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# Econ 11 Final Paper 3 and Data Gathering Summative

Directions:

You will select a country of your own choosing from the list provided in the ​Macroeconomic
Objectives​ slides. You will then gather data on this country to apply to this summative
assessment.

You MUST use the World Bank Database (data.worldbank.org) to complete this activity. Only
data from this source will be recognized. Mr. Drury will check your calculations against this data,
so make certain you only use the World Bank site! Show all of your work for each calculation.

Make a copy of this document and submit your complete version to Managebac by 3pm
Thursday, June 11th.

Section 1: GDP

The following table presents national income statistics for selected variables related to Slabovia
for 2017 and is expressed in millions of dollars.

Table 1
National income statistics \$ (million)
Government spending on goods and 2200
services
Wages and salaries 3400
Investment spending 1680
Consumer spending 7510
Direct taxation 3550
Exports 2040
Profits of companies 3475
Imports 2250

(a) Calculate the Gross Domestic Product (GDP) for Slabovia in 2017.
[2]
GDP= C+I+G+(X-M)
Where C is consumer spending, I stands for investment spending, G is government
expenditure, and X-M represents trade balance ( X being exports and M imports)
GDP= 7510+1680+2200+(2040-2250)
GDP= 11180
GDP​∴ \$11180 million
(b) Identify the following data for your country in 2017

## Total GDP (in \$): 249,724,000,000 (249.724 billion)

Use this data to calculate the GDP per capita for your country in 2017. Show your work!

[2]
GDP per capita=Total GDP/Total Population
GDP per capita= 249,724,000,000/159,670, 593
GDP per capita​=1563.995
GDP per capita∴\$1563.995

Using the GDP Deflator data for your country in the World Bank Database, identify:

## The base year: 2006

The GDP Deflator value for 2017 (if that does not exist then choose the closest year available):
208.442

(c) Using your total GDP figure and the GDP Deflator for 2017, calculate the value of GDP in the
base year’s prices. Show your work!
[2]
GDP (base year)= (nominal GDP/price deflator)x100
Real GDP= (249,724,000,000/208.442)x100
Real GDP= ​119805029697
Real GDP​∴ \$119.805 billion

## Section 2: The Keynesian Multiplier:

(e) In Slabovia, for each additional dollar of income earned, 5 cents (\$0.05) is saved, 15 cents
(\$0.15) is taken as tax, and 10 cents (\$0.10) is spent on imported goods and services. Calculate
the value of the multiplier in Slabovia.
[2]
Multiplier= 1/(MPS+MPT+MPM)
MPS: Marginal propensity to save
MPT: Marginal propensity to tax
MPM: Marginal propensity to import
Multiplier=1/(0.05+0.15+0.10)
Multiplier= 3.333

(f) (i) The government of Slabovia intends to increase government spending in order to increase
GDP by \$900 million. Using your answer to (e), calculate the increase in government spending
needed to bring about the desired change in GDP.
[2]
Multiplier = change in GDP/ change in expenditure
3.33 = 900,000,000/change in expenditure
Change in expenditure/government spending= 900,000,000/3.33
Change in expenditure/government spending= 270270270.3
Change in expenditure/government spending​∴ \$270.27 million

## (ii) ​Sketch a diagram to show the impact of the multiplier. [3]

(g) Explain the multiplier process which causes the final increase in GDP to be different from the
initial increase in government spending.
[4]

The final increase in GDP is greater than the initial increase in government spending as the
initial expenditure produces a chain of reactions further expenditures responsible for
increasing AD and the GDP to a greater value. ​To calculate the value of the multiplier, we
must look at consumer spending more carefully. We know from the circular ow model that a
portion of income ows out of the expenditure ow in the form of leakages: consumers save
part of their income, they pay taxes to the government, and they buy imported goods and
services. For example, the initial increase in Slabovia’s government expenditure is ​\$270.27
million, this spending results in an increase in the GDP of the same value, however, the
increase does not stop there as ​the \$270.27 million increase in investment spending is used
by businesses to pay for materials, equipment, labour, etc., and all this spending translates
into income for owners of the factors of production, who then use it to increase their
consumption spending. ​As consumption spending increases, it results in a further increase in
real GDP and incomes, which produce more consumption spending, and this process
continues to increase real GDP beyond the amount of the initial investment of \$270.27
million.

Section 3: Unemployment:

## Total Population (same data as from section 1): 159,670,593

Labor Force (total - you can use either ILO or national estimate, but specify which here):
67,454,903

## Unemployment rate (%): 4.372%

(i) Calculate the total number of unemployed based on the data you gathered.

[2]
Unemployment rate= (Number of unemployed/total labour force)x100
4.372 = (X / 67,454,903) x 100
4.372 x 67,454,903 = X x 100
(4.372 x 67,454,903)/100 = X
X = 294912835.9/100
X = 2,949,128

(ii) Explain ​two​ difficulties economists face when trying to measure unemployment accurately.

[4]
Unemployment figures include unemployed people who are actively looking for work.
However it excludes the discouraged workers who gave up looking for a job. They were also
seeking work, but became discouraged and stopped searching after being unsuccessful to
find a job. These people drop out of the labor force.

Economists are unable to include people working in the underground economy within the
unemployment figures. The underground portion of the economy is unregistered, legally
unregulated and not reported to tax authorities. Some people may be officially as
unemployed, yet they may be working in an unreported (underground) activity.