1.consider the macroeconomic date in the table below and answer the following qu
ID: 1169410 • Letter: 1
Question
1.consider the macroeconomic date in the table below and answer the following question
a.Compute the output gap for each year.
b.Explain how actual GDP can exceed potential GDP
c.What do economists call it when GDP falls
d.What types of unemployment exist when the economy is at "full employment"?
2.In measuring GDP from the expenditures side (GDP=C+I+G+NX),which of the following expenditures are included and within which of the four categories?
a.Expenditures on automobiles by consumers
b.Expenditures on automobiles by firms
c.Expenditures on new machinery by Canadian owned companies located in Canada
d.Expenditures on new machinery by Canadian owned companies located in the US
e.Expenditures on new machinery by US companies located in Canada
f.Reductions in business inventories
g.The hiring of economic consultants by a provincial government
h.The purchase of used cars and trucks
i. The purchase of Canadian produced software by a company in Japan.
Year Actual GDP Potential GDP Output Gap Unemployment Rate 2005 1168 1188 11.1% 2006 1184 1196 10.2% 2007 1197 1205 9.1% 2008 1211 1215 8.3% 2009 1225 1225 7.6% 2010 1240 1236 7.3% 2011 1253 1247 7.1% 2012 1262 1258 7.3% 2013 1270 1270 7.6%Explanation / Answer
Ans a.
Ans b – The main cause of the gap is considered to be expansionary monetary policies carried out by the government. An inflationary gap is a signal that the economy is in the boom part of the trade cycle, resources are being used over their capacity, factories are operating with increasing average costs; wage rates increase because labour is used beyond normal hours at overtime pay rates. A case of the gap can arise when consumer or investor spending is very buoyant, when foreign demand is increasing or when government expenditure increases.
Ans c – When the GDP falls Recession occurs
Ans d – Frictional unemployment exist at full employment
Ans 2.
Year Actual GDP Potential GDP Output Gap Unemployment Rate 2005 1168 1188 -20 11.10% 2006 1184 1196 -12 10.20% 2007 1197 1205 -8 9.10% 2008 1211 1215 -4 8.30% 2009 1225 1225 0 7.60% 2010 1240 1236 4 7.30% 2011 1253 1247 6 7.10% 2012 1262 1258 4 7.30% 2013 1270 1270 0 7.60%Related Questions
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