Gross Domestic Product Explain how net exports affect the US economy. Describe both positive and negative impacts on GDP. Why do national income accountants use net exports to compute GDP, rather than simply adding exports to the other expenditure components of GDP?
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Gross Domestic Product -
Explain how net exports affect the US economy. Describe both positive and negative impacts on GDP. Why do
national income accountants use net exports to compute GDP, rather than simply adding exports to the other expenditure components of GDP? -
You have the following information on 3 countries: Soccerland, Handeggland, and Neverland
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How long will it take until Soccerland’s GDP increases by 75%?
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How long will it take until Soccerland and Handeggland have the same
GDP?
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Soccerland’s population is not happy that, eventually, Handeggland is
going to have higher GDP than their country. They feel that they are a much better country, so they are going to work harder to ensure that Handeggland will never catch up with Soccerland. If Soccerland’s new growth rate is constant every year, what is the minimum growth rate that ensures that Soccerland will always have a higher GDP than Handeggland?
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Neverland’s ambition is to host the World Cup. At the beginning of 2013, its GDP was 2,000 and it was growing at 10% a year. Moreover, it will keep this pace until it hosts the World Cup. In order to host such a big event, Neverland’s GDP must be at least 6,000. After the moment it reaches that GDP level, it will host the World Cup in the beginning of the next year available for the event (remember that the World Cup takes place every four years, in the years: 2014, 2018, 2022, etc.) During the year that Neverland hosts the World Cup, their GDP will grow at 75%. Then, everything returns to normal, and their GDP will keep growing at 10% a year forever onwards.
1. When will Neverland’s GDP reach 20,000?
2. Suppose the Federation no longer requires Neverland to have a minimum GDP of 6,000 in order to host the World Cup, and instead it lets Neverland host the World Cup in 2014. How does your answer compare to part i), i.e., would Neverland be able to attain a GDP of 20,000 earlier, later or at the same time as in part i)?
4. Business Cycles and
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How has the official unemployment rate been criticized for overestimating and underestimating unemployment?
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Explain the GDP Gap.
5. Inflation
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Suppose the annual nominal rate of interest on a bank certificate of deposit is 12 percent. What would be the effect of an inflation rate of 13 percent?
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Explain how a person’s
purchasing power can decline in a given year even though he or she received a salary increase.
6. The Keynesian Model
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Explain how each of the following affects the consumption function:
i. The expectation is that a prolonged recession will occur in the next yearii. Stock prices rise sharply
iii. The price level rises by 10 percent
iv. The interest rate on consumer loans rises sharplyv. Income taxes increase
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How do households dissave?
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Why is the investment demand curve less stable than the consumption and
saving schedules? What are the basic determinants that can shift the investment demand curve?
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