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Macroeconomic Environment

In: Business and Management

Submitted By riapark
Words 751
Pages 4
I. The Country
South Korea is situated in South East Asia. It consists of roughly 49 million people and has an annual population growth rate of 0.23%. (CIA, 2011) South Korea is a high-income developed country with a very high standard of living. It has a market economy and is one of the fastest growing and is among the 20 biggest economics in the world making it a member of the G-20 major economies. But it wasn’t always that way, for the past four decades South Korea has displayed diligence in its strength to become a high-tech industrialised economy. During the Asian financial crisis of 1997, South Korea’s GDP plunged by 6.9% due to the country’s high debt and abundance of short-term foreign money borrowing. The government then established numerous economic reforms, one being increasing the amount of foreign investment and imports. This saw the GDP to rise by 9%. (CIA, 2011) Their economy is highly dependent on international trade and is currently the tenth largest importer and the sixth largest exporter on the world scale. South Korea is also one of the few developed countries that have avoided the harsh global depression in 2008. South Korea in the year 2010; had a GDP of approximately USD$990 billion with a growth rate of 6.1%. Their GDP per capita totalled USD$30,200. (CIA, 2011)

II. The Theoretical Basis
For South Korea, I have chosen to use the Keynesian system rather than the Classical system to analyse their economy.
Classical economists argue that the economy is always capable of reaching the natural level of real GDP, which is the level where the economy is fully employed. (Peterson & Estenson, 1996) Unemployment exists in any country and it is unrealistic to think that a country can have full employment at any given time. In appendix 1, it shows that there is a steady rate of unemployment annually of 3.3% with a spike of nearly 5% in the first

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