Assignment: GDP and Economic Growth
In this Assignment, you will evaluate the various components of the Gross Domestic Product (GDP) and factors that affect the GDP components. You will also compute the growth rate of U.S. real GDP and compare the average with the expected growth rate of U.S real GDP.
Instructions: Answer all of the following questions. You are required to follow proper APA format. Read the Criteria section below for more information before you begin this Assignment.
In this Assignment, you will be assessed on the following outcome:
Evaluate the effects of globalization and international trade on the U.S. economy.
1. Why does inflation make nominal GDP a poor measure of the increase in total production?
2. Which component of GDP will be affected by each of the following transactions involving FlyCheap Airlines? Briefly explain.
Hint: GDP = C + I + G + Nx
i. You purchase a ticket on a FlyCheap Airlines to visit your niece.
ii. FlyCheap Airlines purchases a new jetliner from Boeing.
iii. FlyCheap Airlines purchases new seats to be installed on a jetliner it already owns.
iv. FlyCheap Airlines purchases 200 million gallons of fuel.
v. A French citizen purchases a ticket to fly on a FlyCheap flight from Paris to New York.
vi. The city of Nashville agrees to spend funds to extend one of the runways so that FlyCheap will be able to land larger jets.
3. Use the table to answer the following questions.
|
Year
|
Real GDP (Billions of 2000 Dollars)
|
|
1993
|
$7,113
|
|
1994
|
7,101
|
|
1995
|
7,337
|
|
1996
|
7,533
|
|
1997
|
7,836
|
i. Calculate the growth rate of real GDP for each year from 1993-1994, 1994-1995, 1995-1996and 1996-1997. Show your work.
ii. Calculate the average annual growth rate of real GDP for the period from 1993 to 1997.
Hint: Compute the average for the growth you calculated under (i) above.
iii. How does the average annual growth rate you calculated in (ii) above compare to the average GDP growth rate the U.S. normally expects?
4. In an open economy, trade is allowed between countries. Assume a consumer purchases $1,000 worth of furniture manufactured in China. Answer the following:
a. Which component(s) of GDP are impacted by this purchase?
b. Does GDP increase, decrease or stay the same? Briefly explain.
c. Does your answer change if the company in China is a U.S.owned company? Why?
5. Describe the relationship between labor productivity and long term economic growth. How do technological advancements impact labor productivity?