Gm Project

According to our graph, in 1965 the smallest contribution to GAP was Net Exports tit 0. 78% of total GAP. These computations were done by taking the sectors contribution and dividing it by the GAP with respect to the year. In 2005, Consumption has the largest contribution to GAP of 70. 19% of total GAP. The Gross Domestic Product is an important statistic of the US economy because it compares our economical standing with another countries economical standing. It indicates whether our economy Is growing quicker or slower than the quarter before.

It is used as a tool for economic planning and budgeting In the private sector and government agencies in the US. What’s more is this information provides a comparison with the standard of living from one country to another. However, many issues arise with accounting for the real GAP of any country. The concern is double-counting for the Intermediate goods and finished good. For example, the output of Samsung Is the Input of Best Buy. If both accounted for the Item separately, then there are inaccuracies of merging the accounts. Undoubtedly there are controls that circumvent such inaccuracies. The most important control activities involve segregation of duties, proper authorization of transactions and activities, adequate comments and records, physical control over assets and records, and Independent checks on performance (economic controls). B) From 1965 through 2005, net exports component of GAP was the most volatile. In 1965, net exports were positive 0. 78% of total GAP. In 2005, the net exports were -5. 75% of total GAP.

This meant there were more exports In 1965, and by 2005 Importation In the US was greater than exportation; resulting in a negative trade deficit. China being a trade surplus country is alleviating the United States from Its problem of trade deficit (China Lecture). C) Consumption has been the fastest growing sector since 1965. In 1965, Consumption was 61. 72% of GAP and by 2005 the consumption had Increased to 8. 47% or a total of 70. 19%. The consumption sector of the GAP had a steady increase over the past 50 years.

Chapter 16, Question 6 Hyperinflation is a type of inflation that is very high or “out of control”, a condition 1 OFF Most economists would say if inflation went up more than 100%, then it is hyperinflation. Hyperinflation usually causes the general price of a product to increase between 5%-10%. In other circumstances, it may go up further than 10%. The main cause of hyperinflation is a massive and rapid increase in the money supply that is not supported by a corresponding growth in the output of goods and services.

The result is an imbalance between the supply and demand for money (including currency, bank deposits), accompanied by a complete loss of confidence in the currency. Before World War I Germany was a prosperous country, with gold- backed currency, expanding industry and world leadership. In 1923, hyperinflation hit the country, the exchange rate between the dollar and Mark was one trillion Marks to a dollar. The price of commodities rose tremendously. Milk went from only 7 Marks to 16 in a few months. There were complains about the high cost of living and how wages were no longer sustaining these costs.

It was difficult to maintain an adequate lifestyle. On top of this tax collector were imposing higher tax brackets. In the midst of hyperinflation, this economic problem caused for citizens to engage in destructive behavior. No longer was society being productive because they were no incentives (Commanding Heights German-Hyperinflation). The main impact of Hyperinflation in an economy is it wipes out the purchasing power of the private and public savings. Hyperinflation reduces an economy’s efficiency by driving people away from monetary transactions and induces bartering.

In a normal economy, using money in exchange for a good or service is highly efficient. During economic hyperinflation, people prefer to be paid in commodities in order to avoid inflation taxes. Throughout the many experiences of hyperinflation economists have developed strategies that can stop the problem. It is important the currency suffering from hyperinflation links to a currency that is stable (US dollar); Controls or prevents overspent spending; stops federal reserve from printing money supply; lifts all price controls; and deregulates the economy.

Deregulate occurs when the government limits control over the markets and the private sector becomes more freely in engaging in business transactions. Therefore, market will determine a balance between the demand and supply curve. Chapter 16, Question 11 There are three types of unemployment: Frictional, Structural and Cyclical. Economists define frictional unemployment as people who are moving between Jobs, careers, and relocating across the country. People voluntarily choose to move around between industries or economies, so economists would refer to it as search unemployment.

In fact, this type of unemployment may become beneficial to an economy since it results in a better allocation of resources (Investigated). People obtain the proper training and skills to improve the efficiency in the labor force. However, the government must assist to reduce frictional unemployment. If people are taking too long in finding another Job or there is a mismatch, eventually the economy will suffer. A second type of unemployment is Structural. This type of unemployment occurs when labor market is unable to provide Jobs for everyone.

The labor force supply is scarce and demand in the labor force keeps growing at a fast those who qualify live outside the borders. Unemployment caused by massive mismatch of skills or geographic location is referred to as Structural. The last type of unemployment is Cyclical. Cyclical refers to one thing the business cycle. This unemployment arises because of downturns in the business cycle. An important fact is changes in government policy can affect cyclical unemployment. Government’s role is to keep the economy on a steady, low-inflationary and solid growth path (Westbrook).

Many economists have discussed that this unemployment is the one that can be control more often than Structural or Frictional. Overall regardless of the many obstacles and problems in these three areas of unemployment, the government can alleviate the problem by reducing expenditures. In addition, the government must provide: educational advice/counseling; schooling and training facilities; information and apprenticeship programs. Furthermore, providing impotent government training programs for displaced workers can bring skills to employees who live closer to certain firms and businesses.

Moreover, the government can assist to provide relocation for those who cannot meet the requirements. The cyclical unemployment can simply be corrected by using macro-economic policies to increase the level of aggregate demand. Policies implemented should involve lower interest rates and lower taxes. This will encourage foreign companies to invest into the US economy, which will result in the increase of Job supply. In addition, decreases the number of employees laid-off. In a perfect world, the problem would be wiped out entirely; in most situations we try to alleviate the problem.