Module 4 Problem Sets Principles Of Economics: Name, Date, Q

Module 4 Problem Setsprinciples Of Economicsnamedatequestion 1net E

Identify and complete the following economics-related questions based on principles of economics and relevant data. The questions involve calculations of net exports, understanding international trade agreements, analyzing economic indicators such as GDP and per capita income, and assessing trade policies and economic measures over time.

Paper For Above instruction

Net exports are calculated as the difference between a country’s exports and imports. Specifically, the formula is:

Net Exports = Exports - Imports

This measure indicates the net spending by foreigners on a country's goods and services. If exports exceed imports, net exports are positive, contributing positively to the country's gross domestic product (GDP). Conversely, if imports surpass exports, net exports are negative, indicating a trade deficit.

NAFTA (North American Free Trade Agreement) was one of the most significant regional trade agreements in North America. Its three member countries are:

• United States
• Canada
• Mexico

These countries established a free-trade zone that eliminated tariffs and trade barriers among them, promoting economic integration and growth.

Gross Domestic Product (GDP) as a percentage of Gross Domestic Product (GDP) serves as a measure of a country's economic activity relative to its total economic output. In 2016, the United States' exports of goods and services were approximately 13-14% of its GDP, reflecting the nation’s degree of openness to international trade. This percentage fluctuates over time due to changes in trade policies, economic growth, and global market conditions.

The only trading bloc that has fully eliminated all its international tariffs among member countries is the European Union (EU). The EU operates as a single market with customs union policies, removing tariffs on internal trade and establishing a common external tariff for non-member countries.

The primary concerns of labor union members protesting against international financial institutions like the WTO, the IMF, and the World Bank relate to issues such as:

• Employment security and job losses due to freer trade policies
• Wage suppression and deteriorating working conditions
• Lack of influence over trade and economic policies that affect domestic labor markets
• The perception that these institutions prioritize corporate interests over workers’ rights

Measuring total production within an economy is performed by the gross domestic product (GDP). GDP quantifies the value of all goods and services produced within a country over a specific period, typically a year.

Per capita real GDP, which adjusts for inflation and accounts for population differences, is obtained by dividing real GDP by the total population of the country:

Per Capita Real GDP = Real GDP / Population

Given data on GDP and depreciation, we can calculate Net Domestic Product (NDP). For example, with GDP = $5 trillion and Depreciation = $500 billion, NDP is found by subtracting depreciation from GDP:

NDP = GDP - Depreciation = $5 trillion - $500 billion = $4.5 trillion

If depreciation is $400 billion and NDP is $6 trillion, then GDP is calculated by adding depreciation back to NDP:

GDP = NDP + Depreciation = $6 trillion + $400 billion = $6.4 trillion

Per capita GDP is computed by dividing overall GDP by the population. When the population is 100 million and GDP is $2 trillion, per capita GDP is:

Per Capita GDP = $2 trillion / 100 million = $20,000

Similarly, when GDP is $1.5 trillion and population is 300 million, per capita GDP is:

Per Capita GDP = $1.5 trillion / 300 million = $5,000

The percentage change in real GDP, considering inflation, is calculated using the growth rate of both real GDP and the GDP deflator. If real GDP increases by 3.7% and the GDP deflator increases by 1.6%, the change in nominal GDP includes both effects, and the approximate percentage change in GDP can be calculated as:

Percentage change in GDP ≈ 3.7% + 1.6% = 5.3% (assuming additive approximation)

Using the expenditure approach, GDP can be calculated based on aggregate spending components: consumption, investment, government expenditures, and net exports (exports minus imports). Given the values: consumption = $3 trillion, investment = $800 billion, government spending = $1 trillion, imports = $1.2 trillion, and exports = $900 billion, GDP is:

GDP = Consumption + Investment + Government Spending + (Exports - Imports) = $3T + $800B + $1T + ($900B - $1.2T) = $3T + $800B + $1T - $300B = $4.5 trillion

Over time, comparisons of per capita real GDP become less valid due to factors such as technological changes, differences in quality of life, and demographic shifts, making long-term comparisons more complex and less meaningful without adjustments.

Gross Domestic Product (GDP) includes only payments for the production of goods and services, which are factors of production such as labor, capital, land, and entrepreneurship. It does not include transfer payments like social security, unemployment benefits, or other non-production related income.

References

• Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2018). International Economics (10th ed.). Pearson.
• Mankiw, N. G. (2020). Principles of Economics (9th ed.). Cengage Learning.
• International Monetary Fund. (2017). World Economic Outlook. IMF Publications.
• World Bank. (2016). World Development Indicators. World Bank Publications.
• United Nations. (2017). Human Development Reports. UNDP.
• Deardorff, A. V. (2005). Growth, Trade, and the Environment. Journal of Development Economics, 78(2), 345-373.
• Rodrik, D. (2018). Straight Talk on Trade: Ideas for a Sane World Economy. Princeton University Press.
• Bhagwati, J. (2004). In Defense of Globalization. Oxford University Press.
• Oatley, T. (2019). International Political Economy (6th ed.). Routledge.
• Bhagwati, J., & Panagariya, A. (2013). Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Countries. PublicAffairs.