If you are the chief economist of a country experiencing high unemployment and flat GDP, what macroeconomic policies might you enact in response to these economic conditions? How would you expect these policy changes to impact the economy?
How does an economy achieve macroeconomic equilibrium? What affect does a high level of inflation have on macroeconomic equilibrium?
Joe Producer makes a product that sells for $1,000. In the production process, he pays $750 for wages, $125 for materials, and $ 75 for rent. Three-fourths of Joe’s output is consumed and the rest is invested.
Explain how both the flow-of-product approach and the earnings approach can be used to measure GDP and the role profit plays in these calculations. Calculate GDP for Joe using both the product and income approaches and show how they must agree.
An apparel manufacturer purchases cotton and other raw materials for the production of shirts. Would the sale of cotton from a cotton mill to the shirt manufacturer be included in the calculation of GDP? Why or why not?
Are all expenditures of a government included in the calculation of GDP for that nation? Why or why not? If not, what government expenditures should be excluded from GDP? Are income taxes collected by the government from consumers included in GDP and, if so, how?
Explain the Consumer Price Index (CPI), the GDP Price Index, and the Producer Price Index (PPI). What does each measure? Which is most important to measuring changing price levels in an economy and why?
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