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Date Created: 11/15/15
MT445 Managerial Economics Unit 7 Assignment KAPiLAN UNIVERSlTY Student Name Amy Sullo Please answer the following questions Submit as a Microsoft Word document to the Dropbox when completed 1 Why does inflation make nominal GDP a poor measure of the increase in total production Inflation makes nominal GDP a poor measure of the increase in total production because inflation will only cause prices to increase and the amount of currency to decrease Nominal GDP will make the economic growth rate appear to be higher than the true GDP Which component of GDP will be affected by each of the following transactions involving FIyCheap Airlines If you do not believe any component will be affected briefly explain why i You purchase a ticket on a FIyCheap Airlines to visit your niece Purchasing a ticket on FIyCheap Airlines to visit your niece will not be affected by GDP This is because the purchase in so small it would not have an impact on the GDP and would not affect the economy for just one ticket ii FIyCheap Airlines purchases a new jetliner from Boeing If FIyCheap Airlines purchases a new jetliner from Boeing this would affect the GDP This would increase the GDP because this could be a multimillion dollar purchase in addition to the extra flights that could be gained by the plane iii FIyCheap Airlines purchases new seats to be installed on a jetliner it already owns If FIyCheap Airlines purchases new seats to be installed on a jetliner that is already owns this would not affect the GDP Spending a couple thousands of dollars on new seats would not affect the economy If they were to replace seats in every plane that would affect the economy iv FIyCheap Airlines purchases 200 million gallons of fuel If FIyCheap Airlines purchases 200 million gallons of fuel this would affect the GDP This would increase the GDP because it is a huge amount of money to be spending v A French citizen purchases a ticket to fly on a FIyCheap flight from Paris to New York Like the first question regarding a purchase of a ticket this would be the same and the GDP would not be affected This is because the purchase in so small it would not have an impact on the GDP and would not affect the economy for just one ticket MT445 Managerial Economics vi The city of Nashville agrees to spend funds to extend one of the runways so that FIyCheap will be able to land larger jets 3 If the city of Nashville agrees to spend funds to extend one of the runways so that FIyCheap will be able to land larger jets this could affect the GDP This could increase the GDP and increase income returns by making it a more functional airport It could increase the number of flights that are brought to Nashville Use the table to answer the following questions 1993 7113 1994 7101 1995 7337 1996 7533 1997 7836 i Calculate the growth rate of real GDP for each year from 1994 to 1997 1994 is 127113 0017x100 17 1995 is 2367101O3x100 332 1996 is 1967337O26x100 267 1997 is 3037533O4X100 402 ii Calculate the average annual growth rate of real GDP for the period from 1994 to 1997 Average growth rate of real GDP is 17 332 267 402 246 iii How does the average annual growth rate you calculated in ii above compare to the average growth rate the US normally expects The average annual growth rate of 246 that I calculated above is much lower than what is expected normally in the US MT445 Managerial Economics 4 In an open economy trade is allowed between countries Assume a consumer purchases 1000 worth of furniture manufactured in China Answer the following Which components of GDP are impacted by this purchase This would impact consumption expenditures from GDP but would not include the value of the furniture since it was imported and manufactured in China a Does GDP increase decrease or stay the same Briefly explain why The GDP would be decreasing This would decrease because the furniture was manufactured and imported from China The money that was used to purchase would not be included in the US GDP b Does your answer change if the company in China is a USowned company Why or why not Yes this would change my answer If the company that is manufacturing the furniture is in China but is a US owned company then the proceeds used to purchase the furniture would increase the GDP as the money would be considered US money Directions for Submitting your Assignment Complete your assignment in this Microsoft Word document and save it as Username MT445AssignmentUnitdoc ExampleTAllenMT445AssignmentUnit4doc Submit your le by selecting the Unit 4 Assignment Dropbox by the end of Unit 4
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