Measurement of GDP - Unemployment - and Market Structures

EC1301 Principles of Economics

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Task

Question 3

a) Define Gross Domestic Product (GDP). (4 marks)

b)Explain the following expenditures in the Expenditure Approach for measuring the GDP:

i) Consumption

ii) Investment

iii) Government expenditure

iv) Net Export

c) Suppose the production and prices of pizza and burgers in Country Z in 2014 (base year) and 2015 are as follows:

	Quantity of pizzas (million)	Price of pizzas	Quantity of burgers (million)	Price of burgers
2014	10	$10.00	15	$5.00
2015	30	$12.00	30	$6.00

Calculate the:

1. Nominal GDP in 2014 and 2015.

2. Real GDP in 2014 and 2015.

3. Real GDP growth rate between 2014 and 2015.

4. Nominal GDP per capita in 2015 if the country has a population of 200,000.

Show working clearly for Part C (i), (ii), (iii), (iv)

Question 4:

a) Explain the following types of unemployment and provide one example:

Frictional unemployment
Structural unemployment
Cyclical unemployment

b) For each scenario below, identify the type of unemployment faced by the person concerned and suggest a measure which the government can adopt to reduce that type of unemployment.

i)Terence who has not been able to find a job because his skill to make typewriters is no longer demanded by the economy.

ii)Patsy who is currently going around for job interviews, after resigning from her previous company.

iii) John who was laid off from his company during the 2008 Global Financial Crisis.

c) Calculate the unemployment rate of County X which has 300,000 working-age people who are looking for a job and a labour force size of 5 million.

Question 5:

a) Identify and explain FOUR (4) different characteristics between perfect competition and monopoly market structures.

b) Identify and explain THREE (3) possible barriers to market entry.

c) Explain the following characteristics of an oligopoly market structure:

i) Inter-dependency

ii) Collusion

iii) Price leadership

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