Part -1:
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? If you do not believe any component will be affected, briefly explain why.
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 1994 to 1997.
ii. Calculate the average annual growth rate of real GDP for the period from 1994 to 1997.
iii. How does the average annual growth rate you calculated in (ii) above compare to the average 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 why.
c. Does your answer change if the company in China is a U.S.-owned company? Why or why not?
5. Describe the relationship between labor productivity and growth? How do technological advancements impact labor productivity?
Part -2:
Your professionally written postings should provide substantive depth that advances the discussion. Also, please be sure to edit your posts for grammatical errors before you post.
Topic 1
The national income accounts measure productivity, spending, and income; but these accounts were not designed to measure economic welfare. Discuss aspects of economic welfare ignored in GDP. HINT: Do a "Google" search on the Genuine Progress Indicator and compare this with GDP in terms of measuring economic welfare.
Topic 2
What factors might contribute to a low growth rates in a country? Why do some poor countries, such as Botswana, experience higher growth rates than others when all face the same challenges such as the HIV epidemic? Compare growth rates across countries by visiting The World Bank website (https://data.worldbank.org/indicator). How does GDP growth (GDP growth (annual %)) compare across developed countries such as the U.S. and poorer countries such as Nigeria. Why might growth rates of developed nations be lower than those of poorer countries?