ECO201 - Macroeconomics
May 6, 2013
There are probably a thousand macroeconomic indicators, some measure the overall national economy, and some are more limited in scope. The three most often quoted and publicized are the Gross Domestic Production Index (GDP), the Consumer Price Inflation Index (CPI) and the Unemployment Index. Below I will give you the link(s) for each one of the indicators followed by two or more questions you are to answer. The links show you the respective formulas and examples of the way the indicator is calculated. In all there will be three indicators with five total links.
Gross Domestic Production (GDP)
1. Assume that consumer spending is $1,000, government expenditures are $250, investments by industry are $200, and the excess of exports over imports is $300. Compute the GDP. (Please show your work)
Basic formula to calculate GDP is Y = C + I + E + G
C= Consumer = $1,000, I= Investment = $250, E= Excess = $200,
G= Government Expenditures = $250
Y= $1,000 + $250 + $200 + $250, Y= $1,700
2. If we are able to increase our domestic energy production, and that allows us to import less oil from foreign countries, briefly explain what will happen to the GDP.
Imports are goods and services produced by foreign countries which are sold domestically. The expenditures on exports are added to total expenditures, in the other hand the expenditures on imports are subtracted from the total expenditures. An example, if the exports amount is $500 and the imports amount is $300, leaving an excess of export over imports of $300. This amount of $300 is added to the GDP, and if the case were the opposite then the amount of $300 should be deducted from the GDP. If we import less oil from other countries used to increase the energy production it would positively impact the nations GDP.
Rate of Inflation
1. If the CPI went from 106 to 111 during the past year, the rate of inflation, in...