Macroeconomic Analysis Essay Example | Topics and Well Written Essays - 500 words

Macroeconomic Analysis - Essay Example In the short run there would be relatively high rates of unemployment due to reduced money supply in an economy (Piros, 2013). Borrowing of funds will be quiet expensive as the rates of interest would be hiked to discourage the general public from holding more funds as the population remains relatively low decreasing the demand. Since the central bank offering more interest at present, the general public will have desire to invest in the feds proposal and limit other wants as it would be profitable to hold the government securities than to hold money (Mariathasan, 2010). The population in the nation is relatively low with little income at their disposal and with an increasing levels of unemployment, an increase in supply to any public commodity will not yield profits rather losses. Even if the feds invests the money for the improvement of the society, in the short run the economy will have to bear with increasing rates of inflation due to the reduced circulation of money Due to the economic changes above, I would advise my uncle not to invest in the shops and houses as it would be relatively expensive as the rates of construction will be relatively high due to the high interest rates (Mariathasan, 2010) Furthermore, the demand for the commodities will be highly reduced due to the decrease of money that circulates in the economy leaving consumers with relatively small amounts to spend on utilities like new housing. Housing construction are investment that is majorly determined by the population of the country. A small population will make the venture unattractive while taking a much longer time to recover its cost which will only results in holding capital that would have been otherwise invested elsewhere like in the government securities which would bring instant income in the present and the future. The economy will also