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GDP, GNP, Natural Rate of Unemployment

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1. Describe the four broad categories of GDP using consumption approach. Give detailed account of each component.

2. Explain the difference between GDP and GNP. What adjustments needs to be made to GDP to arrive at GNP?

3. What is the "Natural Rate of Unemployment" ?

4. Why do some economies grow faster than others?

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Solution Preview

1. GDP = consumption + gross investment + government spending + net exports
Consumption: all final goods and services used by consumers and businesses
Gross investment: tangible and intangible final goods which are produced by businesses for use in future production. This includes such things as factories and on the job training.
Government spending: this includes all goods used in governmental offices as well as the wages paid to government employees.
Net exports: The sum of the value of the goods a nation exports minus the value of the goods it imports. If it imports more than it exports, this value will be negative.

2.
Gross national product (GDP) is the total economic output produced within a given area, usually a nation. It is generally calculated by taking the ...

Solution Summary

GDP, GNP, natural rate of unemployment, and differing rates of economic growth are discussed.

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See Also This Related BrainMass Solution

I need help with GDP problem

1. You have the following data for a developing country (in thousands of
dollars). Calculate each sector's value added and the country's GDP.

Name Total Intermediate Value GDP
Output Inputs Added

Agriculture $15,000 $ 7,000 $_____
Mining 9,000 4,000 ______
Textiles & Apparel 3,000 1,500 ______ = $
Manufacturing 600 100 ______
Trade & Services 2,000 1,000 ______
Government 6,000 2,000 ______

2. You have the following data to calculate some key economic indicators:

National Income $4,000 Wages $2,800
Depreciation 400 Exports (X) 1,000
Consumption (C) 3,500 Rental Income 200
Interest Income 300 Gross Investment (I) 500
Imports (M) 700 Indirect Taxes 200
Government Outlays 1,000 Government Purchases (G) 300

a. GDP =

b. Net investment =

c. NDP =

d. Profit income=

3. Consider an economy that produces only two goods, computers and
television sets in 1995 and 1996.

Output Prices Nominal GDP Real GDP
1995 1996 1995 1996 1995 1996 1995 1996

Computers: 100 200 $1,000 $500

TV Sets: 1,000 800 $500 $600

a. Fill in the table to calculate nominal and real GDP for each year, using 1995 as the base year.

b. Use the growth rate formula to calculate the 1995-96 percentage
Rates of change in:

1) Nominal GDP =

2) Real GDP =

3) Implicit Price Deflator =

4) Suppose an economy has 10,000 people looking and available for work
and 90,000 people working.
a) Calculate the unemployment rate:

U = unemployed =
Labor force

b) Suppose 4,000 of the people looking for work get discouraged and give up
their search.

1) Calculate the new unemployment rate:

U =

2) Would you interpret this as good news or bad news for the economy? Explain.

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