Data Exercise

6 June 2016

Data exercise #1
Name:
Part 1: Expenditures Approach to Calculating GDP
Nominal GDP- the market value of all final goods and services from the nation in a given period of time. Table 1. Gross Domestic Product or nominal GDP (in Billions of dollars)

2012
2013

III quarter
IV quarter
I quarter
II quarter
1
Gross domestic product
16,356.0
16,420.3
16,535.3
16,661.0
2
Personal consumption expenditures
11,193.6
11,285.5
11,379.2
11,427.1
3
Gross private domestic investment
2,493.3
2,499.9
2,555.1
2,621.0
4
Net exports of goods and services
-524.4
-515.8
-523.1
-509.0
5

Government consumption expenditures and gross investment
3,193.5
3,150.7
3,124.1
3,121.9

Table 2. Real Gross Domestic Product (in Billions of chained dollars) Real Gross Domestic Product (real GDP) is a macroeconomic measure of the value of economic output adjusted for price changes.

2012
2013

III quarter
IV quarter
I quarter
II quarter
1
Gross domestic product
15,534.0
15,539.6
15,583.9
15,679.7
2
Personal consumption expenditures
10,541.0
10,584.8
10,644.0
10,691.9
3
Gross private domestic investment
2,456.5
2,441.8
2,470.1
2,524.9
4
Net exports of goods and services
-436.5
-412.1
-422.3
-424.4
5
Government consumption expenditures and gross investment
2,988.8
2,938.8
2,907.4
2,904.5

During the inflation the nominal GDP is higher than real GDP, because real values are adjusted for inflation, while nominal values are not.

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The real GDP is adjusted by dividing the nominal GDP by a price deflator, which we can find by dividing the nominal GDP by the real. According to results I received, the nominal GDP was greater than nominal GDP in each four quarters, because there was an inflation factor that influenced the real GDP. I counted the Implicit Price Deflator and found that it equals 1,05% in the third quarter of 2012, 1,06% in the fourth quarter of 2012, 1,06% in the first of 2013, 1,06% in the second of 2013. The nominal GDP was increasing during these for quarters. This caused by changing of real output and price level. The USA import exceeds export, so U.S. imported more goods and services than exported during this period of time. I think that United States will increase export of the country or increase import because according to the III quarter of 2012 and the II of 2013 we can see that the difference between export and import was going in both nominal and real GDP to the positive side.

Part 2: Income Approach to Calculating GDP

2012
2013

III quarter
IV quarter
I quarter
II quarter
1
Gross domestic product
16,356.0
16,420.3
16,535.3
16,661.0
2
Gross National Product
16,603.7
16,677.3
16,772.7
16,907.9
3
Net National Product
14,048.5
14,102.3
14,168.9
14,276.0
4
National Income
13,962.1
14,204.0
14,324.5
14,438.5
5

Personal Income
13,701.6
14,073.1
13,925.9
14,065.0

The difference between GNP (Gross National Product) and GDP (Gross Domestic Product) is that GNP includes net foreign income rather than net export and imports. GNP adds net foreign investment income. GDP measures the nation’s economy’s performance because it is determined by the market value of all final goods and services made within the borders of the nation. GDP is focused on output rather than who produced it, GDP measures all domestic production. GDP (Gross Domestic Product) = C + I + G + (X – M)

GNP is focused on who owns the production regardless of where the production takes place. GNP calculates the value of output produced by the people of the region. GNP is basically the GDP of the country plus income earned from overseas investments by residents, minus income earned within the domestic economy by overseas residents. National income measures the money value of the flow of output of goods and services produced within an economy over a period of time. It also includes income acquired from business done abroad. The national income is used to determine the overall economic health of the country, trends in economic growth, various production sector contributions, future growth and standard of living. National income is used to measure level and economic growth of a country. This year the Gross National Product is higher than National Income. The GNP has made 16,907.9 and NI has 14,438.5. The main component of national income was compensation of employees. It is estimated that compensation of employees takes up about 55% of national income and includes salaries and fringe benefits. National Income = G.D.P. + Net Domestic Income from Abroad.

National income from GNP = Wages + Interest + Rent + Profit + Proprietors’ Income

Part 3: GDP in Different Countries
Country
GDP (in millions of U.S. dollars)
Population (in thousands)
Per Capita GDP (in thousands of U.S. dollars)
1
2
3
4 = 2/3
United States
15,684,800
313,910
49,965
Japan
5,959,720
127,560
46,72
China
8,358,360
1,350,700
6,188
Mexico
1,177,960
120,850
9,747
Russian Federation
2,014,780
143,530
14,037
Switzerland
632,190
8,000
79,023
Sweden
525,740
9,520
55,224
Luxembourg
57,120
0,530
107,773

Looking at this table we can see that the highest per capita GDP is in Luxembourg. Although the country has the lowest population and GDP, it’s actually one of the richest countries in the world. China has the lowest Per Capita and it’s not because of low GDP, it is because of high population. List of the countries by highest per capita GDP to lowest: Luxembourg, Switzerland, Sweden, United States, Japan, Russian Federation, Mexico, China. Order by highest GDP to lowest is US, China, Japan, Russia, Mexico, Switzerland, Sweden, Luxembourg. These lists are not the same because population is defining indicator. The more people live in a country, the higher GDP should be, but this rule is not observed by all countries.

Part 4: Index of Economic Freedom
Economic freedom is the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state. In economically free societies, governments allow labor, capital and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.

1. Find the rank in economic freedom (overall) of the countries listed on the table in part III of the assignment. Country
Economic freedom (overall)
United states
76.0
Japan
71.8
China
51.9
Mexico
67.0
Russian federation
51.1
Switzerland
81.0
Sweden
72.9
Luxembourg
74.2

2. Find the rank in business, trade, financial freedom, and property rights of the countries listed on Country
Business freedom
Trade freedom
Financial freedom
Property rights
United states
90.5
86.4
70.0
85.0
Japan
81.3
81.8
50.0
80.0
China
48.0
72.0
30.0
20.0
Mexico
81.4
80.6
60.0
50.0
Russian federation
69.2
77.4
30.0
25.0
Switzerland
75.8
90.0
80.0
90.0
Sweden
93.2
86.8
80.0
90.0
Luxembourg
74.8
86.8
80.0
90.0

3. Compare the rank in economic freedom (overall) and other indicators with the order of the countries using the per capita GDP in the table in part III of the assignment.

Country
Per capita GDP
Economic freedom(overall)
Business freedom
Trade freedom
Financial freedom
Property freedom
Luxembourg
107,773
74.2
74.8
86.8
80.0
90.0
Switzerland
79,023
81.0
75.8
90.0
80.0
90.0
Sweden
55,224
72.9
93.2
86.8
80.0
90.0
United States
49,965
76.0
90.5
86.4
70.0
85.0
Japan
46,72
71.8
81.3
81.8
50.0
80.0
Russian Federation
14,037
51.1
69.2
77.4
30.0
25.0
Mexico
9,747
67.0
81.4
80.6
60.0
50.0
China
6,188
48.0
48.0
72.0
30.0
20.0

On the basis of received results we can make conclusion that the most economic freest country listed here is Switzerland, its economic freedom score is 81% and world rank is 5. Switzerland economy is modern and varied. They are open to global trade and as a result Switzerland becomes to be one of the world’s most competitive and flexible economies. Russian Federation has the lowest score 51.9. To compare in terms of continents we can say that North America is the world’s economically freest region in 2013, U.S. is “mostly free” economy. Compared to last year North America has improved trade freedom and declines business freedom. But U.S. has the highest rank in business freedom.

Europe has the second level in economic freedom. The most financially free countries are Switzerland, Sweden and Luxembourg, the same situation on property rights. The most opened trade country is Switzerland (90.0). China has the lowest ranks on almost all indexes except Trade freedom (72) China has one of the biggest export (after U.S.). Japan’s economic freedom score is 71.8 and free in Business and Trade freedom sectors. In Asia-Pacific region (41 countries) Japan takes 6th place. I found significant relationship between economic freedom and per capita GDP. Countries with high level in economic freedom have higher standard of living.

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