Three Loner
Autor: Pracheth Reddy • October 24, 2016 • Case Study • 330 Words (2 Pages) • 668 Views
Business Cycles in France
GDP Growth Trend
Ad expected from developed countries, France has had a stable GDP growth rate with time. The sharp decline in growth rate in 2009 is attributed to the global recession.
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Unemployment/Consumption/Investment Growth Trend
As expected, unemployment shows a decreasing growth trend when GDP growth rates are on a positive side. It is evident that due to 2009 global recession, France faced a sudden spike in the unemployment growth.
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Most of the investments (close to 50% and higher) in France are in the corporate sector, followed next by the Government and Household sector. The investments growth rates are almost constant expect in 2009, where investments fell sharply due to global recession.
AS/AD model for France
The unemployment fluctuations are mainly driven by AS/AD model. The effects of Aggregate shock are longer in France because of sluggish adjustments in labor market and increase in the interest rates.
Fiscal Policy
France has experienced a rise in accumulation of public debt. Former President of France used the fiscal policy measures like Austerity, Budget cuts and tax increases to stimulate the economy and reduce the budget deficit. Current President Hollande was elected in 2012 on a campaign to eliminate the budget deficit through higher taxes on wealthy while maintaining the government spending.
In 2012, at 56% of GDP, public spending in France was higher than in any other EU country. France was in a danger zone and any slippage in reaching targets of budget deficits would lead to a dead spiral. Auditors suggested that even if tax increases are necessary, the effort to reduce the deficit should focus on spending. With the French economy growing slowly, Hollande revaluated his fiscal policy and pledged to reduce government spending.
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However, according to a poll published by Le Parisien, more than seven out of ten French remain unconvinced. Hollande could not fulfill his promise to veto the plant fiscal compact.
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