A Macroeconomic Perspective

A Macroeconomic Perspective

Introduction

The United States has one of the global prosperous and most expanded economics. The country has well-reformed tax regulations leading to high investments, and the financial sector is competitive and stable. On the other hand, South Korea has changed from one of the lowliest regions in the globe in the 1950s to noteworthy manufacturing power (Chun, 2018). The country reflects liberal policies, remarkably sound fiscal and monetary policy leading to high levels of ventures, and the financial sector has undergone consolidated. The main aim of this article is to clarify the influence of inflation, interest rate, unemployment, and other economic indicators in the long-term financial performances for both countries.

Similarities or differences between economies of South Korea and the United States

Trade patterns in both countries

$596B is the exportation, and $471B is the importation of South Korea, which has caused a positive trade balance of $124B. China, the United States, Vietnam, Hong Kong, and Japan are uppermost export terminus, and China, Japan, the United States, Germany, and other Asians are the main import origins of South Korea (Betts, Giri, Verma, 2017). $1.25T is the exportation, and $2.16T is the importation of the United States, which has caused an adverse trade balance of $910B. Canada, China, Japan, and Germany are the uppermost export terminus, and top import origins are China, Mexico, Canada, Japan, and Germany are the main import origins for United States (Betts, Giri, and Verma, 2017).

Economy conduction in both countries

South Korea has created a favorable policy directive for economic development and supporting foreign direct investment. The country has taken an export-oriented financial approach to improving its economy. What is more, the country has accepted the open market economy and is thus negotiating with other states to sign FTAs to enlarge its economic territory worldwide (Steinberg, 2019). Conversely, the United States functions as an open market economy in consumer goods and commercial services. The state also measures everything produced through the gross domestic product. What is more, the state uses the Federal Reserve System to control the United States money supply and manage inflation and unemployment rate.

Population and size of the workforce in both countries

The United States population size is 331,002,651, which is equal to 4.25% of the total world population. The country has 63.1 percent of the American populace qualified to work and contributed to the job market. Additionally, the unemployment rate has increased to 4.4% in Feb 2020, and the country’s monthly earning is 3,915.2 USD in DEC 2019. On the other hand, the population size of South Korea is 51,269,189, which is equal to 0.66% of the total world population. The country workforce participation is 62.6%, the unemployment rate has fallen to 3.3% in Feb 2020, and the country’s monthly earning is 3,307.7 USD in DEC 2019.

Comparison table on the economic indicator of both countries

Economic indicators

Gross domestic product

Inflation

Labor force participation

United States

$20.58 trillion with a GDP growth of 3.5%

1.5%

62.6%

South Korea

$1.62 trillion with a GDP of 2.7%

1.0%

62.6%

Explanation of differences between the economic indicators

The United States is the global largest economy about nominal rates and purchasing power parity. It has a nominal GDP of $ 20.58 trillion, with a GDP growth of 3.5% and$ 21.44 trillion as of the GDP (PPP). However, South Korea is the 12 leading economy in the world to nominal rates and purchasing power parity. It has a nominal GDP of $1.62 trillion with, a GDP growth of 2.7% and $ 2.14 trillion as GDP (PPP).

The inflation rate is the natural rise and fall of economic growth that occurs over time. The current inflation rate for the United States fell to 1.5% in March 2020 due to a slump in gasoline prices, but there is an increase in the prices of food. Nevertheless, the current inflation rate for South Korea dropped to 1.0 percent in March 2020 due to the slowdown in prices of automobiles, and government tax cut has stimulated consumption. Inflation has been stable in both countries due to better policy decisions and managing inflation expectations.

The labor force participation rate in South Korea remained unaffected at 62.6 percent in January and February of 2020 due to working-age has stood at about 8.52 million ( Theoharides, 2020). Nevertheless, the United States’ labor force participation rate has fallen to 62.6 percent in March 2020 due to economic, social, and demographic trends.

The nominal GDP should be used to measure the economic output of the entire country since it is the best way to know the total production of both citizens and companies. GDP growth should be used to measure the year-over-year percent increase in economic output since it is the paramount method to measure both economic developments. The inflation rate should be used to measure the influence of value variations for an expanded set of products since it lets a single value illustration of the increase of the price of goods and services in an economy over a while (Siryana, 2018). The labor force participation rate should be used when examining employment and unemployment data since it measures several individuals who are actively looking for jobs as well as those employed.

Conclusion

The economies of the United States and South Korea are highly developed and mixed. The economy of both countries encompasses production, trade, and the use of goods and services in particular areas. However, there are possible trade wars between China and the United States due to unjust trading practices and rational property embezzlement. South Korea and possible Japan war are due to Japan’s tighter restriction on exports from South Korea (Jo and Lam, 2019). The fallout in commodities could trigger a broader downward cycle by leading companies slash investment. Therefore, countries should put fair traffics on imports and exports to avoid any possible trade wars.

Reference

Betts, C., Giri, R., & Verma, R. (2017). Trade, reform, and structural transformation in South Korea. IMF Economic Review, 65(4), 745-791.

Chun, S. H. (2018). The Economic Development of South Korea: From Poverty to a Modern Industrial State. Routledge.

Jo, Y., & Lam, P. E. (2019). South Korea-Japan Relations in the 2010s: Ambivalent Strategic and Economic Partners?. East Asian Policy, 11(03), 39-49.

Sriyana, J. (2018). Determinants of Inflation in the Local Economy. ETIKONOMI, 17(1), 1-10.

Steinberg, D. I. (2019). The Transformation of the South Korean Economy. In Korea Briefing, 1993 (pp. 31-54). Routledge.

Theoharides, C. (2020). The unintended consequences of migration policy on origin-country labor market decisions. Journal of Development Economics, 142, 102271.