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Inflation and Unemployment

In: Social Issues

Submitted By yy244131437
Words 2059
Pages 9
Inflation and unemployment were not improved by monetary policy
Abstract
The global financial crisis made a long term negative effect on the economy all over the world as well as New Zealand. GDP and inflation decreased with a high level of unemployment rate. This essay is going to discuss the effect of the actions from reserve bank. According to their response, the IS-LM, AD-AS and Phillips models will be used to analyze the effect of change in OCR on economic activities. Furthermore, some previous literature will be used in this essay which is relative to some problem happened during the recession.
Introduction
There is a big impact on the economic environment following the 2008 financial crisis. New Zealand faced a negative effect on unemployment rate, income, inflation and output and etc. as an important part of developed country. The main aim of this essay is to investigate what monetary policy has been used in response to the recession and whether it is useful to make a significant recovery.
The financial crisis can be seen as a very serious problem in New Zealand. The stock market got hit seriously because the investment, income, confidence, employment rate etc. all fall. During the recession, the unemployment rate rose from a low of 3.5% in December of 2008 to a high level of 7.3% in June of 2012. (TRADING ECONOMICS, 2013) The New Zealand GDP had a negative growth during 2008 and 2010 because many businesses shut down and the unemployment rate increased. The economy was going to recover after 2010. However, the GDP growth rate was very slow. The graph below shows the annual GDP growth rate. It is clearly that the GDP of NZ got a serious hit by the global financial crisis. (TRADING ECONOMICS, 2013)

The following part of essay will include literatures which regard to the effect of financial crisis on NZ economy. It will contain

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