Macroeconomics Switzerland - 3998 Words

PART A Introduction The country that we have chosen for analysis is Switzerland. The economy of Switzerland is one of the worlds most stable economies. Its policy of long-term monetary security and political stability has made Switzerland a safe haven for investors, creating an economy that is increasingly dependent on a steady tide of foreign investment. Switzerland has achieved one of the highest per capita incomes in the world with low unemployment rates and a low budget deficit. The service sector has also come to play a significant economic role. *Source: Wikipedia Switzerland in brief * Switzerland’s Real GDP *Source: World Bank Swiss | Year†¦show more content†¦| Lowering the reserve requirement leads to an increase in money supply, which further leads to an increase in investments. Since the investment is increasing, AD will also increase (AD=C+I+G+NX) and AD shifts right back to the full-employment. Assuming the starting point is below full employment. * Switzerland’s Inflation Rate *Source: World Bank In the year 2009, Swiss faced deflation as 2009 is the year that global economy crisis took place. According to the data, the inflation rate of Swiss kept increasing from year 2004 to year 2008, especially in year 2008, the inflation rate shot up from 0.7% to 2.4% because of dwindling oil supplies. Since America was deep in debt and facing a serious financial problem, the US government decided to print US dollar significantly to solve its debt crisis. This led to the depreciation of US dollar against other currencies. As US dollar was used as the global trading currency, the depreciation caused the price of oil and energy to rise sharply. Hedge fund managers who held US dollar were buying a lot of crude oil as their way of keeping profits. 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