29 Jul From your perspective, identify the most important of the 6 scenarios that you have encountered in this course. State which of the 6 scenarios is the most im

2

sCalculating GDP

(Table 1) National Income Acounting 1st year data
Consumption of durational goods	1250000
Consumption of non-durable goods	889000
Compensation of employees	865000
Consumption of service	2350000
Fixed residential investments	645000
Corporate profits	1150000
Fixed nonresidential investments	730000
Consumption of fixed capital	90400
Change of inventories	125000
Government purchase of goods and services	940000
Exports	250000
Imports	360000

(Table 2) National Income Acounting 2nd year data
Consumption of durational goods	1437500
Consumption of non-durable goods	1022350
Compensation of employees	994750
Consumption of service	2702500
Fixed residential investments	748200
Corporate profits	1322500
Fixed nonresidential investments	854100
Consumption of fixed capital	103960
Change of inventories	143750
Government purchase of goods and services	977600
Exports	262000
Imports	378000

Q1. Calculating GDP Using the Expenditure Approach

Year 1:

(a) Personal Consumption Expenditure (C):

Consumption of durable goods + Consumption of non-durable goods + Consumption of services

C=1250000+889000+2350000= 4489000

(b) Gross Private Domestic Investment (Ig):

Fixed residential investments + Fixed nonresidential investments + Change of inventories

Ig=645000+730000+125000= 1505000

(c). Government Purchase of Goods and Services (G):

G=940000

Net Exports (X – M):

Exports – Imports

X – M = 250000 – 360000 = -110000 (since imports exceed exports)

GDP:

Using the expenditure approach: GDP=C+ Ig +G+(X−M)

GDP= 4489000+1505000+940000−110000=6846000

Year 2:

Personal Consumption Expenditure (C):

C=1437500+1022350+2702500=5162350

Gross Private Domestic Investment (Ig):

Ig=748200+854100+143750=1748050

Government Purchase of Goods and Services (G):

G=977600G = 977600G= 977600

Net Exports (X – M):

X−M=262000−378000= −116000

GDP:

GDP=decimal+(X−M) GDP = C + Ig + G + (X – M) GDP=decimal+(X−M)

GDP=5162350+1748050+977600−116000=7624000

Q2. Percentage Change in Expenditure Categories

To find out which category experienced the highest percentage change from year 1 to year 2:

Personal Consumption Expenditure (C):

Percentage Change=5162350−4489000 /4489000×100≈15.01%

Gross Private Domestic Investment (Ig):

Percentage Change=1748050−1505000/1505000×100≈16.14%

Government Purchase of Goods and Services (G):

Percentage Change=977600−940000940000×100≈4.00%

Net Exports (X – M):

Percentage Change=−116000−(−110000) /−110000×100≈−5.45%

The category with the highest percentage change from year 1 to year 2 is Gross Private Domestic Investment (Ig) with an increase of approximately 16.14%.

Q3. Percentage Change in GDP

To calculate the percentage change in GDP:

Percentage Change in GDP=7624000−68460006846000×100≈11.38%

Q4. Importance of GDP and GDP per Capita

Importance of GDP: GDP is important since it represents the summary measure of the national economic activities and performance over time. GDP gives the gross value of goods and services produced within the borders of any country; thus, it indicates the general health and growth of an economy. Policymakers, business people, and investors look toward GDP to determine the trends of the economy, by which they make informed decisions and policy formation for development.

GDP per Capita: GDP per capita is calculated by dividing the country's GDP by the population. It is an average measure of the amount of goods and services produced per person in an economy and helps compare the standard of living and economic welfare of different countries. It measures how much a person can potentially consume or invest from the country's total economic output. A country with a high GDP per head is more likely to have good infrastructure, high levels of income, and more resources available for public services and development.

GDP and GDP per capita describe important measures that give evidence of a relationship between the economic performance of countries and living standards and therefore shape policy implications and investment decisions across the globe.

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Alexandria Wright

ECO 2013

June 2, 2024

1. First, I would like to explain what an opportunity cost would be from my understanding. To calculate the opportunity cost, we must first see how much of the other goods we would have to let go to get one added on unit of the item that we are primarily focused on. Knowing what a comparative advantage is also helped me while solving answer number one. To obtain the comparative advantage, we would need to compare the tons of sugar and corn. Based on the table we can see that Joem has a comparative advantage while producing sugar and Annia comparative advantage would be in producing corn. Joem can likely produce 1 ton of sugar if he lets go of two tons of corn. On the other hand, Annia would have to let go 4 tons of corn to produce the exact same amount of sugar. This obviously lets us know why Joem can produce sugar at a lower cost. Annia can produce 1 ton of corn by giving up 4 tons of sugar, Joem would have to let go of only two tons of sugar to produce the same amount of corn as Annia. This ultimately results in Annia having a lower opportunity cost.

2. Annia should focus on sugar and Joem should focus on corn. While using the table to find out the comparative advantage I noticed that if we sacrifice sugar, we can produce 4tons of corn in both countries. However, in Annia if we sacrifice corn, we’ll be able produce 16 tons of sugar. We can also practice trading in the method due to both countries having the same comparative advantages with corn.

3.Trade would improve economic efficiency for both countries Annia and Joem because both would benefit from trading their product. Corn and sugar would both be on the market. We would no longer have to use comparative advantage to see who should keep selling their product. Each country would also benefit from trading because you both can now agree to sell the product at a lower price. It has been proven that trading has been beneficial to us economically over the years.

4.I have a comparative advantage over my peers at work because I am studying to become a paralegal. I am the only active student in the office, I am currently a paralegals assistant. This is a comparative advantage for me because I am sacrificing my time now for a larger opportunity. In comparison to the other employees. Due to the other employees not sacrificing their time to be able to grow in the legal profession, they may face the consequences of staying at the same pay grade for years, maybe even decades. I used comparative advantage to help me rationalize my life and take a step back to see what I was actually doing with my time. Now that I am making more cautious decisions with my time as far as staying focused on my career and degree, I’m sure just like a thriving company that’s been through many obstacles, I will thrive too !

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