As a result, the quantity and price of good A increase. a. Compute nominal GDP in the base year and later year. b. Compute real GDP in the base and later years (in base-year prices). c. Compute the GDP deflator in the later year, using your answers to parts a and b. d. Compute a fixed-weight price index for the later year, using the base-year quantities as weights. e. Which price index rises faster, the GDP deflator (Paasche) index or the fixed-weight index (Laspeyres) index 1 Question 3 (20 marks) .
It can be argued that quality of people’s lives depends on more things than simply the material resources that are available. Another common problem with using GDP as a way to compare is the problem with exchange rates. GDP is calculated initially in terms of local currencies and then later it is converted into US dollar using official rates. The conversion into US dollar itself is a problem since the rates used are likely to be influenced by government intervention. This is especially true in developing economies where the currencies are normally pegged to another currency such as the US dollars.
The increase in real GDP would put downward pressure on the price level and reduce inflation. Supply-siders also believed that the budget deficit would not increase substantially as a result of the tax cut. Even if it did increase, it would be offset by increased saving due to the lower taxes. Many economic critics today and in the 1980’s questioned the effectiveness of Reagan s policies, also known as Reaganomics. Economists still argue whether Reagan’s actions were helpful or harmful to the United States economy.
Should the Government use Fiscal or Monetary Policy to Eliminate Canada’s Current Contractionary Gap? Introduction An economic recession is a period of slow economic activity; this contractionary phase is characterized by high unemployment and low levels of GDP. On the other hand, government bodies desire economic growth and low unemployment levels in order to attain a stable economy. These goals may be reached through the use of either fiscal policy or monetary policy. This paper will focus on and discuss which policy is more effective in eliminating the current recessionary gap of Canada.
Perhaps the worst economic downturn in the history of the United States occurred from 1930-1939. The Great Depression led to domestic and international crises effecting the poor and wealthy alike. Many financial experts today continue to debate the cause of The Depression, although most agree that several events led to the economic decline. The famous stock market crash on October 29, 1929 is just one of many causes economists believe led to The Great Depression. Known also as Black Tuesday, October 29th left stockholders shattered with recorded losses reaching $40 billion dollars (Kelly, n.d.).
Global groupings are nations with similar aims of economic and social development. Global Groupings can be separated into political (trading blocs of nation for security in trading) and economic grouping. Nations can be categorised according to their overall levels of wealth and power that it brings Economic grouping is based on economic stages of a nation. However in the past countries have usually been classified in a two – tier system as MEDC’s and LEDC’s. LDC(least developed countries) in this group have very low income with a low GDP per capita; they have sometimes been described as ‘Fourth World’ nations to emphasise their bleak conditions and their populations lack of engagement with globalising forces.
Purchasing Power Parity (PPP) is also not taken into account with income per capita; this means that the cost of living in each country is not accounted for so development may appear better in some countries than it actually is. Income per capita can be used to measure the economic and social development, but not any of the other factors of development, such as environmental development. Development can be further measured by income inequality. This can be a useful measurement as it shows the differences between the rich and poor. The greater the inequality, gap between the rich and poor, the worse developed the country is.
In contrast, Supply side economists believe that unemployment is caused by the supply side of the economy not functioning properly. Extract E states how the recent strong performance of our labour market has “to some extent, been based on a foundation of macro economic stability“. This macroeconomic stability has been reached by using “appropriate fiscal and monetary policies to manage aggregate demand“. The fall in unemployment from 7.1% to 4.7% from 1997 to 2006 shown in Extract D is therefore evidence that managing aggregate demand can contribute to an effective reduction in unemployment. Managing aggregate demand(eg) can be self-financing because when the increase in aggregate demand causes an increase in employment, it means that fewer people would be on unemployment benefits.
7. Some argue that aid is focused on industrialization causing a greater gap in incomes and living standards between those in that sector and those in the traditional agricultural sector. 8. Aid is often available only if the country agrees to adopt certain economic policies and these often reflect the Washington Consensus policies that emphasize free market principles of liberalization, deregulation and privatization to promote economic growth. These policies might be more in the interest of MNCs and the developed countries rather than the developing countries.
Through history Africa’s economy has been negatively exploited but they continue to struggle to rebuild. The lasting effects of imperialism have most countries today worse off economically than they were 30 years ago. And the history of apartheid continues to cause separation of groups into middle class to wealthy or poor to poverty stricken which is historically white versus black. Economically this causes the rich to get richer and the poor to get poorer which continues to negatively affect their overall economic growth. By exporting their raw materials to industrialized