Data Exercise 1: Consists Of Four Parts - Part 1 Expenses A

Data Exercise 1 Consists Of Four Parts Part 1 Expenditures Approach

DATA EXERCISE #1 consists of four parts. Part 1: Expenditures Approach to Calculating GDP (weight 25% of the assignment grade). Complete the following exercise: Visit the Bureau of Economic Analysis Web site at Select National, then Interactive Tables: GDP and the National Income and Product Account (NIPA) Historical Tables, click “Begin using the data”, and use Section 1 - Tables 1.1.5 and 1.1.6 to identify the GDP (nominal GDP) and real GDP for the past four quarters. a) Present the information that you received in your project as a table. b) Write a report (1 page double-spaced), which contains the analysis of the results you received.

In this report consider, but do not be limited to the following: 1. Why was nominal GDP greater than real GDP in each of those quarters? 2. What were the percentage changes in Nominal GDP and real GDP for the most recent quarter? 3. What accounts for the difference?

Part 2: Income Approach to Calculating GDP (weight 25% of the assignment grade)

Complete the following exercise: Go to Find the information on GDP in billions of current dollars for the past four quarters (in GDP and the National Income and Product Account (NIPA) Historical Tables)– click “Begin using the data”– choose Section 1 - domestic product and income - table 1.7.5 - Create the table that contains the following information quarterly: Gross domestic product, Gross national product, Net national product, National income, Personal income. Write a report in your own words (1 page, double-spaced), which contains the analysis of the results you received. In this report consider, but do not be limited to the following: 1. What is the difference between gross domestic product (GDP) and gross national product (GNP)? 2. Based on the table, what calculations must you make to determine GNP from GDP? 3. What is national income (NI)? 4. Which was higher in this year, GNP or NI? By how much? 5. What calculations must you make to determine NI from GNP? 6. What was the main component of NI?

Part 3: GDP in Different Countries (weight 25% of the assignment grade)

Complete the following exercise: Go to World Development Indicators database: Choose the country in the window on the top of the page. Fill in the table below. Calculate the per capita GDP for the most recent available year for the countries listed in the table with the equation given in the far right column.

  • Country
  • GDP (in billions of U.S. dollars)
  • Population (in million)
  • Per Capita GDP (in thousands of U.S. dollars) = (GDP in billions) / (Population in millions)

Countries: United States, Japan, China, Mexico, Russian Federation, Switzerland, Sweden, Luxembourg.

Write a short report in your own words (1 page, double-spaced) which contains the analysis of the results you have obtained. In this report consider, but do not be limited to the following: 1. List the countries by highest per capita GDP to lowest. 2. Does the order remain the same for total GDP as for per capita GDP? 3. If not, explain why it is different.

Part 4: Index of Economic Freedom (weight 25% of the assignment grade)

Log onto the Heritage Foundation's website at “The 2011 Index of Economic Freedom” which covers 183 countries across 10 specific freedoms such as trade freedom, business freedom, investment freedom, and property rights. The 2011 Index provides scores between 0 and 100, with lower scores indicating higher economic freedom. Click on RANKING to find the overall rank of economic freedom of the countries listed in part III. Then, explore the specific freedoms: business, trade, financial, and property rights, and record their ranks.

1. Find the overall rank in economic freedom of the countries listed in part III. 2. Find the ranks in business, trade, financial freedom, and property rights. 3. Compare these ranks with the order of countries based on per capita GDP. Write a report in your own words (1 page, double-spaced) which contains the analysis of the results you obtained.

Paper For Above instruction

This comprehensive data exercise spanning four distinct parts aims to deepen understanding of macroeconomic measures, international economic comparisons, and the determinants of economic freedom. Each part involves collecting, analyzing, and interpreting data from reputable sources such as the Bureau of Economic Analysis, World Development Indicators, and the Heritage Foundation, culminating in reports that synthesize the findings and elucidate their broader economic implications.

Part 1: Expenditures Approach to Calculating GDP

The first part involves retrieving nominal and real GDP figures for the most recent four quarters from the BEA's interactive tables (Section 1, Tables 1.1.5 and 1.1.6). Effective presentation of this data in a clear tabular format provides the foundation for subsequent analysis. The primary reason nominal GDP exceeds real GDP in each quarter is the influence of price level changes — inflation causes nominal GDP to increase even when output remains unchanged. This disparity reveals how inflation impacts monetary measures of economic activity.

Percentage change calculations for the latest quarter’s nominal and real GDP reveal the economic growth rate adjusted for inflation. Typically, nominal GDP growth surpasses real GDP growth due to rising prices. Analyzing these variations offers insight into the inflationary pressures during that period. For instance, if nominal GDP increased by 3% and real GDP by 1%, the inflation rate affecting GDP components is approximately 2%.

Part 2: Income Approach to Calculating GDP

Using the NIPA tables (Section 1, Table 1.7.5), the exercise focuses on gathering data in billions of dollars for four quarters across GDP, GNP, NNP, NI, and personal income. Calculations are required to convert between these measures. GNP is derived from GDP by adding income earned by residents abroad and subtracting income earned by non-residents domestically. National income (NI) encompasses all income earned by residents, including wages, rents, interest, and profits, minus taxes and depreciation.

Typically, GNP exceeds GDP if the country’s residents earn more income abroad than foreigners earn domestically. The difference between GNP and GDP can be quantified as net income from abroad. Comparing GNP and NI reveals the influence of depreciation and indirect taxes, which adjust the gross measures into net and national income figures respectively.

Part 3: GDP in Different Countries

Extracting GDP and population data from the World Development Indicators enables per capita GDP calculations, illuminating differences in living standards. The calculation divides the country's GDP (converted from billions) by its population (in millions). When listing countries by per capita GDP, the United States typically ranks highest, followed by Switzerland, Luxembourg, Japan, and others, reflecting variations in economic development and income distribution.

Interestingly, the ordering based on total GDP often differs from per capita rankings. For example, China’s total GDP may be high owing to its large population, but its per capita GDP may be relatively low, demonstrating the importance of population size in evaluating individual prosperity.

Part 4: Index of Economic Freedom

Assessing the economic freedom scores from the Heritage Foundation reveals disparities in economic environments across countries. Overall freedom rankings often correlate with per capita income, where freer economies tend to have higher per capita GDP levels. Specific freedoms such as trade, property rights, and financial freedom influence a country's economic performance.

Comparing the ranks in overall economic freedom with the per capita GDP order highlights this relationship: countries with higher economic freedom typically exhibit higher per capita income, although exceptions exist due to other factors like resource endowments or structural issues.

Conclusion

This exercise demonstrates the interconnectedness of various economic indicators and measures. Nominal versus real GDP differences highlight inflation's role; GNP and NI calculations underscore income flows across borders; per capita GDP emphasizes individual prosperity; and the index of economic freedom contextualizes how economic policies and institutions impact societal wealth. Such analyses are essential for comprehensively understanding macroeconomic performance and guiding policy decisions.

References

  • Board of Governors of the Federal Reserve System. (2023). FRED Economic Data. Federal Reserve Bank of St. Louis. https://fred.stlouisfed.org
  • Bureau of Economic Analysis. (2023). National Income and Product Accounts (NIPA). https://www.bea.gov
  • World Bank. (2023). World Development Indicators. https://databank.worldbank.org/source/world-development-indicators
  • Heritage Foundation. (2011). Index of Economic Freedom. https://www.heritage.org/index
  • Mankiw, N. G. (2021). Principles of Economics (9th ed.). Cengage Learning.
  • Samuelson, P. A., & Nordhaus, W. D. (2010). Economics (19th ed.). McGraw-Hill Education.
  • Krugman, P., Obstfeld, M., & Melitz, M. J. (2018). International Economics (11th ed.). Pearson.
  • International Monetary Fund. (2023). World Economic Outlook. https://www.imf.org/en/Publications/WEO
  • OECD. (2023). Economic Outlook. https://www.oecd.org/economy
  • United Nations. (2023). World Economic Situation and Prospects. https://www.un.org/en/development/desa/policy/wesp

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