Case Study
Economic condition in Greece during the last decade
Below is the table with major Macroeconomic indicators for the Greece economy.
Table 1 Real and Nominal GDP
Table 2 Unemployment
Table 3 Inflation
Assume that in 2016-2019 consumption has increased by 1,800 mln and GDP has increased
approximately by 3,000 mln (see Table 1).
Assume also, that the dynamics of Aggregate Expenditure was the following:
Table 4 Aggregate Expenditure
Years Aggregate Expenditure
2016 175,500
2017 177,850
2018 183,056
2019 187,645
Assumptions: Potential GDP in 2017 was equal to 179,187 mln. Potential GDP in 2019 was 186,874 mln.
Tax multiplier is equal to 2 and government purchases multiplier is -1.2.
Task
Describe economic conditions in Greece during years 2010-2019. Provide good narrative based
on the data provided on the three macroeconomic indicators.
Retrieve appropriate data from the case study, answer the questions below and provide second
part of the narrative:
1. Calculate GDP growth rate in 2017, 2018 and 2019. Calculate average rate of growth in those
years. Provide narrative on growth rate.
2. Explain the meaning of MPC, MPS and Multiplier. Calculate them for Greek economy.
3. Create the table for GDP and Aggregate Expenditure for the years 2016-2019, include columns
for changes in inventories (numbers), change in GDP (increase, decrease), change in
unemployment (increase, decrease). Find the Equilibrium real GDP
4. If the goal is to increase equilibrium real GDP to 185,056 mln, calculate by how much Net Export
needs to be changed. Explain.
5. If investment decreases by 160 mln, calculate the new equilibrium real GDP.
6. Describe the phases of business cycle in 2017 and 2019.
7. Use monetary policy to fix the economy in 2017 and 2019. Describe the activities of Central
Bank. Draw the graphs.
8. Describe how Fiscal policy uses government purchases multiplier and tax multiplier. Now use
Fiscal policy and fix the economy in 2017 and 2019. Explain.
Use those questions to write the essay and provide recommendations to the Central Bank and Government
of Greece.
