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ECON 100 Tutorial 15

ECON 100 Tutorial 15. Rob Pryce www.robpryce.co.uk/teaching. Question 1. Question 1a. GROSS DOMESTIC PRODUCT AT MARKET PRICES GDP MP = C + I + G + NX = Consumer Exp . + Fixed Inv. + Stock Changes + Gov’t Cons . + Exports – Imports

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ECON 100 Tutorial 15

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  1. ECON 100Tutorial 15 Rob Pryce www.robpryce.co.uk/teaching

  2. Question 1

  3. Question 1a GROSS DOMESTIC PRODUCT AT MARKET PRICES GDPMP = C + I + G + NX = Consumer Exp. + Fixed Inv. + Stock Changes + Gov’t Cons. + Exports – Imports = 1,122,961 + 242,822 + 2,046 + 119,101 + 422,401 – 460,640 =1,448,691

  4. Question 1b GROSS NATIONAL PRODUCT AT MARKET PRICES GNPMP = GDPMP + Net Income from Abroad = C + I + G + NX +NIA = Consumer Exp. + Fixed Inv. + Stock Changes + Gov’t Cons. + Exports – Imports + Net Income from Abroad =1,448,691 + 26,940 = 1,475,631

  5. Question 1c GROSS DOMESTIC PRODUCT AT FACTOR COST GDPFC = GDPMP - Net Taxes on Expenditures = C + I + G + NX -NTE = Consumer Exp. + Fixed Inv. + Stock Changes + Gov’t Cons. + Exports – Imports - Net Taxes on Expenditure =1,448,691 - 178,316 = 1,270,375

  6. Question 1d NATIONAL INCOME NI = GDPFC - Capital Consumption + Net Income from Abroad = C + I + G + NX - NTE -CC +NIA =1,270,375 - 145,429+26,940 = 1,151,886

  7. Question 1e GROSS DOMESTIC PRODUCT AT FACTOR COST (FROM INCOME) GDPFC(I) = Employment Income + Profits + Other Income = Wages + Profits and Surpluses + Other Incomes = 769,662 + 339,863 + 172,509 = 1,282,034

  8. Question 1f Can you explain why your answers to (c) and (e) are not identical? Probably rounding error. Also shadow economy effects.

  9. Question 2 What’s the difference between “real” and “nominal” GDP growth? The real rate takes into account inflation. Why do we want real GDP growth? Because if we are measuring expenditure, some of the growth may just come from increases in prices. Taking inflation will show by how much expenditure actually grew in terms of how much was bought. How do we calculate real GDP growth? The calculation is shown on the next slide

  10. How to Calculate Real GDP Growth The table is too big to show everything, so instead I’ll just use two rows as an example. Real GDP growth is found as: (% increase in GDP) – (% increase in prices) The next slide will use the example above to calculate this.

  11. How to Calculate Real GDP Growth The percentage change in GDP is calculated as ((103.9 – 102.5)/102.5) x 100 And the percentage change in prices is the inflation rate, so the real GDP growth rate is 1.365 – 1.42 = -0.054 (rounds to -0.1)

  12. General Formula (GDP period 2 - GDP period 1) ____________________________ x 100 - inflation rate GDP period 1 ( ) % change GDP % change prices

  13. Starting Table

  14. Germany

  15. Final Table

  16. Final Graph

  17. Question 3 In many less developed countries, much economic activity is concentrated in small-scale subsistence agriculture. How would you expect this to affect comparisons of living standards based on GNP measurements? What other problems might you encounter in making international comparisons of living standards? Not all activity will be measured, families will work on their own farms and be paid in kind (eg. given food and accommodation). Anything that isn’t formally traded is left out, such as mutual favours or voluntary work.

  18. Any Questions? Email: r.pryce@lancaster.ac.uk Web: www.robpryce.co.uk/teaching OfficeHour: Wednesday, 9:45 – 10:45 Charles Carter C Floor or by appointment (email me)

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