Business Macroeconomics

1375 Words Jan 16th, 2018 6 Pages
GDP is the market value of all goods and services produced within a country over a given period of time; it is primarily used to gauge a country's economy and is also viewed as the size of the economy at a particular period of time. Moreover, GDP is a comparison made between the previous year and the current year to check the country's economic growth over time. However, measuring GDP is complicated but at its most basic, its calculation is done by either adding up everyone's yearly earnings or adding up what everyone spent; logically both measures lead to the same total (United States Bureau of Economic Analysis, 2009).
The basic formula for calculating the GDP is; Y = C + I + E + G
C =1000; I =200; E =300 and G =250
Y = 1000 + 200 + 300 + 250 = 1750
Y = 1750

2. Whenever a country's exports exceed imports, then it will add to the GDP but if imports are more than the exports it subtracts from the GDP. More exports by a country increases the foreign income flow to the country which has the effect of increasing the GDP while elevated levels of imports increases the country's foreign debts which has the effect of lowering the GDP. If we are able to increase our domestic energy production which allows us to import less oil from foreign countries, then it would positively impact the nation's GDP.
Question B: Inflation

1. Rising inflation and prices has the effect of increasing the inflation rate. Inflation is…
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