Comparison Of South Korea And The USA

Comparison Of South Korea And Usa

COMPARISON OF SOUTH KOREA AND USA 6 COMPARISON OF SOUTH KOREA AND USA Applied Managerial Economic April 15, 2020 To assess and look at the Gross domestic product and different elements of the nation, it is significant for rulers to contemplate the administrative, financial aspects. Administrative, financial matters are the training of how phenomenal assets are assimilated most expertly to achieve administrative zones. It is an esteemed gear for inspecting business conditions to take better ends. We can concentrate as a matter of first importance the interest and its different components influencing the interest; it would be the primary substances of any nation or individual development. To assess the Gross domestic product of any nation, it is significant for the researcher to look at the interest capacities and their employment rate.

In 2018, the average inflation rate in South Korea was about 1.48 percent compared to the previous year, while in the USA it was about 2.4 percent. Elevated inflation rates are problematic, and South Korea is presently battling with similar issues. South Korea is a prosperous nation, ranked eleventh among the twenty countries with the largest Gross Domestic Product (GDP); however, its inflation rate remains below 2 percent, which is a concern. Nonetheless, there is an expectation that inflation will stabilize between 3 and 4.5 percent. Currently, South Korea is striving to reduce its reliance on exports by expanding its services sector, especially as export markets decline.

Gross domestic product (GDP) measures the total value of goods and services produced within a nation annually; it is a solid indicator of economic health. In 2018, South Korea's GDP was approximately 1.72 trillion USD, whereas the USA's GDP was around 20.58 trillion USD. The US economy is expected to grow at a modest pace in 2020 due to global economic conditions, a slowdown in business investment, and challenges from the COVID-19 pandemic. Economists predict US GDP growth of 1.7% in 2020 and 1.8% in 2021. Meanwhile, South Korea's economy is expected to grow slightly faster at 2.1% in 2020, driven by improvements in fixed investment and the technology sector, though risks from China's economic slowdown, the pandemic, and regional tensions remain. In 2021, South Korea's GDP growth forecast is around 2.4%.

Unemployment rates provide additional economic insights. In 2018, South Korea's unemployment was approximately 3.84%, while in the USA it was about 3.9%. Regarding interest rates, South Korea's key rate was around 1.75% compared to the US rate of 2.50% during the same year. During the global financial crisis, South Korea maintained steady economic growth and avoided severe downturns through strategic stimulus packages and sustaining consumer expenditure. South Korea's economy heavily depends on the manufacturing and export of technology, ships, automobiles, and heavy machinery. Notably, it hosts some of the world's largest and most efficient shipbuilding companies, which have accumulated significant debt over time.

Despite domestic challenges and shifting global circumstances, the US economy remains the largest in the world, accounting for about 20% of global GDP, surpassing China in overall size. The US has a highly developed economy, with the service sector contributing roughly 80% of its GDP, emphasizing finance, technology, healthcare, and professional services (IMF, 2020). The US’s innovation-driven economy benefits from significant investments in research and development, fostering technological advancement and economic resilience.

Importance of Financial Theories

Financial theories such as scarcity, market interest, costs and benefits, and incentives help explain the decision-making processes of individuals and institutions. Scarcity is the fundamental economic issue arising from limited resources relative to unlimited wants, driving choices on resource allocation (Beattie, 2020). For instance, demand and supply dynamics determine market prices; if demand for a product like beer exceeds supply, prices tend to increase, incentivizing increased production until equilibrium is restored. These theories encapsulate how markets operate, guiding economic policies and business strategies.

Demand and supply are central to understanding economic behavior. When consumer demand for a product spikes, producers respond by increasing supply, which eventually stabilizes prices. Conversely, a drop in demand causes prices to fall and producers to cut back on production. The balance between costs and benefits influences production decisions; firms will increase output as long as marginal revenue exceeds marginal cost, striving for profit maximization. Consumer choices are similarly guided by the perceived utility and affordability of goods and services, which are influenced by market prices and individual preferences.

Economics is often considered a "nasty science" because of its reliance on scarcity and incentives that shape individual and collective decisions. Limited resources force people and organizations to weigh options carefully, considering opportunity costs—the value of foregone alternatives. The aggregate effect of individual choices creates market trends and economic cycles, emphasizing the importance of understanding incentives and costs at both microeconomic and macroeconomic levels (Beattie, 2020). These core principles underpin economic analysis and policymaking, highlighting the complex interplay between scarcity, incentives, and human behavior.

References

  • Beattie, A. (2020, February 16). Four economic concepts consumers need to know. Investopedia. https://www.investopedia.com
  • IMF. (2020). World Economic Outlook. International Monetary Fund.
  • Focus Economics. (2020). U.S. economic outlook. https://www.focus-economics.com
  • Focus Economics. (2020). Korea economic outlook. https://www.focus-economics.com
  • Plecher, H. (2019, November 13). South Korea: inflation rate from 1984 to 2024. Statista. https://www.statista.com
  • Plecher, H. (2019, November 13). South Korea: unemployment rate from 2014 to 2024. Statista. https://www.statista.com
  • U.S. Economic Outlook. (2020, March 3). Focus Economics. https://www.focus-economics.com
  • Kim, J., & Lee, S. (2019). South Korea's economic strength and challenges. Journal of Asian Economics, 60, 101-115.
  • Smith, A. (2020). Technological innovation and economic growth in the US. Finance & Development, 57(2), 28-31.
  • World Bank. (2021). Global Economic Prospects. Washington, DC: World Bank Publications.

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