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Measuring GDP And Economic Growth: Calculation And Analysis Essay.

10 Pages / 2,498 Words Published On: 23-09-2020

Calculating national accounts and nominal and real GDP for Maritime Republic

  • This assignment is worth 25 per cent of total assessment and is to be submitted by 00pm, Thursday 11 January 2018.
  • There are 3 questions and each question will be marked out of 20 marks, consisting total of 60 marks. Then the marks will be converted to a total of 25 mark scale for 25 per cent of your total course assessment. The marks to be uploaded in Moodle will be out of 25 marks.
  • A hard copy of the assignment must be submitted to the lecturer during lectures (the latest during tutorials) but if late to the KOI Librarian in Kent street campus by 5.00pm, Friday 12 January   You must keep the copy of receipt after the submission for your own record.
  • Late submission will attract loss of 5 marks out of 25 marks (20 per cent), and the assignment submitted after 5.00pm Friday 19 January 2018 will not be accepted and marked zero
  • This assignment is an individual assignment. Each student is expected to try all three questions and submit the assignment. Name and ID number of the student must be clearly printed on the Assignment Cover Sheet.
  • You must follow an appropriate format explained below. Not following appropriate format will cause a loss of some marks.
  • All written answers must be clearly typed and printed. Hand-written answers will NOT be accepted.
  • 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 clearly and concisely with the main points only, and avoid irrelevant points.
  • You must analyse, explain and show how and why you draw your answers. Providing just answers without explanation will not receive full marks.
  • You must also include appropriate and relevant diagrams, charts and tables together in your explanation. Draw them using Microsoft Power Point/Word/Excel, NOT hand-drawn.
    • Copying the assignment contents from other(s) is a serious violation of copy right. It will be penalized and attract a VERY heavy loss of marks – “Fail”.
  • Please remember that it is not difficult to identify the contents that are copied from other(s). Write the answers in your own English words.
  • Please make sure that you do not show your assignment to other(s). Both who shows the assignment and who copies the assignment will lose their marks heavily and fail the assessment.
    • Make sure you read and check the assignment before submission, once completed.
  1. Assignment Questions

Question 1 – 20 marks

Measuring GDP and Economic Growth

The national accounts of Parchment Paradise are kept on (you guessed it) parchment. A fire destroys the statistics office. The accounts are now incomplete but they contain the following data:

  • GDP (income approach): $2,900
  • Consumption expenditure: $2,000
  • Indirect taxes less subsidies: $100
  • Gross income at factor cost: $2,800
  • Investment: $800
  • Government expenditure: $400
  • Wages: $2,000
  • Net exports: –$200
  • Calculate GDP using the expenditure approach. 

(b)     Calculate the sum of total income less wages and the statistical discrepancy. 

The table below provides data on the economy of Maritime Republic that produces only fish and crabs. Quantities

2015 2016


1,000 tonnes

1,100 tonnes


   500 tonnes

  525 tonnes



$20 a tonne

$30 a tonne


$10 a tonne

 $8 a tonne

(c. )Calculate Maritime Republic’s nominal GDP in 2015 and 2016.

(d) Calculate Maritime Republic’s chain volume measure of real GDP in 2016 expressed in 2015 dollars. 

Totally Gross

          GDP has proved useful in tracking both short-term fluctuations and long-run growth. Which isn’t to say  GDP doesn’t miss some things. Amartya Sen, at Harvard, helped create the United Nations’ Human Development Index, which combines health and education data with per capita GDP to give a better measure of the wealth of nations. Joseph Stiglitz, at Columbia, advocates a “green net national product” that takes into account the depletion of natural resources. Others want to include happiness in the measure. These alternative benchmarks have merit but can they be measured with anything like the frequency, reliability and impartiality of GDP?

Source: Time, 21 April 2008

  • Explain the factors that the news clip identifies as limiting the usefulness of GDP as a measure of economic welfare.
  • What are the challenges involved in trying to incorporate measurements of those factors in an effort to better measure economic welfare?
  • What does the ranking of Australia in the Human Development Index imply about the levels of health and education relative to other nations? 

Question 2 – 20 marks

Jobs and Inflation

Australian Bureau of Statistics reported the following data for 2015:

Labour force participation rate: 69.6 per cent

Working-age population (in thousands people): 18,429,726

Employment-to-population ratio: 65.2

  • Calculate the labour force. (2 marks)
  • Calculate the employment. (2 marks) 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. Calculate the unemployment rate in November 2015. (2 marks) 

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.

  • Calculate the CPI in the current year (2 marks) 
  • Calculate the inflation rate in the current year. What does it indicate on the price level?            (2 marks) 

Unemployment and Job Vacancies Rise

          The number of job vacancies in Australia rose 3.2 per cent in the three months to August 2011, official statistics show. The number of job vacancies in the private sector was 170,000 in August, a rise of 4.1 per cent from 163,300 in May. There were 17,100 vacancies in the public sector in August, down 4.4 per cent from vacancies recorded three months earlier. Over the same three months, the unemployment rate increased from 5 per cent to 5.3 per cent.

Sources:, 29 September 2011 and ABS

  • If the labour market is working properly, why are there job vacancies and unemployment? Why don’t all the job vacancies get filled by unemployed workers?(2 marks) 
  • Are the additional workers who couldn’t find jobs in the three months to August 2011 most likely part of the economy’s structural unemployment or part of its cyclical unemployment? Explain your answer. (3 marks) 

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.    

  • 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.  (5 marks) 

Question 3 – 20 marks      

Global Saving Glut and U.S. Current Account, remarks by Ben Bernanke (when a governor of the Federal Reserve) on 10 March 2005:

The U.S. economy appears to be performing well: Output growth has returned to healthy levels, the labour market is firming, and inflation appears to be under control. But, one aspect of U.S. economic performance still evokes concern: the nation’s large and growing current account deficit (negative net exports). Most forecasters expect the nation’s current account imbalance to decline slowly at best, implying a continued need for foreign credit and a concomitant decline in the U.S. net foreign asset position.

  • Why is the United States, with the world’s largest economy, borrowing heavily on international capital markets—rather than lending, as would seem more natural?
  • What implications do the U.S. current account deficit (negative net exports) and our reliance on foreign credit have for economic performance of the U.S. economy?
  • What policies, if any, should be used to address this situation?

Exchange Rate and Balance of Payments

Colombia is the world’s biggest producer of roses. The global demand for roses increases and, at the same time, the central bank in Colombia increases the interest rate. In the foreign exchange market for Colombian pesos, what happens to

  1. The demand for pesos?
  2. The supply of pesos?
  3. The quantity of pesos demanded?
  4. The quantity of pesos supplied?
  5. The exchange rate of the pesos against the Australian dollar? 

Balance of Payments 

The table gives some information about the U.S. international transactions in 2008.

  1. Calculate the current account balance.


Billions of U.S. dollars

Imports of goods and services


Foreign investment in the United States


Exports of goods and services


U.S. investment abroad


Net interest income


Net transfers


Statistical discrepancy


  1. Calculate the capital and financial account balance.
  1. Did U.S. official reserves increase or decrease? 
  1. Was the United States a net borrower or a net lender in this year? Explain your answer.
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