GREECE

The country:
Economic Greece is a capitalist country, with 40%of its Gross Domestic Product belonging to the public sector. 2 0% of the workforce are immigrants, and they usually work in unskilled, or agricultural jobs. Tourism is a major industry, as it accounts for 15% of the countrys GDP. 3.3% of the GDP is from the EU aid, as Greece is one of the major beneficiaries (The World Factbook, 2O11). Between 2003 and 2007, the countrys economy grew by close to 4.0%, due to the 2004 Olympic Games, held in Athens. This was because they had greater available credit, so it increase d consumer spending. In 2009, however, the country went into recession. The government tightened by 2% that year, and by 4.8% in the next. In 2 009, they violated the EUs Growth and Stability Pact, as their deficit h ad reached 15.4% of their GDP. It reduced to 9.4% in 2010, however unemployment rose to 12% (The World Factbook, 2O11). In 2010, the IMF and Eurozone governments, gave Greece $147 billion as emergency short term and medium term loans, to pay out the creditors. The Greek government announced increases in tax and cost reductions adding up to $40 billion in three years.

Demography Greece has an approximate population of 10,760,136 (July 2011 est.), with 42.5years being the median age. 61% of the total population seems to be urbanized (2010). The labor force is made up off 5.013 million people (2010 est.). 12.4% of them in agriculture, 22.4% in industries, and 65.1% in services (2005 est.). Due to recession, the unemployment rate has risen to 12.5% (2010 est.) (Greece Demographics Profile 2O11, 2O11).

Social Greek culture and society is very rich and diverse. Since they are situated where the east meets west, their traditions and practices have been influenced and altered (Greece Culture and Society, 2O11). Women are regarded as very important, and given a good education. Usually, the Greeks have tight knit families, where religion is highly important. They celebrate different religious festivals with enthusiasm. Due to westernization, the people have become less orthodox, and more open minded

Political Greeces conventional long name is the Hellenic Republic, and its capital city is Athens (The World Factbook, 2O11). The Prime Minister is head of government and a multi party system in Greece. The Executive or Legislature do not influence the Judiciary. The country is divided into 13 peripheries, which are in turn divided in to 51 prefectures Nomoi. Each is headed by a prefect Nomarch. A prefect is directly appointed by popular vote (Politics of Greece, 2O11).

Geographical Greece is located in Southern Europe. It is between Albania and Turkey, and borders the Aegean Sea and the Mediterranean Sea. It is peninsular, and consists of an archipelago of nearly 2,000 islands. It is 131,957 sq km in area. The main natural resources are petroleum, iron ore, lead, zinc etc. the temperature is usually dry and hot summers, and wet and mild winters (The World Factbook, 2O11).

Transnational issues Greece has disputes with Turkey in regards to air, territorial and maritime affairs. Greece does not agree to adopting the name Macedonia (The World Factbook, 2O11).

The theoretical basis:

Keynesian Economics John Maynard Keynes developed a theory of macroeconomics known as Keynesian economics. Its basis is that aggregate demand is the main source of business instability, and the main cause of recessions (Keynesian Model, 2O11). In simple words, the main idea of his theory is that when someone decides to hide and save a part of their money, rather than spend it, the money in the economy reduces by the same amount they have hidden. This in turn affects that persons income, as ther e is now less money in the economy. We would be working, but producing less, and getting paid less. This is how a recession begins. As Paul Krugman puts it beautifully (in mild economese): - The key to Keyness contribution was his realization that liquidity preference the desire of individuals to hold liquid monetary assets can lead to situations in which effective demand isnt enough to employ all the economys resources. (Keynesian economics: the basics, 2O1O)

3 Key Assumptions The three assumptions of Keynesian economics are: Rigid Prices- usually it is the case that producers wouldnt mind increasing their prices, but would be quite reluctant on dropping their prices. Therefore prices are rigid in the downward direction, which prevents achieving market equilibrium Effective Demand- this states that consumption expenditures are based on a households disposable income, instead of what is available during full employment (Keynesian Model, 2O11). Saving and Investment Determinants- while Classical economists believe that investments and savings are triggered by current interest rates, Keynesian economists believe that household investments and savings, base themselves on disposable income, and want to save for the future. Commercial capital investments are based only on the expected profitability of the production (Keynesian Model, 2O11).

The Workings of An Economy Commodity Markets There is excess supply in case there is less aggregate expenditure than aggregate production. To stop this, businesses reduce the amount they produce. Whereas when aggregate production is less than aggregate expenditure, businesses increase production.

Employment Markets According to Keynesian economists, when there is an economic problem, the solution lies in altering one of the key indicators. These are inclusive off interest rates, government policies, confidence, etc (Patil, 2O1O).

Composition of the Keynesian Formula C + I + G + X M = Y(GDP)

Consumption + Investment + Government Spending + Exports Imports = Gross Domestic Product (Keynesian formula, 2O1O) Consumption- the utilization of economic goods to satisfy needs or in manufacturing. (economic consumption, 2O11)

Investment- an asset is usually purchased, or a deposit is made in a bank, in hopes of getting a future return or interest from it (Keynesian formula, 2O1O).

Government Spending- government purchases that can be financed by taxes or government borrowing. It is one of the major components of a countrys GDP (Keynesian formula, 2O1O).

Exports- goods or commodities transferred to another country legitimately, usually for trade (Keynesian formula, 2O1O).

Imports- goods or commodities brought in from another country legitimately, usually for trade (Keynesian formula, 2O1O).

GDP- Gross Domestic Product is a common measurement of national income (Keynesian formula, 2O1O).

Economic Consequences There will be an increase in GDP in the case that there is an increase in the rate of consumption, investment, government spending and increase in exports. This will cause a rise in aggregate demand (Keynesian formula, 2O1O). On the other hand, if there is a fall in the mentioned factors, aggregate demand will fall.

Criticisms and Inconsistencies Classic Liberal criticism- the law of unintended consequences occurs when money is spent to fix something damaged, as this comes with an opportunity cost, and this governmental decision may be misguided (Keynesian economics, 2O11) . New Classical Macroeconomics criticism- they felt that Keynesian economists assumed everyone to short-sighted and foolish in order for their theories to prove true, as their economic understanding was different at a micro level.

The indicators:
Consumption Household final consumption expenditure (annual % growth)

(The World Bank, 2O11) The graph above shows us the household final consumption expenditure (19902010) in Greece. We can tell that 1993 suffered a dip in consumption, however it rises again, unsteadily, and reaches its peak in 2006 with a 6% growth. Then it falls to 3% in 2007-2008, and then due to recession, it falls close to a -3%. (decreased consumption)

Investment Gross capital formation (% of GDP)

(The World Bank, 2O11) The graph above shows us the gross capital formation (1990-2010) in Greece. We see that from the years 1990, through to 2008, there is a sort of wave motion,

with smooth rises and falls in the economy. However, after recession hit, people stopped investing in Greece, as it was too risky. That is why there is a major fall in investment after 2008. (decreased investment)

Government Spending Goods and services expense (% of expense)

(The World Bank, 2O11) The graph above shows us the goods and services expense (1990-2010) in Greece. We can see that the years 1995-1998 were pretty stagnant, but then there was an increase in government spending. This must have been due to the Olympic Games being held in Athens. After which it falls, but then slowly rises. (increased government spending)

Exports Exports of goods and services (%of GDP)

(The World Bank, 2O11) The graph above shows us the exports of goods and services (1990-2010) in Greece. We see that the exports from Greece have been quite constant. Its only in1999 that exports start to increase, with a fall in 2002-2003. This however rises slightly and stabilizes, until it falls again in 2009. (decrease in exports)

Imports Imports of goods and services (% of GDP)

(The World Bank, 2O11) The graph above shows us the imports of goods and services (1990-2010) in Greece. We see that imports have been pretty stable, until 2000, when they peaked. There has been a gradual decline, then incline, but then it suddenly drops in 2009. (decrease in imports)

To put it concisely, in the current situation, Greece has:

Decreased consumption Decreased investment Increased government spending Decrease in exports Decrease in imports.

As I stated earlier on :

C + I + G + X M = Y(GDP)

Consumption + Investment + Government Spending + Exports Imports = Gross Domestic Product (Keynesian formula, 2O1O) There will be an increase in GDP in the case that there is an increase in the rate of consumption, investment, government spending and increase in exports. This will cause a rise in aggregate demand. On the other hand, if there is a fall in the mentioned factors, aggregate demand will fall. Therefore there is no rise in aggregate demand for Greece, instead, the aggregate demand will fall.

The data
Household final consumption expenditure (annual % growth)

(The World Bank, 2O11)

Gross capital formation (% of GDP)

(The World Bank, 2O11)

Goods and services expense (% of expense)

(The World Bank, 2O11)

Exports of goods and services (%of GDP)

(The World Bank, 2O11)

Imports of goods and services (% of GDP)

(The World Bank, 2O11)

Unemployment, total (% of total labor force)

(The World Bank, 2O11)

Greece consumer confidence

(Trading Economics, 2O11)

Greece inflation rate

(Trading Economics, 2O11)

Euro area interest rate

(Trading Economics, 2O11)

Bibliography
economic consumption. (2O11). Retrieved from The Free Dictionary: www.thefreedictionary.com/economic+consumption Greece Culture and Society. (2O11). Retrieved from Maps of World: www.mapsofworld.com/greece/culture-and-society/ Greece Demographics Profile 2O11. (2O11, june 12). Retrieved from indexmundi: www.indexmundi.com/greece/demographics_profile.html Keynesian economics. (2O11, aug 25). Retrieved from wikipedia: en.wikipedia.org/wiki/Keynesian_economics#Main_theories Keynesian economics: the basics. (2O1O). Retrieved from Bluematter: bluematter.blogspot.com/2OO9/1O/keynesian-economics-basics.html Keynesian formula. (2O1O, jan). Retrieved from wikipedia: en.wikipedia.org/wiki/Keynesian_formula Keynesian Model. (2O11). Retrieved from AmosWEB: www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=Keynesian+model Patil, S. B. (2O1O). Classical Economics vs Keynesian Economics. Retrieved from Buzzle: www.buzzle.com/articles/classical-economics-vs-keynesianeconomics.html Politics of Greece. (2O11, july 25). Retrieved from Wikipedia: en.wikipedia.org/wiki/Politics_of_Greece The World Bank. (2O11). Retrieved from The World Bank: data.worldbank.org/indicator The World Factbook. (2O11). Retrieved from Central Intelligence Agency: https://www.cia.gov/library/publications/the-world-factbook/geos/gr.html Trading Economics. (2O11). Retrieved from Trading Economics: tradingeconomics.com/greece/indicators