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The purpose of your research is to understand National Income: trends, components, relationship between current account and economic growth.
You must read Chapter 24-3. The Components of GDP, 24-3a. Consumption, 24-3b. Investment, 24-3c. Government Purchases, 24-3d. Net Exports. In your research, you must compare the GDP expenditures approach equation, with the components of the GDP = C + Ig + G + Xn for 6 countries,
To do that you must visit the IMF website https://www.imf.org/en/Data , on the next page under “National Accounts and Price Statistics” click on “Gross Domestic Product”. In the top menu, select one by one the six countries.
Download in your computer the Excel attached above called National Accounts.
Copy the last column of the IMF chart in the rows at the top. (You can click on the website on the “Export” link on the top menu, and copy the data).
Once you have copied the data of the six countries in the Excel file, copy the bar graph into your essay. The bars reflect the components of the GDP equation: consumption, investments, government expenditure and net exports.
The information you will obtain corresponds to the National Income equation:
Y = C + I + G + (X – M).
Where:
Y = Gross Domestic Product (GDP)
C = Household Consumption Expenditure (Private Consumption)
I = Gross Fixed Capital Formation (Gross Fixed Capital Formation or national investment)
G = Government Consumption Expenditure
X = Exports of Goods and Services X = Exports of Goods and Services
M = Imports of Goods and Services (Imports of Goods and Services)
(X – M) = Balance of Trade Balance
Respond to the following questions:
1. Compare the six countries, analyze what the differences are, and what your conclusions are regarding the policies of these countries and the social results.
The Excel file has the information of 6 countries only as an example, and the bar graph looks like this: bar graph 1
In the same Excel file, look at the graphed called USA 40 years copied below: bar graph 2
2. What has been the trend in each component of National Income for the United States?
3. What component of National Income is the highest?
4. Has the U.S. balance of trade been in surplus or deficit over the past years?
In the same Excel file attached, look at the Trade Balance graph, which is copied below: graph 3
Respond to the following questions:
5. In the United States, has the net real balance of trade been in surplus or deficit over the past 40 years?
6. What has been the trend in the trade balance, is the deficit increasing or decreasing? Analyze what happened to this indicator during the 2008 financial crisis. Why do you think the trade balance deficit decreased during the financial crisis?
Has real GDP increased or decreased over time? Can you identify some of the economic cycles?
7. Based on 4 and 5, can you say that the current account deficit is detrimental to U.S. economic growth? Why?
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