Impact of Net Migration on Aggregate Demand and Supply

Running head: BACHELOR OF APPLIED MANAGEMENT
Bachelor of Applied Management
Name of the Student
Name of the University
Course ID
Student ID

1BACHELOR OF APPLIED MANAGEMENT
Table of Contents
Section A.........................................................................................................................................2
Answer 1......................................................................................................................................2
Answer 2......................................................................................................................................2
Section 2..........................................................................................................................................4
Answer 1......................................................................................................................................4
Answer 2......................................................................................................................................5
Answer 3......................................................................................................................................8
Section C........................................................................................................................................10
Answer 1....................................................................................................................................10
Answer 2....................................................................................................................................10
Answer 3....................................................................................................................................11
Section D.......................................................................................................................................12
Answer 1....................................................................................................................................12
Answer 2....................................................................................................................................13
Answer 3....................................................................................................................................14
Answer 4....................................................................................................................................15
List of References..........................................................................................................................18

2BACHELOR OF APPLIED MANAGEMENT
Section A
Answer 1
Consumer price index is an indicative measure of price level in a nation. CPI measures
the change in price of a certain basket of goods and services that household purchases to
maintain a certain standard of living in two different periods (Rao & Selvanathan, 2016). Rate of
change in CPI from one year to the next is termed as inflation rate. Rate of inflation in computed
from CPI using the following formula.
Inflation rate= CPIt −CPIt−1
CPIt −1
× 100
In New Zealand, the New Zealand department of statistics estimates Consumer Price
Index to measure price level in the nation. The department first determines basket of goods and
services. The spending pattern of household indicates relative importance of the selected items.
Different items in the CPI basket indicates spending pattern of New Zealand’s household
(stats.govt.nz, 2019). The department collects prices of goods and services over time. Based on
price and weight of relative items CPI is computed with the given formula
CPI= Price of desired basket ∈current year
Price of desired basket ∈base year × 100
Answer 2
Answer a
Given the information, GDP of the accounting year can be computed using the
expenditure method. The formula of GDP is given as follows
GDP=Cosumption+ Investment +Government expenditure+ Net export

3BACHELOR OF APPLIED MANAGEMENT
¿ Household consumption expenditure+ ( Gross¿ capital formation+ changes∈inventories ) +Government expenditur
¿ 23100+9500+1300+ 6200+(13300−15100)
¿ 38300
Answer b
National income of a nation is a quantitative measure computed based on produced
quantity of goods and services and associated price. As it is a quantitative measure insufficiency
of available data may lead to underestimation of national income figure. The second source of
misconduct in national income estimate is activities occur in the underground economy. National
income include goods and services exchanged in the market (Feldstein, 2017). As several
activities take place in the underground economy, the official GDP figure understate level of
economic activity.
Answer c
Nominal GDP measure monetary value of GDP in a year where calculation is based on
market price of that year. Real GDP is a way of estimating GDP in an inflation adjusted manner
such that it can be compared between years (Garin, Lester & Sims, 2016). Real GDP actually
helps to understand the actual purchasing power and gives a measure of national account beyond
just monetary unit.

4BACHELOR OF APPLIED MANAGEMENT
Answer d
Real GDP per capita represents a measure for economic output of a nation accounting for
number of people. It divides gross domestic product of the country by total population of the
country.
Answer e
Two measures alternative of GDP are Human Development Index (HDI) and Genuine
Progress Indicator (GPI). HDI measure effect of growth on people instead of its impact only on
the economy. Well-being under HDI is assessed in terms of income, level of education and state
of health. GPI includes several qualitative aspects of lives that GDP does not (Bleys & Whitby,
2016). The qualitative aspects evaluated under GPI include household work, volunteer work,
pollution, depletion of resources, changes in leisure time and such other.
Section 2
Answer 1
Net migration has significant influence on demand and supply side. As more and more
people from other countries, enter the nation, size of labor force increases. In the labor market,
an increase in supply of labor reduces equilibrium wage. Because of increasing migration flow,
producers now can have more labors at a relatively lower cost. This leads to an increase in
aggregate supply in the nation (Dustmann, Schonberg & Stuhler, 2016). On the other hand,
increase in net migration increase aggregate demand in the economy by increasing consumption
and other spending. As both aggregate demand and aggregate supply increases simultaneously,
there is an increase in equilibrium GDP. If aggregate demand and aggregate supply change by

5BACHELOR OF APPLIED MANAGEMENT
the same amount, price level remain unchanged. This can be understood with the help of
following figure.
Figure 1: Effect of net migration
As labor supply increases due to an increase in migration, the aggregate supply curve
shifts to the right from AS1 to AS2. Associated with this, there is an increase in aggregate
demand shifting the aggregate demand curve to the right from AD1 to AD2. Consequently,
macroeconomic equilibrium shifts from E to E1. As shown in the above figure, the simultaneous
shift of aggregate demand and aggregate supply increase GDP from Y1 to Y2. The price level
stays unchanged at the level P1.
Answer 2
Fall in business confidence
Sudden decline in business confidence is considered as a shock affecting both aggregate
demand and aggregate supply. As businesses are less confident, there is a contraction in business