country is formally in a recession if it experiences negative growth
rates for two consecutive quarters. Simply said, if an economy contracts by 2%
from the previous year, the income of the population as a whole decrease by 2%
during that year.

Consumer Price Index (CPI)

The Consumer Price Index is a popularly used economic indicator that measures
the average changes in prices of goods and services purchased by households over
a specified time. The CPI is used to compute real GDP as well as to adjust several
economic variables for inflation, including wages, taxes, and interest rates. The
CPI can be used for a variety of purposes, such as guiding economic policy,
detecting investment possibilities and dangers, and assisting companies in deciding
on pricing and business strategies. The CPI is a useful tool for analysing.
the economy and making choices, but it must be used in conjunction with other
economic indicators and contextual data.

CPI Inflation Rate

The percentage change in the CPI from the preceding period. The "best" inflation
measure will vary depending on how the data will be used. When it comes to
modifying consumer payments so that people may buy a market basket of goods
and services that is comparable to one, they could buy in a previous period at
today's prices, the CPI is typically the best metric to use. The CPI is calculated by
gathering price information for a sample of goods and services that reflect the
spending patterns of households in a certain area or nation. We can find food,
shelter, transportation, healthcare, and entertainment in the basket of goods and
services. Based on their relative relevance to consumers, the goods in the basket
are given varying weights, and the prices of these items are then monitored over
time. Consumer expenditure surveys are the foundation of the weighting
methodology used to calculate the CPI. National statistics agencies periodically
carry out these surveys to gather information on household spending habits. Based
on the portion of total household spending that is allotted to each item in the
basket, weights are assigned to each one. Collecting pricing information on the
items in the basket from many sources, including shops, service providers, and
governmental organizations, is necessary to track their prices over time. To get the
CPI for a certain time period, the prices are weighted and summed up.

Unemployment Rate

When a person is ready and able to work but does not have a paid job, they are
unemployed. The proportion of unemployed people in the labor
force is known as the unemployment rate. As a result, figuring out who is
employed is necessary for calculating the unemployment rate. People who are
either employed or jobless make up the labor force. Making practical decisions,
such as how much paid work someone must perform to be deemed to have a job, as
well as counting how many people have employment or not is required to
determine who is employed or jobless.

Data Analysis
GDP Growth Rate

BD, IND, PAK GDP Growth Rate Comparison

3,500,000,000,000.0

3,000,000,000,000.0

2,500,000,000,000.0

2,000,000,000,000.0
Value

1,500,000,000,000.0

1,000,000,000,000.0

500,000,000,000.0

0.0
60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 11 14 17 20
19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20

Time
Yearly GDP Comparison (1960-2022)
 Bangladesh:
 Lowest GDP: $22,247,400,352.2 (1960)
 Highest GDP: $305,522,975,082.0 (2022)
 India:
 Lowest GDP: $136,368,118,764.5 (1960)
 Highest GDP: $2,954,977,663,032.9 (2022)
 Pakistan:
 Lowest GDP: $17,051,904,825.0 (1960)
 Highest GDP: $362,160,464,010.8 (2022)

 India has consistently had the highest GDP among the three countries,
followed by Pakistan and then Bangladesh.
 There is a general upward trend in GDP for all three countries, indicating
economic growth over the years.
 Bangladesh has shown significant growth, with a rapid increase in GDP in
recent years.
 India's GDP growth has been steady and substantial, becoming one of the
world's largest economies.
 Pakistan's GDP growth has also increased steadily, though at a somewhat
slower pace than India and Bangladesh.
 CPI Inflation Rate

BD, IND, PAK CPI Inflation Rate Comparison

300.0

250.0

200.0

150.0
Value

100.0

50.0

0.0
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20

Time

Inflation Trends:
 All three countries experienced an increase in their Consumer Price Index
values over the years, indicating inflation and rising prices.
Inflation Rates:
 The CPI values for each year can be compared to their respective values in the
base year (2010 = 100) to calculate the inflation rate. Higher CPI values
indicate higher inflation rates.
 Pakistan has consistently shown higher inflation rates compared to Bangladesh
and India.
Significant Increases:
 Pakistan experienced a significant increase in its CPI values from 2008 to
2009, indicating a sharp increase in inflation during that period.
Relative Inflation:
 Bangladesh generally had lower inflation rates compared to India and Pakistan
until around 2015. After that, Bangladesh's inflation started to increase at a
higher pace.

Recent Years:
  In recent years (2020-2022), all three countries saw a noticeable increase in
their CPI values, reflecting a period of relatively higher inflation.
 It's important to note that inflation can have significant implications for an
economy, including its impact on purchasing power, savings, and investment
decisions. Governments and central banks often use monetary policy tools to
control inflation and stabilize the economy.

1960s to 1970s: India generally had the highest inflation rates among the three
countries during this period.
1980s: All three countries experienced high inflation rates, with Pakistan often
having the highest.
1990s to 2000s: Inflation rates in all three countries generally decreased, but
Pakistan's rates remained higher.
2010s: Inflation rates fluctuated, with India and Pakistan experiencing periods of
higher inflation, while Bangladesh's rates remained relatively stable.
2020s: All three countries experienced spikes in inflation rates, with Pakistan
consistently having the highest rates.
Inflation rates can be influenced by a variety of factors including monetary policy,
supply and demand dynamics, government policies, and external shocks. It's
important to consider these factors when interpreting the trends.
 Unemployment Rate

BD, IND and PAK Unemployment Rate Comparison

12.0

10.0

8.0

6.0
Value

4.0

2.0

0.0
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20

Time

 1960s to 1970s: Data for these years is missing (NA).

 1980s: Data for these years is missing (NA).
 1990s: The unemployment rates for these years are relatively low for all three
countries.
 2000s: Unemployment rates vary, but there seems to be an upward trend in
some cases.
 2010s: Unemployment rates are relatively stable for Bangladesh, show some
fluctuation for India, and decrease for Pakistan.
 2020s: Unemployment rates generally increase for all three countries, with
India experiencing a significant spike.
Average Unemployment Rates:

Year Range Bangladesh India Pakistan

1990s 2.7 7.9 0.6
2000s 3.8 8.2 1.1
2010s 4.5 7.8 3.7
2020s 5.1 8.4 6.4

 1990s: Pakistan had the lowest average unemployment rate, while Bangladesh
had the highest.
 2000s: Pakistan still had the lowest average, while India's and Bangladesh's
averages increased slightly.
 2010s: Pakistan's average increased significantly, and all three countries had
relatively higher unemployment rates compared to the previous decades.
 2020s: The averages continued to rise for all three countries, with Pakistan
having the highest average unemployment rate.
 Trade Balance % of GDP

BD, IND and PAK Trade Balance Comparison

60.0

50.0

40.0

30.0
Value

20.0

10.0

0.0
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20
Time

 1960s: Bangladesh and Pakistan had similar trade percentages of GDP, while
India's was lower.
 1970s: India's trade percentage increased, while Bangladesh's and Pakistan's
remained relatively stable.
 1980s: All three countries experienced an increase in trade percentage, with
Pakistan having the highest.
 1990s: Trade percentages continued to increase for all countries, with
Pakistan's remaining the highest.
 2000s: India's trade percentage increased significantly, surpassing the other
two countries.
 2010s: India maintained the highest trade percentage, while Bangladesh's trade
percentage grew substantially.
 2020s: Bangladesh's trade percentage decreased from the previous decade,
while India's and Pakistan's remained relatively stable.
 Discussion
From the data analysis, it can be observed that Bangladesh’s GDP per capita
experienced limited fluctuations which indicate its economy is relatively stable
over time. This stability can create negative impacts on the country’s economy and
its citizens. For instance, a lack of fluctuation can indicate a lack of economic
growth and innovation. Bangladesh may find it difficult to stay up with other
nations in terms of competitiveness and the capacity to open new opportunities for
its inhibitions if its GDP per capita is not increasing significantly over time.
Government can encourage innovation to stay competitive in the global economy.
The government needs to encourage entrepreneurship. This can involve providing
incentives for businesses to invest in research and development as well as creating
a supportive regulatory environment that fosters innovation. Also, to ensure
financial stability the government needs to ensure that the financial system is
sound and resilient in the face of potential shocks.

In 2020 there was a huge decrease in GDP growth in Bangladesh. Although the
country was able to increase its GDP growth in the next year. To increase the GDP
growth government can invest in infrastructure high-quality infrastructure that can
facilitate commercial operations and the transportation of products and services such
as highways, bridges, and airports. To increase economic activity and create jobs.
An educated workforce may play a significant role in economic expansion. For the
workforce to be successful in changing the economy, the government can make
investments in education and training.

According to the data analysis, Bangladesh’s unemployment rate is increasing year

by year. Which is not a positive sign for the economy. The federal government can
offer incentives for businesses to hire workers, such as tax credits or subsidies for
hiring new employees. This can encourage the creation of new jobs. Also providing
unemployment benefits can provide a safety net for workers who have lost their
jobs. The government can offer unemployment compensation to support employees
during times and assist them in their search for new jobs.

Bangladesh has had a lower inflation rate measured by the CPI in recent years
according to the analysis which indicates that the general level of prices for goods
and services in the economy is increasing at a slower rate. If inflation is lower, then
the central bank may lower interest rates to stimulate borrowing and spending.
Having lower interest rates may make it simple for people and businesses to take
out loans and engage in new ventures which may promote economic growth.
Therefore, above government policy implications can be taken for Bangladesh to
develop its economic growth.
 Conclusion
Taking both the GDP growth and Inflation CPI data into account, it’s clear that the
two are closely linked. As discussed by Investopedia, the growth in GDP causes
inflation, and, if unchecked, inflation can be harmful to the economy, causing
painful periods of high unemployment and lost production. Most economists today
agree that a small amount of inflation, about 1% to 2% a year, is more beneficial
than detrimental to the economy. We can see, therefore, that lower inflation in
consumer prices appears to be linked with lower GDP growth for the same
countries. To increase economic growth for these countries, aggregate supply and
demand can be increased. This can be done by lowering interest rates, increasing
real wages, higher global growth, devaluation, rising wealth, development of new
technology, introduction of new management techniques, more flexible work
practices, increased net migration, raising retirement age, and public sector
investment. India, Pakistan, and Bangladesh exhibit a relatively steady increase in
their GDP per capita over the years with the limited fluctuations in value. Bhutan,
on the other hand shows a faster rate of increase despite starting at a similar level as
the countries. By boosting economic growth, the unemployment rate could be
reduced. If the GDP per capita increases, then we can hope that the unemployment
rate can be reduced.
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