Macroeconomics & International Finance for Business Essay

Macroeconomics & International Finance for Business - Essay Example us and significance in the 21st Century, when globalisation and e-commerce-induced technological advancement have rendered corporate existence and future growth subservient on marketing competitive advantages and better skills in a rapidly changing global business environment. There are several factors that could determine a country’s economic progression. It could be as diverse aspects as the availability of roads and infra-structural facilities as the quality of education and the significant technological prowess the country is able to wield in the comity of nations. Resorting to Foreign Direct investments and equity participation of foreign governments or public/ private agencies in investments of government and/or private sectors and also capital repatriation from NRI’s In the context of capital accumulation, the Harrod-Domar Model assumes significance since it is a determinant of the growth rate G. If Y could be represented as GDP and S=Savings, then the growth of savings is determined by GDP-S=SY. The Investments represented by I is an important determinant for the produce as well as increase in capital. Thus, ∆K = ÏÆ'∆Y. Thus, it could be said that for the equilibrium point to be reached, a consensus needs to be made between demand and supply of a country’s produce. Hence I = S. This model is important since the equilibrium growth rate of the output = Ratio of the marginal propensity to save and the capital=output ratio. How the economy is growing is based on the growth of the capacity of the economy to produce as compared with the demand of the produce of the state. If, in this hypothetical instance, the marginal propensity to consume out of the Gross Domestic Product (GDP) is 0.7, then the marginal propensity to save is 0.3, which is inclusive of all types of savings. The equilibrium growth rate = propensity to save/capital output ratio, and in this case, it would be 0.3/3 or 10% annual growth rate. Thus, the position in this hypothetical