Unit 7 Assignment: GDP and Economic Growth

Unit 7 Assignment: GDP and Economic Growth Student Name: In this Assignment, you will evaluate the various components of the Gross Domestic Product (GDP) and factors that affect the GDP components. You will also compute the growth rate of U.S. real GDP and compare the average with the expected growth rate of U.S real GDP. Instructions: Answer all of the following questions. You are required to follow proper APA format. Read the Criteria section below for more information before you begin this Assignment. In this Assignment, you will be assessed on the following outcome: MT445-6: Evaluate the effects of globalization and international trade on the U.S. economy. Why does inflation make nominal GDP a poor measure of the increase in total production? Nominal GDP does not account for inflation as opposed to real GDP. Nominal GDP measures output of a given year based on the prices yet prices get affected by inflation. Therefore, an increase in total production may occur due to reduced prices or deflation which nominal GDP does not account for in its computation making it a poor measure CITATION Gre172 \l 1033 (Mankiw, 2017). Which component of GDP will be affected by each of the following transactions involving FlyCheap Airlines? Briefly explain. Hint: GDP = C + I + G + Nx i. You purchase a ticket on FlyCheap Airlines to visit your niece. Consumption. It involves a person spending on a good and service that affects the functioning of an economy. ii. FlyCheap Airlines purchases a new jetliner from Boeing. Investment. The airline is making a purchase to produce a consumer good. It is investing in a product (jetliner) that will influence consumers to make purchases through the tickets to utilize it. iii. FlyCheap Airlines purchases new seats to be installed on a jetliner it already owns. None of the components as this purchase is part of an operational cost being incurred by the company. Thus, the expense does not affect GDP. iv. FlyCheap Airlines purchases 200 million gallons of fuel. None of the components of GDP will be affected. The fuel purchase is an expense by the company not by a household. v. A French citizen purchases a ticket to fly on a FlyCheap flight from Paris to New York. The net export (NX) component gets affected. Buying a ticket from own country to a different state is export as foreign currency gets into the country (U.S. dollar). vi. The city of Nashville agrees to spend funds to extend one of the runways so that FlyCheap will be able to land larger jets. This is government expenditure hence affects the government (G) component. the government incurs the cost of constructing the runway. Use the table to answer the following questions. Year Real GDP (Billions of 2000 Dollars) 1993 $7,113 1994 7,101 1995 7,337 1996 7,533 1997 7,836...