Country Z, a medium-sized Caribbean nation, is undergoing significant economic challenges. Recently, it has faced external shocks including a decline in tourism, rising global oil prices, and a reduction in remittances from abroad. The government is keen to understand the performance of the economy over the past year by calculating the nation's Gross Domestic Product (GDP) using the expenditure method and assessing its future prospects, particularly in light of rising unemployment. Below is the economic data for Country Z for the past year: ⚫ Household Consumption (C): $60 billion Government Expenditure (G): $35 billion Gross Private Domestic Investment (I): $25 billion Exports (X): $50 billion Imports (M): $65 billion Depreciation: $10 billion Unemployment Rate Increase: 2% over the past year, reaching a total of 10% Natural Rate of Unemployment: 6% The government of Country Z has heard of Okun's Law and wants to assess how the rising unemployment rate will impact future economic growth, particularly considering the difference between actual unemployment and the natural rate of unemployment. 1. Calculate the Gross Domestic Product (GDP) of Country Z using the expenditure method. 2. Calculate the Real GDP Growth Rate if last year's nominal GDP was $140 billion, and inflation was 5%. 3. Using Okun's Law, calculate the GDP gap for Country Z, considering that the natural rate of unemployment is 6%. 4. Discuss three (3) potential consequences of the rising unemployment rate on the long-term economic prospects of Country Z, considering Okun's Law and structural vulnerabilities. 5. Evaluate how inflation and external dependencies (e.g., tourism, remittances) are affecting Country Z's economy. How might these factors influence future fiscal and monetary policy decisions?
Country Z, a medium-sized Caribbean nation, is undergoing significant economic challenges. Recently, it has faced external shocks including a decline in tourism, rising global oil prices, and a reduction in remittances from abroad. The government is keen to understand the performance of the economy over the past year by calculating the nation's Gross Domestic Product (GDP) using the expenditure method and assessing its future prospects, particularly in light of rising unemployment. Below is the economic data for Country Z for the past year: ⚫ Household Consumption (C): $60 billion Government Expenditure (G): $35 billion Gross Private Domestic Investment (I): $25 billion Exports (X): $50 billion Imports (M): $65 billion Depreciation: $10 billion Unemployment Rate Increase: 2% over the past year, reaching a total of 10% Natural Rate of Unemployment: 6% The government of Country Z has heard of Okun's Law and wants to assess how the rising unemployment rate will impact future economic growth, particularly considering the difference between actual unemployment and the natural rate of unemployment. 1. Calculate the Gross Domestic Product (GDP) of Country Z using the expenditure method. 2. Calculate the Real GDP Growth Rate if last year's nominal GDP was $140 billion, and inflation was 5%. 3. Using Okun's Law, calculate the GDP gap for Country Z, considering that the natural rate of unemployment is 6%. 4. Discuss three (3) potential consequences of the rising unemployment rate on the long-term economic prospects of Country Z, considering Okun's Law and structural vulnerabilities. 5. Evaluate how inflation and external dependencies (e.g., tourism, remittances) are affecting Country Z's economy. How might these factors influence future fiscal and monetary policy decisions?
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Taking The Nation's Economic Pulse
Section: Chapter Questions
Problem 1CQ
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Kindly assist me with solving this econ query. Any assistance would be appreciated.
Transcribed Image Text:Country Z, a medium-sized Caribbean nation, is undergoing significant economic
challenges. Recently, it has faced external shocks including a decline in tourism,
rising global oil prices, and a reduction in remittances from abroad. The government
is keen to understand the performance of the economy over the past year by
calculating the nation's Gross Domestic Product (GDP) using the expenditure method
and assessing its future prospects, particularly in light of rising unemployment.
Below is the economic data for Country Z for the past year:
⚫ Household Consumption (C): $60 billion
Government Expenditure (G): $35 billion
Gross Private Domestic Investment (I): $25 billion
Exports (X): $50 billion
Imports (M): $65 billion
Depreciation: $10 billion
Unemployment Rate Increase: 2% over the past year, reaching a total of
10%
Natural Rate of Unemployment: 6%
The government of Country Z has heard of Okun's Law and wants to assess how the
rising unemployment rate will impact future economic growth, particularly
considering the difference between actual unemployment and the natural rate of
unemployment.
1. Calculate the Gross Domestic Product (GDP) of Country Z using the
expenditure method.
2. Calculate the Real GDP Growth Rate if last year's nominal GDP was $140
billion, and inflation was 5%.
3. Using Okun's Law, calculate the GDP gap for Country Z, considering that the
natural rate of unemployment is 6%.
4. Discuss three (3) potential consequences of the rising unemployment rate on
the long-term economic prospects of Country Z, considering Okun's Law and
structural vulnerabilities.
5. Evaluate how inflation and external dependencies (e.g., tourism, remittances)
are affecting Country Z's economy. How might these factors influence future
fiscal and monetary policy decisions?
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