Micro Economics in the Real World - Term Paper Example

The unrestricted mobility of resources and factors of production has made the unbalanced economic performance worse as the developed countries control and regulate economic activities of the lower tier economies at their benefits (Kunz, 56). As reported by the World Bank, the economic performance of India and Germany significantly vary. This can be measured by focusing on GDP, inflation, rate of employment and poverty index. HOW THE GPD OF INDIA COMPARE TO THAT OF GERMANY Being the largest economy in Europe, Germany benefits from a pool of technically gifted labour force, hence her dominance in chemical and machinery industry.

GDP which is the key determinant of growth and development is defined as the “the total market value of all goods and services produced in a country during a given year” The GDP of Germany has been positive over a couple of decades. However, following the 2008-2010 global financial contagion, the steady gross domestic production of Germany significantly declined. In the first quarter of 2012, the GDP of Germany increased by 0.5%, while in the second quarter, it increased by 0.3%. Over the same period, government and household expenditure and exports increased.

On the contrary, fixed investments reported a decline in real value. Private investment and consumption fell following the Euro financial crisis. Amid the global financial and economic crisis, in 2009 Germany posted purchasing power parity (PPP) of $2.182 trillion (Oecd Economic Surveys: Germany, 23). Even during the recession, Germany’s economy recorded positive returns with its GDP ranking sixth globally. 2009 reported the worst economic performance for Germany after posting a GDP of -5%.

The economic growth rate and development (2007-2009) are as graphically represented above. Over the same period (2007-2011), India’s economy posted a positive return with a 5.5% GDP in 2011 and 4.1% in 2007. A report by the KPMG’s executive in India stated, “Whether it (GDP growth) is 5-5.5 per cent or 7-8 per cent, the most important part is that the country is still growing. If you look at the rest of the world.India is still growing at 5-5.5 per cent, it’s a slower growth but it’s a growth” (Kajal, and Moore, 67) In the first quarter of 2012, the performance of the Indian economy slipped because of decline in mining, quarrying, and manufacturing sectors.

This performance was much better than that of the world’s largest economy, United States which posted an economic growth of approximately 1.5% in the gross domestic production (Oecd Economic Surveys: Germany, 87). Measured in purchasing power parity (PPP), the GDP of India was US $2.996 trillion during the 2008 financial period. In official exchange rates, this represented $1.099 trillion. The real economic growth rate for 2008-2009 was approximated to be 9%. INFLATION RATE IN GERMANY AND INDIA Inflation is the persistent rise in the general price level of goods and services in economy measured as a proportion of the base period records.

Inflation is measured using the consumer price index (CPI), which is the critical indicator of inflation. It therefore represents the changes in retail prices of commodities for a specific consumer basket. It is the measure of the purchasing power of the local