The stability observed in the country's economic development leads to the growing interest of foreign investors in that country and appropriately to an increase in the demand for the country's currency. The main macroeconomic factors that affect a country's economic development are the following:
TRADE BALANCE AND PAYMENT
In many developing countries, an increase in trade balances is indicative of the economic development of a country. However, the increase in a trade balance also means the indebtedness and the rise of inflation in a country. Thus, in the industrialized countries, that is the countries that produce more than they consume, a trade surplus ensures the country's economic development through external financing.
The unemployment rate is calculated by dividing the number of unemployed individuals by all individuals currently in the labor force. Housekeeping income shall decrease resulted from the rise of the unemployment rate in the country. By this means, consumption in the country decreases. A decrease in consumption shall lead to a reduction in labour force and company products. A decline in the unemployment rate might cause an increase in people's income and the revival of the consumption sector. Companies, experiencing a shortage of workforce increase their production to meet the growing demand. A low unemployment rate giving rise to a production increase in a country results in economic growth. The unemployment rate is an objective measure of the economic situation in a country. As the value of the national currency of a country with low unemployment rate increases, the value of the national currency of a country with a high unemployment rate decreases.
Inflation occurs when the demand for goods and services exceeds existing supplies. Inflation is defined as a sustained increase in the general level of prices for goods and services. In economics, the price for goods and services rises as a result of increasing demand for productivity. When this happens, the general level of prices increases and inflation occurs.
As inflation indicators rise the productivity decreases and funds flow from a producer to intermediary organizations. The fall in inflation rates below an optimal level results in stagnation in the financial and trade sectors. Inflation rates at the optimal level create such a balanced situation in production that causes an increase in production efficiency and operational performance of companies. The positive level of inflation figure has a positive impact on domestic demand and economic growth. However, countries with a high level of inflation experienced a rising income inequality that adversely affects economic development and regional stability.
GROSS DOMESTIC PRODUCT (GDP)
The gross domestic product (GDP) is one of the primary indicators used to gauge the level of a country's economic development;
The value of a country's overall output of goods and services (typically during a specific period) at market prices;
The important macroeconomic indicator used to show changes in GDP, the growth and decline in a country's economy;
Generally, GDP is usually calculated on an annual basis and the rise of GDP per capita is directly proportional to the standard of living;
A country with a high GDP per capita shall have a higher standard of living.
One of the most important factors that affect currency prices is a country's interest rates. The difference in interest rates between the two countries gives rise to price fluctuations. The difference in interest rates in different countries affects international capital flow. In other words, the rise of interest rates in one country increases its currency value while the decrease of interest rates leads to a loss of currency value.
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