Is GDP below trend, is there a significant GDP gap?

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Macroeconomic position of Iran

Essay question: “Choose any one country, assess its current macroeconomic position and discuss what policy options might be adopted (or have been adopted) by the monetary and fiscal authorities in the past year. What should the monetary and fiscal authorities be doing over the next year or so?” The country of choice is Iran. Detail required for writing: The central focus should be on GDP and its recent history. Is GDP below trend, is there a significant GDP gap? [For major countries, estimates of the GDP gap are available from the IMF, but for others you would have to compare actual GDP with its trend.] Is it positive or negative? If negative, why is demand weak… it C, I, G or net trade? Look for other indicators of slack or overheating, what is happening, for example, to inflation and unemployment? If inflation is high the economy may be overheating, but if unemployment is high and rising then the economy may need some stimulus. What is the state of the balance of payments? Does the economy need some stimulus or some slowing down? In most countries the dominant issue has been the recent global crisis. This has cut demand and led to output falls and higher unemployment. So a sensible focus would be: how has the crisis affected the country in question and what have the authorities done to try to mitigate the effects? What else should now be done? What have monetary and fiscal policy makers been doing recently? Have there been announcements of tax or spending increases or decreases by the government? Have official interest rates been rising or falling? On the basis of your analysis what would you recommend that policy makers should do next? The answer may be “nothing” but that would mean that you think things are as good as they can be.
Name:Institution:Course:Tutor:Date:Iran`s macroeconomic positionIntroduction Iran`s economy has been identified as among the largest economies globally through power parity purchasing and with regard to official claims of Iran; it is likely to improve considerably by the year 2015. The economy is a transitional and mixed economy, having a great public sector together with a 50% centrally planned economy. In addition, Iran`s economy is diversified within more than forty industries which are involved directly in Tehran Stock exchange (Shorrow 2004, p.284). Great religious foundations presence makes the economy unique. The spending by the religious foundations is usually beyond 30% regarding the spending by central government. It is evident that Iran is among the economies which have sustained positive growth following the experienced worldwide financial crisis of the year 2008. History concerning Iran`s economy Before 1979, the economic development of Iran was rapid. Being a society which was agricultural based traditionally, by the year 1970s it had gone through significant economic modernization and industrialization (Mau 2001, p.369). This growth pace had dramatically slowed by the year 1978 when capital flight attained an amount between $30 and $40 billion prior to the revolution. The long-term objectives which have been held by the government from the revolution time have been comfortable living standards for citizens, full employment and economic independence, although by the closing stages of 20th century, Iran`s economy experienced a variety of obstacles (Olson 2000, p.274). As a result of the nationalizations within 1979 together with Iran-Iraq war outbreak, more than 80% concerning the economy of Iran ended up being controlled by the government. Within the beginning of 21st century, the highest domestic gross product was produced by service sector, the second highest was industry (manufacturing and mining) and agriculture. The estimate of GDP was $383.3 billion in 1998, or 5,470 dollars within a year (Looney 2007, p.190). Growth patterns indicate that the held GDP in Iran has the capacity to double in the coming five years. In view of the attained figures together with the nation`s industrial base which is small although diversified, Iran was categorized by United Nations as semi-developed within the year 1998. Energy subsidies were found to be huge due to the fact that the nation has energy inefficiency. The year 2009 was marked by a situation where in research ratio to GDP amounted to 0.87% in opposition to the target of 2.5% by government. In accordance with Goldman Sachs, the country is capable of being among the largest economies worldwide within 21st century. From the time of revolution in 1979, government spending within Iran has on average been 13% upon general affairs, 15% upon national defense, 17% upon economic matters, and 59% upon social policies (Rugman 2001, p.877). Amid economic and social affairs, expenses have average...

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