Principles behind economic growth and sustainability in Micronesia

Debt is the general government gross debt (annual levels, national currency) and debt%var is the percentual of variation of debt of same period.
Studies finds a negative correlation between gdp growth and level of debt (as % of gdp). Generally when debt to gdp ratio overtakes 75-80%, each additional percentage point of debt costs 0.017% of annual real growth.

In these graphs are shown the components of GDP (except for current account). Household consumption in developed countries is generally about 66-70% of GDP, while investment is about 20%. This is the reason why so much interest is given to consumption and household confidence in future in economic news .

In these graphs are shown some interest rates that reveal how is the current monetary policy.Central bank generally determines the interest rate that banks exchange overnight and then the market determines the interest rates in the long run.

Output gap is the difference between current gdp and potential gdp, where potential is a value of gdp that could be theorically reached if all resources, human and capital, would be fully used, but without increasing inflation. If output gap is negative, it should be possible to implement expansive policy without increasing inflation.

The relationship between inflation and unemployment is known and described by Philips with its curve, where it shows that an increase in inflation causes a reduction of unemployment. Then theories are evolved, but substantially the relationship is inversed between these two indicators; the reason is easily understandable: to reduce inflation when it overtakes limit targeted by central banks (generally 2%), interest rated are increased until inflation is taken under control. In this period, it's usual for company to wait to invest, for people to wait to borrow money, invest and delay durable consumption, causing, potentially a recession and an increase of unemployment (mainly in nation where labor force can be dismissed more easily)

These data show revenues and expenditures incurred by government, having a deficit if expenditures are bigger than revenues or, otherwise, a surplus. A deficit is not always a negative element, because in a recession is justifiable and useful. Of course, if the current debt level is still high (in europe Maastricht rules indicate that the ratio of gross government debt to GDP must not exceed 60%) a deficit could be not welcomed by market (causing, for example, selling bond securities, increasing the level of interest rate to be paid, in case of new financing).

In this graph investment's components are enlightened in order to show where resources are used. In macroeconomic buying a house by a person is included in investment (this is the reason why dwellings generally is a high percentual of total investment).

Population is a core element for the economy, considering that generally working-age people is the category between 20-64 years. A reduction of natality and an increasing of elederly people can cause serious problems to the sustainability of current model.

A factor that only in the last years has become relevant is the expenditure in R&D. In company balance sheet there has been an evolution considering it as an investment, instead of an expenditure. R&D can be the basis for future development of a society and it can sustain competion in a world that is global and interconnected.