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Research Project Starbucks Assignment

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1.0 Introduction

 

Gross Domestic Product of a country is the indicator of per capita income as well as developments of the respective country. With the help of economic evaluation, it can be seen that there are three ways to calculate Gross Domestic Product, all of these produce same results. It has been seen that Gross Domestic Product has been measured consistently, frequently and widely. Gross Domestic Product has been found to be available in the developed countries as well as in the developing countries.

2.0 Summary of the performance of economy of country X

 

As per the statement of Wojcik (2018), Gross Domestic Product of the concerned country has excluded the activities, which are not relevant to the national as well as international market of the country. According to the statements of Anghelache et al. (2015), it has also been found that Gross Domestic Product of the respective country has deducted all the processes of economies which are involved in non-monetary transactions. This has been found that the non-monetary transactions have been assumed as the abnormal as well as inaccurate results in the figures of Gross Domestic Product (Mishel et al. 2016). Economic performance of the respective country has been derived with the help of Gross Domestic Product of country X.

It has also been found that the Gross Domestic Product of the concerned country is used for improvements of quality of products as well as introducing new products (Frumkin, 2015). Real of economy of the mentioned country has been figured out from the Gross Domestic Product of the country. As per the statements of Hussain et al. (2017), Gross Domestic Product also implements the distribution of wealth. This has removed the maximum inequality of the incomes for various demographic groups for the concerned country. According to the words of Budzianowski (2018), there has been found some limitations too of Gross Domestic Product. These have been encountered as social and economic progress sometimes are not impacted by the Gross Domestic Product, measurement of social improvements are literally poor in the design of Gross Domestic Product figure (Rouksar-Dussoyea et al. 2017).

Gross Domestic Product of the country has not taken into account the unpaid work as well as the values of households. According to the statement of Szkorupová (2014), as the household labours have been found to be the huge substitute for purchased goods and services, it has been said that Gross Domestic Product should consider the household labours of the respective country.  As per the words of Reinsdorf and Yuskavage (2018), it has been seen that Gross Domestic Product has been measured consistently, frequently and widely in country X. It has reflected the standards of lives as well as the cost of living in the respective country.

3.0 Calculation for GDP deflators

2. Which proposal will you recommend?

Proposal A, as this is greater than proposal B and without investment.
3. Will your recommendation change if Proposal A results in hyperinflation?

Yes, because hyperinflation refers to hyper deflators as the calculation has been made in 2023.

4. Which proposal will you recommend on the basis of GDP deflators?

No, because in comparison deflator cannot be used.
5. Will your recommendation change if 2023 is used as the base year for determining Real GDPs instead of 2018 (as is presently the case)?

No, as proposal A has higher real Gross Domestic Product as compared to without investment as well as proposal B.
6. How much investment (expressed in 2018 dollars) will be needed in (currently investment is $30bn, expressed in 2013 prices) in order to make Proposal A better than Proposal B?

$58 billion, as this will lead the country to receive real Gross Domestic Product higher than present proposal A.
7. What value of ‘Marginal Propensity to Consume’ is implicit in your calculations for proposal B?

0.50. The calculation as follows:

Gross Domestic Product of 2023 (without investment) = 1220

Gross Domestic Product of 2023 (proposal A) = 1296

Y = 1296-1220 = 76

∆I = (46/100) * 122 = 38

76 = 38 * [1 / (1 - MPC)]

MPC = [1- 1 / (76/38)] = 1 - 1/2

This reflects that MPC is equal to 0.50.


8. Is the proposal, in this assignment, to invest in infrastructure based on Keynesian or Neo-classical reasoning?

Either. This is because the respective government has played a role in investment in 2018 on the basis of Keynesian. However, this refers that the investments for both private, public as well as in joint venture on the basis of Neo-classical reasoning.
9. Will your recommendation change if, say, due to unforeseen Global Financial Crises, the economy experiences a severe deflation and - as a result – the GDP Deflator for 2023 gets reduced to 10?

No. Gross Domestic Product of 2023 can be converted to the real Gross Domestic Product on the basis of proposal A and prices of 2023. This would become much higher as compared to others.
10. Will your recommendation change if, for Proposal A, people save every dollar of the yearly increase in their incomes as shown in Table 1 of the assignment?

No. This would have the same tendency in the increase of the Gross Domestic Product of the respective country. Therefore, proposal A would come up with more real Gross Domestic Product.

4.0 Annexure

From the calculation of Gross Domestic Product of the respective country X it has been found the followings:

Gross Domestic Product deflator of 2008 regarding the base year 2013 is equal to 115.

Gross Domestic Product deflator of 2013, considering the base year 2013 has been found 100.

Gross Domestic Product deflator of 2018 with respect to the base year of 2013 is equal to 122 approximately.

And Gross Domestic Product deflator of 2023 as compared to the base year of 2013 is equal to 100.

Nominal Gross Domestic Product of 2008 has been seen 783.

Nominal Gross Domestic Product of 2013 has been found as 850.

Nominal Gross Domestic Product for the year 2018 has been come up with undetermined value due to lack of proper information as well as data.

And the nominal Gross Domestic Product of the year 2023 with respect to the base year of 2013 is equal to 1000.

Real Gross Domestic Product of the year 2008 regarding the prices of the year 2018 has been found 831.

Real Gross Domestic Product of 2013, considering the prices of 2018 has been found to be come up with the value 1037.

Real Gross Domestic Product of the year 2018 considering the prices of the same year has been seen to be undetermined as there is no existence of nominal Gross Domestic Product of the respective year.

Real Gross Domestic Product of the year 2023 with respect to the prices of the year 2018 has been found to be come up with the value of 1220.

These are the values of Gross Domestic Product of the concerned country X in the scenario of without investment acts of the regulatory governing board of the country.

With respect to the role of investment in the design of Gross Domestic Product of the concerned country it has been seen the following:

In case of proposal A:

Real Gross Domestic Product of the year 2008 regarding the prices of the year 2018 has been found 831.

Real Gross Domestic Product of 2013, considering the prices of 2018 has been found to be come up with the value 1037.

Real Gross Domestic Product of the year 2018 considering the prices of the same year has been seen to be undetermined as there is no existence of nominal Gross Domestic Product of the respective year.

Real Gross Domestic Product of the year 2023 with respect to the prices of the year 2018 has been found to be come up with the value of 1296.

In case of proposal B:

Real Gross Domestic Product of the year 2008 regarding the prices of the year 2018 has been found 831.

Real Gross Domestic Product of 2013, considering the prices of 2018 has been found to be come up with the value 1037.

Real Gross Domestic Product of the year 2018 considering the prices of the same year has been seen to be undetermined as there is no existence of nominal Gross Domestic Product of the respective year.

Real Gross Domestic Product of the year 2023 regarding prices of the year 2018 has been found to be come up with the value of 1139.

5.0 Conclusion

 

It has been seen from the above study that Gross Domestic Product has been measured consistently, frequently and widely for country X. Gross Domestic Product has been found to be able to propose the best idea for developing of country X.

References

Anghelache, C., Manole, A. and Anghel, M.G., 2015. Analysis of final consumption and gross investment influence on GDP–multiple linear regression model. Theoretical and Applied Economics22(3), pp.137-142.

Budzianowski, W.M., 2018. Enhancing low-carbon economic growth by renewable energy uptake in countries with per capita gross domestic product between 10 and 20 kUSD. International Journal of Energy Technology and Policy14(2-3), pp.292-318.

Frumkin, N., 2015. Guide to economic indicators. Abingdon: Routledge.

Hussain, I., Khan, Z., Khan, M.I., Khalid, S., Kiran, A. and Hussain, T., 2017. Long Run and Short Run Relationship among Gross Domestic Saving, Net Bilateral Foreign Aid, External Debt and Economic Growth in Pakistan. Dynamics of Economics1(1), pp.1-7.

Mishel, L., Bernstein, J. and Schmitt, J., 2016. The state of working America: 1996-97. Abingdon: Routledge.

Mugableh, M.I., 2015. Time series analysis of inward foreign direct investment function in Malaysia. Procedia-Social and Behavioral Sciences172, pp.679-685.

Reinsdorf, M. and Yuskavage, R., 2018. Offshoring, Sourcing Substitution Bias, and the Measurement of Growth in US Gross Domestic Product and Productivity. Review of Income and Wealth64(1), pp.127-146.

Rouksar-Dussoyea, B., Ming-Kang, H., Rajeswari, R. and Yin-Fah, B.C., 2017. Economic Crisis in Europe: Panel Analysis of Inflation, Unemployment and Gross Domestic Product Growth Rates. International Journal of Economics and Finance9(10), p.145.

Szkorupová, Z., 2014. A causal relationship between foreign direct investment, economic growth and export for Slovakia. Procedia economics and finance15, pp.123-128.

Wojcik, D., 2018. The New Oxford Handbook of Economic Geography. Oxford: Oxford University Press.

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