...regular sequence. CHAPTER 1: CIRCULAR FLOW AND GDP The Circular Flow Model Our next economic model represents the main participants in the economy and how they interact. The two main sectors of an economy are the households and the producers. Producers make the goods and services and sell them to households, but in order to make the goods and services they first need inputs or the factors of production. There are four factors of production and each receives payment for its participation in production: labor is paid wages, capital is paid interest, land is paid rent and entrepreneurship is paid profit. There are always two directions to the flows in the economy – the money to purchase something is moving in one direction, the good or service being purchased is moving in the opposite direction. Households sell the four inputs to the production sector and receive payment back. Households then spend most of their income buying the goods and services produced by the production sector; what the households don’t spend they save. The production sector and government access those savings by borrowing in order to finance purchases. In addition both the production sector and government spend part of their income buying goods and services. Foreign businesses, governments and consumers not only inject funds into this economy when they buy from us, but also divert funds from this economy when they sell to us. Money keeps flowing from one sector to another forming...
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...Learaye Macroeconomics Economic Growth & GDP “Gross domestic product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of neither public debate not the integrity of our public officials. It measures neither our courage nor our wisdom, not the devotion to our country. It measures everything, in short, except that which makes life worthwhile and it can tell us everything except why we are proud to be Americans.” Quote by Robert F. Kennedy GDP GDP is not a measurement of overall prosperity of a nation and it fails to measure some aspects of a national economy. As you can gain from the quote by Robert F. Kennedy, we do not use this to measure those things which “make life worthwhile” but rather use it to judge one country from another. It helps to evaluate how societies function in different economic environments and how to use this measurement to improve conditions in a society or to keep things flowing for a healthy economy. Gross Domestic Product (GDP) is defined as the total market value of final goods and services produced by factors of production. GDP also measures markets of what is being produced or whether problems are occurring. There is a relationship presented with a circular flow model that gives us a picture of the flow of production being produced in an economy. The circular flow model demonstrations...
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...Econ 202 Unemployment in the US The unemployment rate in the United States has gone through changes in the past few years. It can fluctuate from high to low depending on our economy’s stability at the time. With the economy in a recent recession the level of unemployment rose. This affected millions of US citizens as well the US GDP levels. When citizens are out of work fewer products are being purchased and retail starts to decline. The US economy is slowly coming out of the financial crisis and recession within the last recent years. It wasn’t until the past year of 2011 did our economy see a positive turn around and unemployment levels began to decline. The Unites States economy has been showing increasingly positive signs throughout the year 2011. The unemployment rate fell recently in 2012 and is continuing to show good signs for a better economy. As of January 2012 the unemployment rate has fell to 8.3% in the Unites States. This is the lowest level the economy has seen since February 2009. Since August 2011 the unemployment rate has decreased by .8%. The widespread unemployment experienced in the last recent years is not the worst the US economy has ever experienced. The unemployment rate in the US averages 5.70 % from 1948 to 2010. The worse rate experienced was a record high for unemployment during November of 1982 with a 10.80% rate. There is hope though for the future with the unemployment rate slowly declining. In last several years...
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...Indonesian Economy Overview The largest economy in Southeast Asia, Indonesia – a diverse archipelago nation of more than 300 ethnic groups -- has charted impressive economic growth since overcoming the Asian financial crisis of the late 1990s. The country’s gross national income per capita has steadily risen, from $560 in the year 2000 to $3,630 in 2014. Today, Indonesia is the world’s fourth most populous nation, the world’s 10th largest economy in terms of purchasing power parity, and a member of the G-20. It has made enormous gains in poverty reduction, cutting the poverty rate to more than half since 1999, to 11.2% in 2015. Indonesia’s economic planning follows a 20-year development plan, spanning from 2005 to 2025. It is segmented into 5-year medium-term plans, called the RPJMN, each with different development priorities. The current medium-term development plan – the third phase of the long-term plan -- runs from 2015 to 2020, focusing, among others, on infrastructure development and improving social assistance programs in education and healthcare. Such shifts in public spending has been enabled by a reform of long-standing energy subsidies, allowing for more investments in programs that directly impact the poor and near-poor, as well as vast improvements in infrastructure investment. Considerable challenges remain in achieving Indonesia’s goals. Due to weaker demand for commodities – the fuel for Indonesia’s economic boom in the past decade – Indonesia’s GDP growth has...
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...single global economy. China is current the world’s second largest economy and in the past two decades has been the worlds fastest growing economy, sustaining an average rate of growth in real GDP of 10% per annum. The effect of globalisation on China’s economy can be seen in the areas of economic growth, economic development, quality of life, economic stability and environmental sustainability. Economic growth refers to the increase in a country’s GDP over a period of time. The influence of globalisation on China has been profound with economic growth being sustained between 8 and 10 percent in the past 2 decades. This is due to China moving away from being an ecnomy with a domestic focus to a trade oriented economy, highly integreated with the global economy to take advantage of globalisation. This increased integration has seen China’s share of world exports in goods and services rise to 9.4%, and its share of world GDP estimated at 14.3%. The effect of this increased integration is evident as China is now the worlds second largest economy in the world measured by the nominal value of GDP in US dollars. Economic development can be measured through growth in GDP per capita as well as other qualitative measures. China’s rapid rate of economic growth has been based on its export oriented strategies financed by foreign investment which has increased substantially as a result of China’s involvement with the global economy. This has resulted in a rise of 9.4% in GDP per capita from...
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...|Review Exam – Semester Two 2015 | |Course Code: | |ECON1246 /1273 | | | |Course Description: | |Macroeconomics 1 | | | |ALLOWABLE MATERIALS AND INSTRUCTIONS TO CANDIDATES | |Write your full name and student number on each exam booklet together with the number of exam books used. | |Students must not write, mark in any way any exam materials, read any other text other than the...
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...Principles of Macroeconomics course, we were given an assignment in which we show how well we understand and describe key terms we discussed during class in our own words. Terms such as; Gross domestic product (GDP), Real GDP, Nominal GDP, Unemployment rate, Inflation rate, and Interest rate. The second part of this assignment is describing economic activities such as Purchasing of groceries, Massive layoffs of employees, and Decrease in taxes, affects our government, households, and businesses. We also need to describe the flow of resources from one entity to another for each activity. Let’s begin first by describing each term in our own words. Gross Domestic Product, or GDP, shows how well a country’s economic health is, and gauges its standard of living. This is all based on the monetary value of all the finished goods and services produced within that country. The GDP is usually calculated on an annual basis. Nominal GDP, also known as current dollar GDP, is the country’s GDP that has not been adjusted for inflation. Without accounting for inflation, the GDP figure can be very misleading because the GDP will appear higher than it actually is. Real GDP, often referred to as inflation-corrected GDP, is the inflation-adjusted GDP, and unlike nominal GDP, real GDP can account for changes in the price level and can provide a more accurate figure. The Unemployment rate is the country’s percentage of total labor force that does not have a job. Although hard to say, these...
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...This essay shall discuss the most current U.S. GDP figures and the current state of the economy. It will also discuss how the current state of the economy will or will not impact my organizational profitability, using the Timken Company. The most current figures available for GDP are in reference to 2014. GDP is the measure of all final goods and services made in a year, and made in the United States. This does include foreign country operations that are located in the U.S., however it excludes U.S. plants in foreign countries. The GDP numbers are important because it represents how well the economy is doing. An economy doing poorly will have lower profits for businesses, which effects stock price. This is significant to investors that look at GDP growth, and if it is negative it could suggest that the economy is in a recession. The real GDP is the most looked at figure in discussion with the economy. Real GDP is comparing one year to the other taking out the effects of inflation calculated by the Bureau of Economic Analysis (BEA). According to the BEA, the U.S. GDP increased 2.4 percent in 2014 from the figures found in 2013. The results I will also look at is the latest fourth quarter of 2014, because GDP is reported quarterly as well. The GDP is a very in depth and comprehensive report, therefore I will concentrate on the most important numbers that the report contains. The extras that the report contains breaks down personal consumption expenditures, gross...
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...2012) No replay of 2011 in the cards for Canadian and US economies Part 1. Summary of the Article First article that I chose is the outlook for advanced economic and financial market particularly US, European union, Canadian and Chinese market that are strongly influence to the world market. Source of the Information and analysis are IMF World Economic outlook and RBC Economic research for year 2012 and forecast for year 2013. This paper includes several economic issues such us economic recession and growth, risk, Labour market and Inflation additionally monetary policies for central banks. Researcher and forecasters compared those issues for different countries and they aim to differentiate and discuss for each of the countries and market situation. Overall, the world economy faces significant challenges in the recent years and is expected to grow by 3.5% this year. Authors stated some significant issues and problems and explained them in detail. For example, paper includes several subtitles about European risk and recession situation, Finding the right policy for Europe, China is in slow growth stage, Canada and US economic situation and factors that impacted in positive and negative ways on the economy, Labour market volatility, Housing market, Households income and debt status, Consumer spending shift, Businesses that are supporting market, Canada’s dollar appreciation, Fed and other central bank policy, US labour market trend and the Fiscal policy. In the conclusion...
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...Expected U.S. GDP growth rate going forward The Gross Domestic Product (GDP) is a major factor that shows how the economy will either get better or worse. The GDP is how we can measure the spending and production of the U.S. The GDP is a total measurement usually calculated quarterly (Russell, 2012). These calculations show change to the economy even if products and services increased or decreased, According to Russell, (2012) regardless of changes in the purchasing power of the currency. There are many things that affect our economy such as international debt, increase in taxes, the effect to interest rates, the rise in unemployment, the poor failing real estate market, lack of investing, lack of spending by consumers, which is directly affected because of lack of employment. Some believe that the economy will eventually recover. This may be a slow process, however. Those in the business world believe this will most likely put inflation at a standstill. (TBQ, 2012). It is predicted that the GDP will continue to go up and down for years to come as the US tries to recover from the economic slump that it has found itself in unless congress and the president can pull us out. There are three different methods of determining GDP. The first one is estimating each industry’s gross output or production (Wells and Krugman, 2009). Second would be to measure income (Wells et al). Third would be expenditures, showing different types of spending throughout the economy (Wells et al)...
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...when it comes to our economy. At the beginning of 2009, job growth was down. From 2010 until this present moment we have seen steady job growth and a minor decrease in the unemployment rate. In others words people are starting to find jobs and spend money. This report will show you some of the trends associated with the US economy and it will explain how this information will affect your local economic development. Gross Domestic Product (GDP) is defined as the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, mostly calculated on an annual basis. GDP is commonly used as an indicator of the economic health of a country as well as a gauge of a country’s standard of living. (Gross Domestic Product - GDP, 2012) Some of the trends looked at in calculating GDP include, but are not limited to, the unemployment rate, job growth, and federal debt. (Amadeo, 2012) Simply put, do we have enough job growth to handle supply and demand on a local, state, and federal level? GDP is calculated by using a simple formula. GDP = C+G+I+NX. “C” represents consumption which is defined as the final purchase of a finished good or commodity. “G” represents the sum of government spending. “I” is the sum of all the country’s business spending on capital. “NX” is the nation’s total exports- total imports. (NX=Exports-Imports) (Gross Domestic Product - GDP, 2012) It is important to note that if you are calculating GDP you must take into...
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...the Assignment (1) (a) Australia: The rate of growth of real GDP in the December quarter 2011 is 2.3, and the three months to the December quarter is 0.4. The United States: the rate of growth of real GDP in the December quarter 2011 is 1.2, and the three months to the December quarter is 0.7. Australia has a greater GDP growth rate for the year to the December quarter 2011 but a lower growth rate in the fourth quarter. （b）Australia: Final consumption expenditure, the general government increased 1.0 percent and contributed the least of 0.2 to growth. The households increased 0.5 and contribute 0.3 to growth. Thus the final consumption expenditure increased 1.5 and contributed 0.5 to growth. Gross fixed capital formation, the total private decreased 17.4 percent and contributed negative 0.3 to the growth. The total public increased by 0.6 percent and had no contributions to the rate of growth in GDP. Therefore, the gross fixed capital formation decreased by 16.8 and contributed 0.3 to growth in GDP. The exports increased by 2.2 percent and contributed 0.4 to GDP growth. The imports increased by 0.7 percent and contributed negative 0.2 to GDP growth. (Australian, 2012) For Australia, the exports grew at the highest rate while the gross fixed capital formation grew at the lowest rate and the final consumption expenditure contributed the most to growth whereas the import had contribution of 0.2 percent which the least. The United...
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...Analysis of the Gross Domestic Products of CHINA INDIA PAKISTAN Background of the Indian Economy The India economy, the third largest economy in the world in terms of purchasing power, is going to touch new heights in coming years. As predicted by Goldman Sachs, the Global Investment Bank, by 2035 India would be the third largest economy of the world just after US and China. It will grow to 60% of size of the US economy. This booming economy of today has to pass through many phases before it can achieve the current milestone of 9% GDP. | The history of Indian economy can be broadly divided into three phases: Pre- Colonial, Colonial and Post Colonial. Pre Colonial: The economic history of India since Indus Valley Civilization to 1700 AD can be categorized under this phase. During Indus Valley Civilization Indian economy was very well developed. It had very good trade relations with other parts of world, which is evident from the coins of various civilizations found at the site of Indus valley. Before the advent of the East India Company, each village in India was a self sufficient entity and was economically independent as all the economic needs were fulfilled within the village | Colonial Indian Economy: The arrival of the East India Company in India caused a huge strain to the Indian economy and there was a two-way depletion of resources. The British would buy raw materials from India at cheaper rates and the finished goods were sold at higher...
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...public institutions, in particular the inflation targeting framework coupled with exchange rate flexibility and the Fiscal Responsibility Law. Improvement in the social area has also been impressive, with a remarkable fall in poverty and inequality. Most product markets have been opened up, and labour market informality has receded. The count1ry is now reaping the benefits of economic stability and increasing resilience, which, together with a timely macroeconomic policy response combining monetary easing, some fiscal stimulus and credit expansion, allowed Brazil to withstand the 2008-09 global financial crisis well. Real GDP growth of 7.5% in 2010 was the highest since 1986 and the fifth-best performance amongst the G20 countries (Table 1). This robust growth is estimated to have removed all remaining slack from the economy. Over the next two years, real GDP growth is foreseen to slow to less than 4%, well below trend rates of around 4.5% per year. Domestic demand, spurred by strong investment, is likely to continue to sustain activity (Table 2). Inflation is projected to diminish gradually but to remain in the upper part of the target range of 2.5-6.5%. Risks surrounding this scenario are on the downside and good economic performance in Brazil remains contingent on a relatively benign scenario for the...
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... 1 What is Gross Domestic Product? Jesse Leslie Argosy University Macroeconomics George Williams 07/ 26/2014 GROSS DOMESTIC PRODUCT 2 Current-Dollar and "Real" Gross Domestic Product | 6/25/14 | | | | | | | | | | Annual | | Quarterly | | | | | | | (Seasonally adjusted annual rates) | | | | | | | | | | | | | GDP in billions of current dollars | GDP in billions of chained 2009 dollars | | | GDP in billions of current dollars | GDP in billions of chained 2009 dollars | | | 1982 | 3,345.0 | 6,484.3 | | 1960q2 | 542.7 | 3,108.4 | 1983 | 3,638.1 | 6,784.7 | | 1960q3 | 546.0 | 3,116.1 | 1984 | 4,040.7 | 7,277.2 | | 1960q4 | 541.1 | 3,078.4 | 1985 | 4,346.7 | 7,585.7 | | 1961q1 | 545.9 | 3,099.3 | 1986 | 4,590.1 | 7,852.1 | | 1961q2 | 557.4 | 3,156.9 | 1987 | 4,870.2 | 8,123.9 | | 1961q3 | 568.2 | 3,209.6 | 1988 | 5,252.6 | 8,465.4 | | 1961q4 | 581.6 | 3,274.6 | 1989 | 5,657.7 | 8,777.0 | | 1962q1 | 595.2 | 3,333.6 | 1990 | 5,979.6 | 8,945.4 | | 1962q2 | 602.6 | 3,369.5 | 1991 | 6,174.0 | 8,938.9 | | 1962q3 | 609.6 | 3,401.6 | 1992 | 6,539.3 | 9,256.7 | | 1962q4 | 613.1 | 3,414...
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