Phase 2 IP Assignment
David Bailey
ECON 210
12/1/2014
Richard Fendler

Phase 2 IP Assignment
Part I
Assume that Country A has a population of 500,000 and only produces 1 good: cars. Country A produces 100,000 cars per year. The people in Country A purchase 90,000 cars, but there are not enough cars to fulfill all the demand. They decide to import 50,000 more. The government buys 25,000 cars for its police force, and 10,000 cars are bought by companies to transport employees to other locations to work. They also export 65,000 cars to nearby countries for sale. Discuss the following (for all three of these questions, merely record your numerical answers). 1. What is Country A’s GDP? GDP = C + I + G + (X - M) G=25,000 C=90,000 I=10,000 X=65,000 M=50,000 GDP= 90,000+10,000+25,000+(65,000-50,000) GDP= 125,000+ (15,000) GDP= $140,000 2. What is the composition of GDP by percentage? 3. What is the GDP per capita? GDP per Capita= GDP/ Population a. GDP Per Capita = 140,000/500,000 b. GDP Per Capita= .28

Part II
Go to the Bureau of Economic Analysis at this Web site (http://bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm), and look up the latest new release for real GDP. Address the following questions after reading the latest release:

1. What is the real GDP today? 3.9% 2. What is the largest component of GDP? Consumption
3.What is the smallest component of GDP? Net Exports 4. What is the fastest growing component of GDP, and why? The fastest growing component of GDP is the exports of goods and services. According to the BEA, “the increase reflects growth in personal consumption expenditures, exports and fixed investment outside residential, as well as inventory investments from the private sector and local government spending”