Business Economics

Running head: BUSINESS ECONOMICS
Business Economics
Name of the Student
Name of the University
Student ID

BUSINESS ECONOMICS1
Table of Contents
Answer to question 1.......................................................................................................................2
a) GDP in income method...........................................................................................................2
b) GDP in expenditure method....................................................................................................2
c) Gross National Expenditure (GNE).........................................................................................2
d) Net Domestic Product (NDP)..................................................................................................2
e) GDP vs NDP............................................................................................................................3
f) Gross National Product (GNP)................................................................................................3
g) Net National Product (NNP.....................................................................................................3
h) Current Account Balance (CAB)............................................................................................3
i) Gross National Saving (GNS)..................................................................................................4
j) National saving.........................................................................................................................4
k) Estimation of domestic consumption......................................................................................4
l) New GDP.................................................................................................................................5
Answer to question 2.......................................................................................................................6
a) Demand-pull and cost-push inflation......................................................................................6
b) Causes of demand-pull and cost-push inflation......................................................................7
Answer to question 3.......................................................................................................................8
a)Zero unemployment target........................................................................................................8
b) Unemployment in classical model..........................................................................................9
c) Structural and cyclical unemployment....................................................................................9
Answer to question 5.....................................................................................................................10
a) Improvement in marketing and selling skills of firm managers............................................10
b) Increase in personal income tax............................................................................................10
c) Increase in export...................................................................................................................11
d) Destruction of capital stock...................................................................................................12
Answer to question 6.....................................................................................................................13
a)Advantages and disadvantages of using CPI..........................................................................13
b) Inflation: winners and losers.................................................................................................14
References......................................................................................................................................15

BUSINESS ECONOMICS2
Answer to question 1
a) GDP in income method
GDP=Return ¿ labor + profit of firms+other factors rental
¿ 2651+1687+ 482
¿ $ 4820 billion
b) GDP in expenditure method
GDP=Consumption expenditure+ Investmentexpenditure+Government expenditure+ Export−Impor
¿ 3115+785+210+585+ 690−565
¿ $ 4820 billion
c) Gross National Expenditure (GNE)
GNE=Consumption+Government + Investment
¿ 3115+210+585+785
¿ $ 4695 billion
d) Net Domestic Product (NDP)
Net Domestic Product ( NDP )=GDP−consumption of ¿ capital
¿ 4820−320
¿ $ 4500 billion

BUSINESS ECONOMICS3
e) GDP vs NDP
One significant difference between GDP and NDP is that NDP incorporates the impact of
consumption of fixed capital while GDP does not. If there is an increase in GDP along with a
higher depreciation of capital then increased GDP does not mean a higher living standard.
Realizing this, NDP is often said to be a better welfare measure relative to GDP (Stiglitz, 2015).
f) Gross National Product (GNP)
GNP=GDP−net factor income paid abroad
¿ 4820−34
¿ $ 4786 billion
g) Net National Product (NNP)
NNP=GNP−consumptionof ¿ capital
¿ 4786−320
¿ $ 4466 billion
h) Current Account Balance (CAB)
CAB=Export−import−factor payment abroad
¿ 690−585−34
¿ $ 91 billion
i) Gross National Saving (GNS)
GNS=GNI−C−G