Assignment of Fin-2209: Macroeconomics

A Report On

“A

case stu

dy o

f Ba

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ladesh

- Infla

tion, U

nem

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ymen

t, Gro

wth

Tren

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Saud Ahmed

Course Instructor/ Lecturer,

Department of Finance,

Faculty of Business Studies

Jagannath University, Dhaka

Sultan Ahmed Khan

Representative of the group

Epimetheus

BBA 3rd Batch

Department of Finance,

Faculty of Business Studies

Jagannath University, Dhaka.

Submitted by

Submitted to

Group Name: Epimetheus

Group No:

Name of the members of the group:

Serial No: Name of the members of the group Roll Number

01 Sultan Ahmed Khan 091597

02 Md. Mynul Islam 091633

03 Mamunur Rashid 07882747

04 Md. Mofazzal Hossen 091615

05 Sharjil Ahmed 091623

06 Md. Anik Mahmud 091636

07 Protiva Talukder 091602

08 Md. Mehedi Hasan 091590

09 Mohammad Didarul Islam Khan 091613

Group Representative: Sultan Ahmed Khan.

Group Coordinator : Md. Mynul Islam.

Contact : epimetheus.jnu@gmail.com

May 02, 2011

The Course Instructor,

Saud Ahmed,

Lecturer,

Department of Finance,

Jagannath University, Dhaka.

Sub: Thanks giving letter to the respective faculty member.

Sir,

We are the student of Department of Finance (3rd batch) of Jagannath University, Dhaka & also from

the group named “Epimetheus”. We are very much enthusiastic about our presentation. We are

really happy to have such a presentation of challenging and interesting like this presentation & also thanks to you for making us worthy for corporate. Our presentation topic is “A case study of

Bangladesh- Inflation, Unemployment & Growth trend”. We have learned many things from

this topic which will help us in future to conduct as an analyst of economics. There were some

obstacles we have faced at the time of collecting data about our topic. But we have overcome all the

obstacles by the endeavor effort by each member of our group and tried our best to give an overview

of our topic.

We the group “Epimetheus” tried our best to make this presentation attractive, impeccable,

interesting, informative and enjoyable by the help of electronic and print media in association with

our honorable teacher, mentor, counselor, instructor and advocate Saud Ahmed. We are really grateful

to him. We had limitations at the time preparing presentation. So mistakes may occur in our

demonstration of our presentation. We hope that, you will exempt our mistakes.

Thanking in anticipation,

Yours Fidel,

Sultan Ahmed Khan

Group Representative,

Group-“Epimetheus”

BBA 3rd Batch

Department of Finance

Jagannath University,Dhaka.

First of all we would like to thank the Almighty for giving us the strength, and the aptitude to

complete this report within due time. We are deeply indebted to our course teacher, mentor,

and counselor, Saud Ahmed for assigning us such an interesting topic named “A cause

study of Bangladesh- Inflation, Unemployment and Growth Trend”. We also express the

depth of my appreciation to our honorable course teacher for his suggestion and guidelines,

which helped us in completing this report.

Inflation, unemployment and growth trend are the major factor of macro economics. Losing

the purchasing power and increasing the cost of production indicates the high rate of

inflation. Unemployment occurs when people are without jobs and they have actively looked

for work within the past four weeks. The trend of the growth of the real GDP is called

Growth Trend. Economic growth is primarily driven by improvements in productivity.

However, inflation & growth rate have both positive & negative relationship depending on

situation. Moreover, inflation and unemployment have a negative relationship. All the factors

are interrelated and at the time of analyzing one must consider each and every factor with

equal consideration. If we analyze the economical condition of our country it is clear that

inflation is higher in recent years comparing with past decade. Growth trend is upward till the

inflation rate is 7 percent. After that the trend gets downward. At the same time

unemployment rate is inverse all the time with inflation rate maintaining contractionary &

expansionary policy. Inflation fluctuates all the time because of the fluctuation of the money

supply. But in recent years, we came to know that international affairs are influencing to

increase the inflation rate. Consistent budget deficit and exchange rate deteriorate the

economic growth which directly relates with unemployment & inflation.

NAME Page no

Executive Summary

Chapter- 01

Introduction

1.1 Introduction 01

1.2 Rational of the study 01

1.3 Objective of the study 02

1.4 Scope of the study 02

1.5 Methodology of the study 02

1.6 Limitations of the study 02

Chapter- 02

Body of the term paper

Inflation 03

Effect on the economy 03

Causes behind inflation 05

Historical trend analysis 07

Limitation of economic system & needed

step

10

Unemployment rate 11

Effect of unemployment 12

Causes behind unemployment 14

Aftermath of unemployment 17

Needed steps 18

Growth Trend 19

Relationship with inflation 22

Historical trend & needed step 23

Chapter-03

Findings of the study 24

Conclusion 25

Bibliography 25

Contents of Tables, Graphs

NAME Page No

Trend of inflation 07

Trend of unemployment 16

Trend of growth trend 21

Chapter- 01

Introduction

“Too much money in circulation causes the money to lose value”-this is the true meaning of

inflation.

“Unemployment occurs when people are without jobs and they have actively looked for work

within the past four weeks”-ILO.

The trend of the growth of the real GDP is called Growth Trend. Economic growth is

primarily driven by improvements in productivity.

In this report we tried to show that how inflation, unemployment, growth trend are related

each other & how important it is for economy & how it works in our country.

Rationale of the study

The case study is assigned by our course teacher Saud Ahmed as a part of our “Macro

Economics” course. The topic of our case study is “A case Study of Bangladesh: Inflation,

Unemployment, and Growth Trend”. By conducting this study we can enhance our

knowledge and skill to apply various research methods in professional life on higher

educational life. The report has given us a chance to raise our quality in developing research

instrument and its applications. By doing so, we can boost our acceptability in job market and

develop our real life knowledge.

Objective of the Case Study

Primary objective

The main objective of the study is to know how the factors of macroeconomics work in our

country.

Secondary objective:

The case study has the following objectives:

To know about Inflation, unemployment, Growth Trend.

How inflation, Unemployment and Growth Trend fluctuate.

Relationship among the inflation, unemployment and growth trend.

Causes behind the inflation, unemployment and growth trend.

Scope

There were huge scopes to work in the area of this Case Study. Considering the dead line,

and exposure of the paper has been wide-ranging. The study “A case Study of Bangladesh:

Inflation, Unemployment, and Growth Trend” has covered overall scenario of

macroeconomics situation of Bangladesh. It has measured the living standard of mass people.

We have a chance to work on the economic variable used in modern economic world. By

doing the assignment, we are able to know that the importance of inflation, unemployment &

growth trend to assess how the people of the country living in. In the case study we have

showed how the above variables are inter related on each other.

Methodology

We have used the concept of the course, information of the case study.

Sources of Data

Here the secondary sources of information were used. The secondary sources are:

Books.

Website.

Limitations

While conducting the report on “A case Study of Bangladesh: Inflation, Unemployment,

and Growth Trend”, some limitations were yet present there:

Because of time shortage many related area can’t be focused in depth.

Website in different organization of Bangladesh contains poor information.

Recent data and information on different activities was unavailable.

Chapter-2

Inflation

Definition

“Too much money in circulation causes the money to lose value”-this is the true meaning of

inflation. The popular opinion about the costs of inflation is that inflation makes everyone

worse off by reducing the purchasing power of incomes, eroding living standards and adding,

in many ways, to life’s uncertainties.

In economics, inflation is a rise in the general level of prices of goods and services in an

economy over a period of time. Inflation refers to a rise in prices that causes the purchasing

power of a nation to fall. Inflation is a normal economic development as long as the annual

percentage remains low; once the percentage rises over a pre-determined level, it is

considered an inflation crisis.

In another word “Inflation means that your money won’t buy as much today as you

could yesterday”.

Definition of Inflation rate (consumer prices)

This entry furnishes the annual percent change in consumer prices compared with the

previous year's consumer prices.

The inflation rate is the percentage rate of change of a price index over time.

Effect on the economy

Effect of Inflation

General

Negative

Positive

General Effect

An increase in the general level of prices implies a decrease in the purchasing power of the

currency. That is, when the general level of prices rises, each monetary unit buys fewer goods

and services. Increases in the price level (inflation) erode the real value of money (the

functional currency) and other items with an underlying monetary nature (e.g. loans and

bonds). For example if one takes a loan where the stated interest rate is 6% and the inflation

rate is at 3%, the real interest rate that one are paying for the loan is 3%. It would also hold

true that if one had a loan at a fixed interest rate of 6% and the inflation rate jumped to 20%

one would have a real interest rate of -14%.

Negative Effect

High or unpredictable inflation rates are regarded as harmful to an overall economy. They

add inefficiencies in the market, and make it difficult for companies to budget or plan long-

term. Inflation can act as a drag on productivity as companies are forced to shift resources

away from products and services in order to focus on profit and losses from currency

inflation. Uncertainty about the future purchasing power of money discourages investment

and saving and inflation can impose hidden tax increases.

In case of international trade, ‘Higher inflation in one economy than another will cause the

first economy's exports to become more expensive and affect the balance of trade’

Positive Effect

Positive effects include ensuring central banks can adjust nominal interest rates (intended to

mitigate recessions), and encouraging investment in non-monetary capital projects. It puts

impact on Labor-market adjustments, Room to maneuver, Mundell-Tobin effect, Instability

with Deflation etc.

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