Thai Economic GDP - Assignment Example

Economic Customer Inserts His/her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name Date Question 1 a) (i) On the newspaper dated 11 April 11, 2012, the top economic story is the announcement of closure of Qld by BHP Company. The big macroeconomic question that deals with is the issue of employment, foreign exchange and overall GDP for the local country. (ii) The tradeoff in the news is cost of production that down size on the net profit in context of employment and foreign exchange earning for the country. BHP Company cited high cost of production as a major reason for the move and this may be justifiable on their side but it has a devastating implication in the economy. First it will render about 2,000 employees jobless and it will reduce the GDP income for the country. The country would not be able to earn foreign exchange since there would be no more mines to be exported. (iii) Factor of production determines the viability of production. When the cost of factor of production is high compared to income generated form it, the investment therefore not worth venturing into. The high cost of factor of production result in low gross profit that may not cover all the expenses leading the company to make losses. BHP opted to venture in a different investment that worth (opportunity cost) in petroleum. Read more: http://www.smh.com.au/business/bhp-announces-qld-mine-closure-20120411-1wpsk.html#ixzz1rlcYDChP b) (i) 200 Sun 150 100 50 50 100 150 200 250 300 Food (ii) to produce 250 food per month 50 sunscreen must be produced 250=50 150=? (250×50)/150 =83 (iii) The opportunity cost of 1 pound of food is 1/2 gallon of sunscreen. The opportunity cost of the first 100 pounds of food is 50 gallons of sunscreen. To find the opportunity cost of the first 100 pounds of food, increase the quantity of food from 0 pounds to 100 pounds. In doing so, Sunland’s production of sunscreen decreases from 150 gallons to 100 gallons. The opportunity cost of the first 100 pounds of food is 50 gallons of sunscreen. Similarly, the opportunity costs of producing the second 100 pounds and the third 100 pounds of food are 50 gallons of sunscreen. The opportunity cost of 1 gallon of sunscreen is 2 pounds of food. The opportunity cost of producing the first 50 gallons of sunscreen is 100 pounds of food. To calculate this opportunity cost, increase the quantity of sunscreen from 0 gallons to 50 gallons. Sunland’s production of food decreases from 300 pounds to 200 pounds. Similarly, the opportunity cost of producing the second 50 gallons and the third 50 gallons of sunscreen are 100 pounds of food. Question 2 (a) GDP= C+ I+ G+ (X_M) = 791+207+267 + (322-366) = 1,221 (ii) Income approach sum the total income of individual living in the country during the given year. This method measures GDP by adding income firms pay to household for the factors of they hire. The factors include interest for capital, wages for labour, rent for land and profit for entrepreneur. To get GDP two adjustments must be made, these are indirect tax and depreciation. To get factor cost to market prices indirect taxes minus subsidies are added. Depreciation is added to arrive at gross domestic product from net domestic product. b) (i) Tropical republic nominal GDP for the year 2008 and 2009 2008 2009 Banana 1600 3600 Coconut 4000 2500 GDP 5600 6100 (ii) Tropical republic real GDP for the year 2009 2009 Banana 1800 Coconut 5000 GDP 6800 Question 3 2009 2008 Employed 1,600,000 1,560, 800 Unemployed 95,400 80,000 Total work-age population 1,695,400 1,640,800 Unemployment rate 5.63% 4.88% Participation rate 67.5 % 67 % (i) Unemployment rate 2009 2008 Unemployment rate 5.63% 4.88% (ii) Working-age population 2009 2008 Employed 1,600,000 1,560, 800 Unemployed 95,400 80,000 Total work-age population 1,695,400 1,640,800 (iii) Employment to working-age population ratio 2009 2008 Employed 1,600,000 1,560, 800 Total work-age population 1,695,400 1,640,800 Ratio 1,600,000: 1,695,400 1 : 1.06 1,560, 800: 1,640,800 1 : 1.05 iv) Queensland labor market during 2008 In relation to year 2009, 2008 is better in terms of employment. In the year 2009 there was an increase in population of working-age and no more employment was grated to observe them. (i) If the Thailand imposes coastal security and legal restriction to crack down on illegal immigrants and returns million of workers to their home country then there will be impact on the real GDP depending on the economy scenario. Unproductive population in a country has a negative impact on the real GDP of that particular country. When the population is high such that there is unemployment the income per capita reduces and this will result in a poor life standards. On the other hand if the population matches the required labor such that there is no unemployment then population increase does not have adverse effect on real GDP. Population refers number of people in a given area in relation to available economic resources. The word population has been changing of time so does the economic resources. However, world population is said to have significantly change with the industrial revolution. Under population arise where a number of then people in a given area are few compared to the resource available hence a number people fall behind the optimum point. When a labour force that is available is combined with resource it does not produce maximum output. The resources are many than labour force with under population, specialization is difficult, resource are under utilized, industrialization is very slow, economic growth development are very slow, there lack of labour force, low demand for good and service and per capita income is very slow . The only solution is to pumped more people in to the economy to stimulate output. (ii) Similarly over population arise from excess population. Labour force is more than resource available. People are beyond the optimum point. When labour is combined with resources no minimum output is realized with over population. There is unemployment problem, high dependency ratio, a lot of poverty, social evils and slow industrialization. (iii) Optimum population is the ideal population in which labour and resources are equal, when labour forces is combined with available resources they produce maximum output. The average output per person is very high, with optimum population. There is high efficiency, very low wastage, maximum quality and income per capita is highest in such a situation the economy is at equilibrium. (iv) If the economy scenario is low such that unemployment already exist with the country then the move will not have any impact on real GDP. However, if the economy is good such that more labor is needed then the move to deny migration into the country will have negative impact on the GDP. This is simply because no enough manpower to exploit the potential production in the country. (v) The effect of the decision on the employment is that there wills a reduction on unemployment in the country if in the first place existed. On the other hand if there was deficit in the employment then the decision will reduce labour force. (vi) The impact on the real wage rate will depend on the demand of the labour. If the demand of the labour in the country exceeds supply the decision to impose restriction in the immigration will make the wage rate to rise. On the other hand if demand if the supply exceed demand then decision to impose restriction in the immigration will make the wage rate to reduce. (vii) On the country where population returns to there will be two side of the coin. There will be either under population or overpopulation depending on the resource available. If the country would have adequate resources to match up the population inflows then there will optimum output in the country. On the other hand if the resource in the country is low compared with the inflow of migrant then their will over population leading to negative impact on the GDP. i) If the government has budget surplus of $1 trillion, what are the real interest rate, the quantity of the investment, quantity of private saving? Is there any crowding out in this situation? The real interest rate is 6 percent, and the quantity of loanable funds, private saving, and investments are all $8.5 trillion. There is no crowding out. (ii) If the government budget deficit is $1 trillion, what are the real interest rate, the quantity of loanable funds, investment, and private saving? Is there any crowding out in this situation? The equilibrium real interest rate becomes 7 percent. The equilibrium quantity of loanable funds is $8.0 trillion, the equilibrium quantity of investment is $8.0 trillion, and the equilibrium quantity of private saving is $9.0 trillion. There is crowding out of $500 billion of investment. (iv) If governments want to stimulate the quantity of investment and increase it to $9 trillion, what must they do? Assuming no Ricardo-Barro effect, the government needs to have a budget surplus of $1 trillion. In this case, the new equilibrium is at a real interest rate of 5 percent, the quantity of investment is $9 trillion, and the quantity of private saving is $8 trillion. b) Rapid inflation in Brazil in early 1990s caused the cruzeiro to lose its ability to function as money. Which of the following commodities do you think would most likely have taken the place of cruzeiro in the Brazilian economy? Explain why? i) Tractor parts It is unlikely that tractor parts would be used as money because tractor parts are heavy and unwieldy to carry around for use as a medium of exchange. ii) Packs of cigarettes Packs of cigarettes would likely be used as a substitute for money because they are light to carry around, are durable, and can be easily divided into fractions of packs for making change. iii) Loaves of bread Loaves of bread would be unlikely to be used as a substitute for money because they would spoil too rapidly. iv) Impressionist paintings Impressionist paintings would be unlikely to be used as a substitute for money because they would be unwieldy to carry around and because their quality and value differs dramatically from one artist to another. References Ararwall, V. (2006). Macroeconomics. New York: Tata McGraw-Hill Education. Arnold, R. (2010). Macroeconomic. London: Publisher Cengage Learning. Autor, D. (2009). Studies of Labor Market Intermediation. 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