Calculate chain volume measure of real gdp

Reference no: EM131181617

Introduction to Macroeconomics-

Question 1- Measuring GDP and Economic Growth

The table lists some macroeconomic data for a country in 2015.

Item	Billions of dollars
Wages paid to labour	569
Consumption expenditure	627
Gross income at factor cost	1,310
Investment	275
Government expenditure	351
Net exports	-21
Gross operating surplus	474

(a) Calculate the country's GDP in 2015. Then explain the approach (expenditure or income) that you used to calculate GDP.

An economy produces only three commodities - fish, crabs and coconuts. The base year is 2014, and the table gives the quantities produced and the prices.

Quantities	2014	2015
Fish	2,000 tonnes	2,100 tonnes
Crabs	600 tonnes	650 tonnes
Coconuts	500 bunches	700 bunches

Prices	2014	2015
Fish	$20 a tonne	$30 a tonne
Crabs	$10 a tonne	$8 a tonne
Coconuts	$10 a bunch	$5 a bunch

(b) Calculate chain volume measure of real GDP in 2014 and 2015 expressed in base-year prices. Then, calculate the real GDP growth rate between 2014 and 2015.

Jobs and Inflation - Australian Bureau of Statistics reported the following data for 2015:

Labour force participation rate: 69.6per cent
Working-age population (in thousands people): 18,429,726
Employment-to-population ratio: 65.2

(d) Calculate the employment.

In New South Wales in October 2015, the labour force was 3,803,200 and 200,500 people were unemployed. In November 2015, the labour force decreased by 300 and the number employed increased by 2,900.

(e) Calculate the unemployment rate in November 2015.

A typical family on Sandy Island consumes only juice and cloth. Last year, which was the base year, the family spent $40 on juice and $25 on cloth. In the base year, juice was $4 a bottle and cloth was $5 a length. This year, juice is $4 a bottle and cloth is $6 a length.

(f) Calculate the CPI in the current year.

(g) Calculate the inflation rate in the current year.What does it indicate on the price level?

Question 2 - Quantity Expansion (QE) of Money in the European Union (EU)

On March 9 2015, the European Union (EU) commenced quantity expansion of money, Euro (€). The European Central Bank (ECB) has increased the quantity of money by 60 billion euro every month in the open market in an attempt to support the economy of EU countries. The large increase in the quantity of money is expected to have significant impacts on a range of economic sectors in the EU and global financial markets.

(a) Analyse how the quantity expansion of euro money is likely to affect money supply, interest rate, investment and consumption, and economic growth in the EU. Draw relevant graph(s) for your analysis.

(b) Discuss how the quantity expansion of euro money would change the value of euro, exchange rate (depreciation or appreciation) against other currencies, and exports and imports in the EU. How would this contribute to EU's current account balance and would this improve the competitiveness of the EU economy in the global market?

The United States is likely to Raise Interest Rate soon

The U.S. Federal Reserve chairman,Dr Janet Yellen, has signalled that the United States is likely to raise its interest rate as US economic indicators has improved. On the other side of the world, however, the interest rates in many other countries including the EU and Australia are on hold at their lowest level ever.

(c) Explain, in the short run, how and why an increase in US interest rate is likely to change the flow of funds between the United States and Australia.

(d) Using a graph, explain how an increase in US interest rate is likely to affect loanable funds supply and interest rate in Australia. Also, analyse how the change in loanable funds supply and home loan interest rate are likely to influence housing demand, house prices, and household debt burden in Australia.

(e) Discuss how and why an increase in US interest rate is likely to affect the value of Australian dollar and exchange rate (depreciation or appreciation) against the US dollar. Also, discuss how the change in exchange rate is expected to influence Australia's exports, imports and the current account balance (improve or worsen).

Question 3 - Exchange Rate and Balance of Payments

In October 2012, the exchange rate was 82 Japanese yen per US dollar. As a result of Abenomicsin Japan since late 2012 and economic recovery in the US, the exchange rate rose to 114 Japanese yen per US dollar in March 2016.

(a) Draw a graph and explain what would have happened to the quantity of US dollar supplied and the US exchange rate? What would have happened to the interest rate in the United States? Would people now plan to buy or sell US dollar in the foreign exchange market?

(b) What would have happened to the quantity of Japanese yen supplied? Would people now plan to buy or sell Japanese yen in the foreign exchange market?

In July 2015, Australian dollar is trading at US$0.75per Australian dollar and the interest rate in Australia is currently 2 per cent a year. It is forecast that the US will increase its interest rate sometime later this year.

(c) If the interest rate in the US increases to 3 per cent a year, how is it likely to affect the flow of funds between Australia and the United States and the exchange rate of US dollar against Australian dollar (depreciation or appreciation)? What is likely to happen to the current account balance of the United States?

Balance of Payments

The table gives some information about the US international transactions in a year.

Item	Billions of U.S. dollars
Imports of goods and services	2,561
Foreign investment in the US	955
Exports of goods and services	1,853
U.S. investment abroad	300
Net interest income	121
Net transfers	-125
Statistical discrepancy	68

(d) Explain and calculate the current account balance.

(e) Explain and calculate the capital account balance.

(f) Did the US official reserves increase or decrease? Explain.

(g) Was the US a net borrower or a net lender in this year? Explain your answer.

Reference no: EM131181617

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len1181617

8/25/2016 3:19:50 AM

There are 3 questions and in the assignment. All assignment questions and sub-questions must be typed in order at the heading. Separate each main question by different page. For example, if Question 1 (a) (b) (c) and (d) are answered on pages 1-2, then start Question 2 on page 3, etc. If not following, it will attract a loss of some marks. The answers must be written concisely and clearly with the main points only, and avoid irrelevant points. You must analyze, show and explain how and why you draw your answers. Providing just answers without explanation will not receive full marks. You must also include relevant and appropriate diagrams, tables and charts together in your explanation. Draw them using Microsoft PowerPoint/Excel/Word, NOT hand-drawn. Make sure you read and check the assignment before submission, once completed.

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