What is the equilibrium level of real gdp

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Reference no: EM131349396 , Length: word count:1200

The Global Economy Written Assignment

The assignment has two parts, A and B.

Part A: Data collection, presentation and analysis

China, Japan, USA and the Republic of Korea are the four top trading partners of Australia. Recently there have been developments in the political front in some of these countries, which may have an impact for the Australian economy. More precisely, there are some concerns that after President Trump been elected, many trade agreements between the USA and other countries (in particular with China) will be revoked. Moreover, massive protests in Seoul have been witnessed as hundreds of thousands of angry South Koreans took to the streets calling for President Park Geun-hye's resignation. These developments can impact Australian exports and exports. In this part of the assignment, you will collect, present and analyse important macroeconomic indicators for the above four countries.

Q1. Using FRED's website (under Data), collect and present annual data showing: (i) GDP per capita (current US$); (ii) the GDP annual percentage growth rate; (iii) Exports of goods and services (% of GDP); (iv) Imports of goods and services (% of GDP); and (v) inflation rate for the USA, South Korea and Australia for the years 1970 - 2014.

Present the data in tables. You are free to decide how many tables to use, and which variables/countries to include in each table. Each table must be numbered and have a clear heading/title indicating its contents, and a reference for the source of the data under the table.

Use the data to construct the following graphs. Indicate under each graph which table(s) the data came from. Give your graph a title, and make sure to label each of the axis and the variable.

Figure 1. GDP per capita for all three countries.

Figures 2, 3, 4 and 5: One figure for each country, with the GDP growth, Exports of goods and services, Imports of goods and services and inflation rate for that country.

Figure 6: GDP growth and Exports of goods and services for all three countries.

Q2. Using figures 2 - 6, analyse and explain any general relationship you see between the three variables in each of the countries. Is there any link between Australian exports and the GDP growth in the USA? How political risk and uncertainty can affect the performance of these economies? (Word limit: 300 words)

Q3. Now, from the same website, download the data for harmonized unemployment (% of labour force) and the annual percentage inflation rate (using the GDP deflator) for the years 1990-2014. Using the GDP growth rate data from above, draw a graph for each country with the GDP growth rate, inflation rate and unemployment rate for that country. Could you see if inflation rate and unemployment move together/opposite with the GDP growth rate in USA, South Korea and Australia? Explain your answer. (Word limit: 300 words)

Part B: Short Answer Questions

Q4. Using the following table, answer the following questions. The numbers in the table are in billions of dollars.

Real GDP

Consumption

Planned Investment

Government Purchases

Net Exports

1000

1000

100

150

-50

2000

1900

100

150

-50

3000

2800

100

150

-50

4000

3700

100

150

-50

a. What is the equilibrium level of real GDP?

b. What is the MPC?

c. If potential GDP is $4000, is the economy at full employment? If not, what is the condition of the economy?

d. If the economy is not at full employment, by how much should government spending increase so that the economy can move to the full employment level of GDP?

Q5. Discuss the leading causes of the Great Depression in Australia and use the 45° line diagram to show how they caused a decline in real GDP. (Word limit: 300 words)

Q6. Starting from long-run equilibrium, use the basic (static) aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth. (Word limit: 200 words).

Reference no: EM131349396

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