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But now, I think Europe's economy is in a bad state with recession, low inflation rate and high unemployment rate which indicates a poor performance of economy.

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But now, I think despite being a rich country, that Europe is really not doing well economically and people living in Europe are facing many macroeconomic problems, such as unemployment, recession and deflation. If the EU government does not solve the roots of these problems, the EU will face greater problems next time.

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But now, I think, Europe's economy is super bad! The policies they use are also not very helpful as Monetary policy was being used and interest rates reduced to the negative territory. Investors will not find it attractive and thus worsening the economic growth as investments decreases.

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In opinion, supply side interventionist policies is the most effective policy.
The objectives of the supply side interventionist policy are:

1.Improve incentives to look for work and invest in people’s skills

2.Increase labour and capital productivity

3.Increase occupational and geographical mobility of labour to help reduce the rate of unemployment

4.Increase investment and research and development spending

5.Promoting more competition and stimulate a faster pace of invention and innovation to improve competitiveness

6.Provide a platform for sustained non-inflationary growth

7.Encourage the start-up and expansion of new businesses / enterprises especially those with export potential

8.Improve the trend rate of growth of real GDP

These focuses cover the major problems Europe's economy is going through. Thus by using interventionist policy, all issues would be solved. Although this is more of for Long Run, it is okay as Europe economy will start to be stable and healthy.
The other 2 policies may be effective in the sense that it can solve the problem in the short run. However the concern is can it solve in the long run ? Maybe not.Thus i strongly believe that interventionist policy is the best

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I used to think that the economy of Europe was very stable and an open economy since they were open to trade and they have many popular products like L'Oreal

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Unemployment rate in European Union

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European Union Unemployment Rate | 2019 | Data | Chart | Calendar | Forecast

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Unemployment Rate in European Union remained unchanged at 6.40 percent in April from 6.40 percent in March of 2019. Unemployment Rate in European Union averaged 8.85 percent from 2000 until 2019, reaching an all time high of 11 percent in February of 2013 and a record low of 6.40 percent in March of 2019.

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UN+ will cause consumers to have less purchasing power, hence consumption (C) falls. The fall in C will cause AD to fall and AD will shift from AD1 to AD2. The fall in AD results in the fall in iPONY, hence the fall in output, production and national income. General price level will fall from P1 to P2, resulting in deflation and real national income will fall from Y1 to Y2, resulting in the fall in economic growth.

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The European Union, in a bid to encourage interstate dependency and trading relationships, has abolished all forms of tariffs on trading and adopted a common currency. The move has definitely made this strong economic region even stronger. Such policies have resulted in Europe's trade running smoothly internally and internationally.

In figures, European trade is the biggest in the world and is the source of all major heavy engineering products. Led by nations such as Germany, Italy, the UK and France, Europe's trade is dominated by reliable automobiles and heavy machinery.

Europe Trade, Exports and Imports

Europe's exports were reported at $1.952 trillion in 2007 and the continent ranked first across the globe in terms of export volumes. This volume has witnessed a positive increase ever since the currency was standardized.

The main commodities exported were:

European imports were recorded at $1.69 trillion and the continent ranked first in terms of import volume as well.

The main commodities imported were:

Here is the list of commodities that the various countries of the European Union manufacture and export:

Automobiles - France, Italy, UK, Germany, Czech Republic, Spain

Fashion- Italy and France and other western European countries

Aircraft- France and Germany

Machinery- The entire continent

Electronics- Italy, The Netherlands, Germany

Food products such as wine, beer, cheeses, chocolates- Western Europe

Pharmaceuticals- Switzerland

Military equipment- UK, France, Italy, Germany, Russia

Industrial chemicals- Most countries

Germany remains the largest player in terms of European trade, while the UK remains a financial hub for most activities in Europe.

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The European Union, in a bid to encourage interstate dependency and trading relationships, has abolished all forms of tariffs on trading and adopted a common currency. The move has definitely made this strong economic region even stronger. Such policies have resulted in Europe's trade running smoothly internally and internationally.

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I used to think that Europe's economy is in good condition and has sustainable economic growth with low unemployment rate.

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Unemployment in Europe

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Eurostat estimates that 21.651 million men and women in the EU-28, of whom 16.634 million were in the euro area (EA-19), were unemployed in February 2016. Compared with January 2016, the number of persons unemployed decreased by 59 000 in the EU-28 and by 39 000 in the euro area. Compared with February 2015, unemployment fell by 1 971 000 in the EU-28 and by 1 303 000 in the euro area.

The euro area seasonally-adjustedyou unemployment rate was 10.3 % in February 2016, down from 10.4 % in January 2016, and from 11.2 % in February 2015. The EU-28 unemployment rate was 8.9 % in February 2016, stable compared to January 2016, and from 9.7 % in February 2015.

Among the Member States, the lowest unemployment rates in February 2016 were recorded in Germany (4.3 %) and the Czech Republic (4.5 %). The highest rates have been observed in Greece (24.0 % in December 2015) and Spain (20.4 %).

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1. Expansionary Fiscal Policy

increase G or decrease T to increase AD

to resolve recession and cyclical unemployment

increase in G on public projects will immediately raise AD assuming other components of AD remain unchanged

decrease in T will lead to a rise in C and I as consumers have more disposable income to spend on and improve the profitability of investment

increase in AD will lead to iPONY increase, thus increase in EG

however, the size of the multiplier is determined by the marginal propensity to withdraw (MPS, MPT, MPM)

a country with high marginal propensity to withdraw will have small multiplier, thus it will be difficult for exp FP to raise output and employment to desired level

hence, AD does not increase by the full extent

2. Expansionary Monetary Policy

lowering of interest rates

households: lower cost of borrowing → less expensive to purchase goods and services on credit → increase C

firms: lower COB → higher marginal efficiency of  investment (MEI) → increase I

increase C and I → increase AD

external economy: outflow of hot money → depreciation of local currency → increase X competitiveness → increase (X-M) → increase AD

however, demand for consumption and/or investment may ne interest inelastic → consumer and business sentiments are poor

hence, AD might not rise significantly

3.  Interventionist

increase G on education, training and healthcare

improve labour mobility

more education and upgrading of skills for workers will help ensure the employability of workers

Singapore's continuing education and training (CET) masterplan

however, workers may be reluctant to undergo education and training

it will require a change of mindset especially for older workers and employers

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The Europe economy trade in various sectors and industries, with many trading partners within Europe and outside of Europe.

Amongst the domestically produced products in Europe, their Machinery, Motor vehicles, Aircraft, Plastics, Pharmaceuticals and other chemicals, Fuels, Iron      and steel, Nonferrous metals, Wood, pulp and paper products, Textiles, Meat, Dairy products, Fish and Alcoholic beverages are the highest contributor to Europe's exports between EU countries and globally. However, European consumers too spend on imported goods from other countries like China due to its cheaper prices.

Hence it is safe to say that the countries within the EU are open economies due to free trade and lack of trade barriers. For European countries outside the EU, there may be trade barriers imposed alongside transport costs.

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Eurozone growth lags behind the US and the rest of the EU

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Fresh Recession Cause Eurozone to collapse

The eurozone's 19 member states only managed to grow by 0.3% in the last three months of 2015, despite asset purchases from the European Central Bank and the collapsing price of oil.

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A recession in Europe could lead to the collapse of the eurozone, as the single currency would buckle under the political turmoil unleashed by a fresh downturn, a leading investment bank has warned.

In a research note titled "Close to the edge", economists at Swiss bank Credit Suisse warned the fate of monetary union hangs in the balance if Europe's policymakers are unable to ward off another global slump and quell anti-euro populism.

"The viability of the euro is contingent on the current recovery," said Peter Foley at Credit Suisse.

"If the euro area were to relapse back into recession, it is not clear it would endure."

Although the bloc's nascent recovery was likely to persist in the coming...

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Fresh recession will cause eurozone collapse, warns Swiss bank

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A recession in Europe could lead to the collapse of the eurozone, as the single currency would buckle under the political turmoil unleashed by a fresh downturn, a leading investment bank has warned.

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I used to think that Europe only consisted countries in the EU and that they are a closed 'society'.

I used to think that Europe's economy relied very heavily on their own products and free trade between the countries in the EU only.

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Recently, Europe has been experiencing a sluggish economic growth of 0.3% in 2016

- due to :
1) the Gross domestic product in Italy — the eurozone’s third-largest economy — rising by just 0.1 per cent in the fourth quarter (not meeting expectations)
2) Greece’s economy falling back into recession

This causes:
1) investors to be concerned over their low profitability and large stock of non-performing loans (poor economic outlook by the investors)

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I used to think that Europe is a stable and rather exclusive economy (European Union).

I also used to think that Europe benefitted greatly from the large influx of tourists due to the rich culture and history present in the area.

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I used to think that Europe's economy focuses mainly on the production of cereal.

I used to think that Europe has major companies to support it's economy, such as Anheuser-Busch InBev, largest beer company, and L'Oreal Group.

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Firstly, Europe's Inflation rate is too low. Inflation is the increase in the general price levels. Too low of an inflation rate is unhealthy for the country's economy. Current inflation rate is -0.2% as stated by tradingeconomincs.com
Also, 'The main reason for having a higher inflation rate would be to prioritise economic growth and help to reduce unemployment. Higher inflation would also help to contain and reduce government debt to GDP ratios – without excessive austerity."

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Now, I want you to think about how your ideas about Europe's economy has changed as a result of what your team has been discussing whilst completing the task above. Again in just a few sentences write down what you now think about  Europe's economy. Start your sentences with,

“But now, I think…”

Each of you must post your response in the space below this box.

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Task 3: Based on the findings from Task 1, One of your team members will need to address the policies to solve this problem.

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Task 3: Based on the findings from Task 1, One of your team members will need to address the policies to solve this problem.

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Explain and evaluate the use of 3 policies

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Task 2: One of your team member will also need to find out the current nature or structure of your economy, supported with research (eg news paper articles or video)

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Task 2: One of your team member will also need to find out the current nature or structure of your economy, supported with research (eg news paper articles or video)

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For example, is it a small and open economy? Is it a large economy? Is the economy an export-driven economy? Is it undergoing any structural changes? Please upload the links here too.

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 Task 1: Two of your team members in your cabinet need to identify the top macroeconomic problems your country is facing. Other than the video clip and newspaper provided in this page, you will need to do research (eg news  paper articles) and thereafter post in this wall.  Explain the potential sources of these macroeconomic problems your country is facing.

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 Task 1: Two of your team members in your cabinet need to identify the top macroeconomic problems your country is facing. Other than the video clip and newspaper provided in this page, you will need to do research (eg news  paper articles) and thereafter post in this wall.  Explain the potential sources of these macroeconomic problems your country is facing.

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Please write your response here, or you may just add new post. Use economic analysis (for example ADAS analysis) in your answers where possible.

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THE world economy is not in good shape. The news from America and Britain has been reasonably positive, but Japan's economy is struggling and China's growth is now slower than at any time since 2009. Unpredictable dangers abound, particularly from the Ebola epidemic, which has killed thousands in West Africa and jangled nerves far beyond. But the biggest economic threat, by far, comes from continental Europe.

Now that German growth has stumbled, the euro area is on the verge of tipping into its third recession in six years. Its leaders have squandered two years of respite, granted by the pledge of Mario Draghi, the European Central Bank's president, to do "whatever it takes" to save the single currency. The French and the Italians have dodged structural reforms, while the Germans have insisted on too much austerity. Prices are falling in eight European countries. The zone's overall inflation rate has slipped to 0.3% and may well go into outright decline next year. A region that makes up almost a fifth of world output is marching towards stagnation and deflation.

Optimists, both inside and outside Europe, often cite the example of Japan. It fell into deflation in the late-1990s, with unpleasant but not apocalyptic consequences for both itself and the world economy. But the euro zone poses far greater risks. Unlike Japan, the euro zone is not an isolated case: from China to America inflation is worryingly low, and slipping. And, unlike Japan, which has a homogenous, stoic society, the euro area cannot hang together through years of economic sclerosis and falling prices. As debt burdens soar from Italy to Greece, investors will take fright, populist politicians will gain ground, and-sooner rather than later-the euro will collapse.

This parrot has ceased to be

Although many Europeans, especially the Germans, have been brought up to fear inflation, deflation can be still more savage (see article). If people and firms expect prices to fall, they stop spending, and as demand sinks, loan defaults rise. That was what happened in the Great Depression, with especially dire consequences in Germany in the early 1930s.

So it is worrying that, of the 46 countries whose central banks target inflation, 30 are below their target. Some price falls are welcome. Tumbling oil prices, in particular, have given consumers' incomes a boost (see article). But slowing prices and stagnant wages owe more to weak demand in the economy and roughly 45m workers are jobless in the rich OECD countries. Investors are starting to expect lower inflation even in economies, such as America's, that are growing at reasonable rates. Worse, short-term interest rates are close to zero in many economies, so central banks cannot cut them to boost spending. The only ammunition comes from quantitative easing and other forms of printing money.

The global lowflation threat is a good reason for most central banks to keep monetary policy loose. It is also, in the longer term, a prompt to look at revising inflation targets a shade upwards. But the immediate problem is the euro area.

Continental Europe's economy has plenty of big underlying weaknesses, from poor demography to heavy debt and sclerotic labour markets. But it has also made enormous policy mistakes. France, Italy and Germany have all eschewed growth-enhancing structural reforms. The euro zone is particularly vulnerable to deflation because of Germany's insistence on too much fiscal austerity and the ECB's timidity. Even now, with economies contracting, Germany is still obsessed with deficit reduction for all governments, while its opposition to monetary easing has meant that the ECB, to the obvious despair of Mr Draghi, has done far less than other big central banks in terms of quantitative easing (notwithstanding this week's move to start buying "covered bonds").

If there was ever logic to this incrementalism, it has run out. As budgets shrink and the ECB struggles to convince people that it can stop prices slipping, a descent into deflation seems all too probable. Signs of stress are beginning to appear in both the markets and politics. Bond yields in Greece have risen sharply, as support for the left-wing Syriza party has surged (see article). France and Germany are trading rhetorical blows over a new budget proposal coming out of Paris.

Joining the bleedin' choir invisible

If Europe is to stop its economy getting worse, it will have to stop its self-destructive behaviour. The ECB needs to start buying sovereign bonds. Germany's chancellor, Angela Merkel, should allow France and Italy to slow the pace of their fiscal cuts; in return, those countries should accelerate structural reforms. Germany, which can borrow money at negative real interest rates, could spend more building infrastructure at home.

That would help, but not be enough. It is a bit like the early years of the euro debacle, before Mr Draghi's whatever-it-takes pledge, when half-solutions only fed the crisis. Something radical is needed. The hitch is that European law bans many textbook solutions, such as ECB purchases of newly issued government bonds. The best legal option is to couple a dramatic increase in infrastructure spending with bond-buying by the ECB. Thus the European Investment Bank could launch a big (say €300 billion, or $383 billion) expansion in investments such as faster cross-border rail links or more integrated electricity grids-and raise the money by issuing bonds, which the ECB could buy in the secondary market. Another possibility would be to redefine the EU's deficit rules to exclude investment spending, which would allow governments to run bigger deficits, again with the ECB providing a backstop.

Behind all this sits a problem of political will (see article). Mrs Merkel and the Germans seem prepared to take action only when the single currency is on the verge of catastrophe. Throughout Europe people are hurting-in Italy and Spain youth unemployment is above 40%. Voters vented their fury with the established order in the EU's parliamentary elections earlier this summer, and got very little change. Another descent into the abyss will test their patience. And once deflation has an economy in its jaws, it is very hard to shake off. Europe's leaders are running out of time.

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THE world economy is not in good shape. The news from America and Britain has been reasonably positive, but Japan's economy is struggling and China's growth is now slower than at any time since 2009. Unpredictable dangers abound, particularly from the Ebola epidemic, which has killed thousands in West Africa and jangled nerves far beyond.

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Video Clip on Eurozone economy: Italy

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How did Italy become more sceptical about membership in the EU? FT Rome bureau chief James Politi visits Parma in northern Italy and asks students, shop owners, the mayor and business people about the matter.

Transcript

See our accessibility page for more information about transcripts

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How did Italy become more sceptical about membership in the EU? FT Rome bureau chief James Politi visits Parma in northern Italy and asks students, shop owners, the mayor and business people about the matter. See our accessibility page for more information about transcripts

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Videoclip on the Eurozone Economy

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The European Central Bank has jolted investors with a bold package designed to stimulate the eurozone's economy, cutting interest rates to a new low and expanding QE. FT economics editor Chris Giles talks to FT editor Lionel Barber about whether it will be enough.

Transcript

See our accessibility page for more information about transcripts

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The European Central Bank has jolted investors with a bold package designed to stimulate the eurozone's economy, cutting interest rates to a new low and expanding QE. FT economics editor Chris Giles talks to FT editor Lionel Barber about whether it will be enough.

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Task 4: Based on the findings from Task 1,2 & 3, the group leader will evaluate and synthesize (similar to writing evaluative conclusion) whether the use of these policies will be effective in addressing these macroeconomic problems. 

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Task 4: Based on the findings from Task 1,2 & 3, the group leader will evaluate and synthesize (similar to writing evaluative conclusion) whether the use of these policies will be effective in addressing these macroeconomic problems. 

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You may wish to use specific judging criteria to assess the suitability of these policies.

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As an economic advisor (group leader), your role is to recommend and justify whether the use of policies have been effective in tackling recent macroeconomic problems faced by your country. Your job is to discuss with a panel of ministers (your team members) to do research and to propose solutions (policies) to solve these problems. Thereafter, you need to evaluate if the use of these policies  are effective or appropriate for your country.

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Before commencing the activities (Task 1 to 4 below) spend 3 minutes to think of this question:

You may have some initial ideas about Eurozone economy. In just a few sentences, I want you to write what it is that you used to think about Eurozone economy. Take a minute to think back and then post your response in the following format:

“ I used to think that Europe is ..........................

Each of you must post your response in the space below this box.