Brazil’s Booming Economy: Too Hot for Comfort

Words: 644 Pages: 2

Name of the article

Brazil’s booming Economy: Too hot for comfort

Author of the article

The Economist online

In 1-2 paragraphs, outline what the article is about?

The article describes the occurrences in the Brazilian Economy in the recent period after the famous global crisis. The Brazilian economy has experienced GDP growth rates higher than was expected, and the pressure on prices as a result of the economic boom is already manifest.

The article also describes and profiles the most important factors which have led to the high economic growth estimated at 6% in the Brazilian economy. The cited factors include the rise in global demand for oil, iron as well as agricultural products from Brazil. The fact that local companies have maintained competitiveness in the international markets has enabled the country to recover fast from the recession recorded in the period between 2008 and 2009.

What were the main ideas the author was trying to communicate in the article?

The author was trying to communicate two main ideas in the article. The first idea is an understanding of some of the economic fundamentals, which often result in an economic boom. Here, a rise in exports for domestic products, a rise in demand for goods in the domestic markets as a result of increased incomes, and a reduction in taxation levels are the factors that have driven the Brazilian economy.

The second idea is the relationship between the GDP growth rate and price levels or inflation rates. The economic growth rate of 6% has led to a rise in the inflation rate to 5.2%, which is above the projections of 4% made by the central bank. This positive relationship necessitates action by governments in order to avoid a case where all the gains made in GDP growth are eroded by a rise in prices.

What are the economic principles presented in the article?

The two most visible economic concepts visible from the article are the cyclical nature of GDP and the factors which drive the cycles, as well as some measures applicable in countering the cycles leading to a more stable economy.

The article describes the processes involved in the development of an economic boom but also describes the effects of government action to counter the cycle and hence prevent “overheating,” a termed which refers to the counterproductive effects of price increases resulting from an abrupt rise in demand in the context of low capacity to produce.

What are the definitions of the economics principles you listed above?

The cyclical nature of GDP is a phenomenon that defines the behavior of GDP over time. It is characterized by times of economic boom and times of economic recession. Boom times are times of high growth rates, while recession times are characterized by extremely low growth rates or economic contractions.

Contractionary Monetary policies used to counter economic booms are employed by governments through the central banks with the aim of limiting the number of funds flowing in the economy hence control prices.

What is your analysis of the article? Did you agree with the opinions that the author stated in the article? Why or why not? (should be at least 1 paragraph in length)

The article is indeed well developed with credibility as almost all the assertions made are backed by data meaning that the author has done thorough research on the issues before developing the ideas. Economic principles are properly represented and developed throughout the arguments.

I agree with the opinion of the author that there is a need for the Brazilian leadership to implement deeper economic reforms in order to achieve much faster and sustainable growth in the long-run. This is because it is proven that application of monetary policies can only solve short term economic challenges and that there are many other obstacles which hinder faster GDP growth such as inefficiency and educational levels of the workforce.