Principles of Macroeconomics

500-700 words

Part I

Assume that Country A has a population of 500,000 and only produces one good—cars. Country A produces 100,000 cars per year. The people in Country A purchase 90,000 cars, but there are not enough cars to fulfill all the demand. They decide to import 50,000 more. The government buys 25,000 cars for its police force, and 10,000 cars are bought by companies to transport employees to other locations to work. They also export 65,000 cars to nearby countries for sale.

• What is Country A’s GDP?
• What is the composition of GDP by percentage?
• What is the GDP per capita?
• How does this relate to Keynesian economics?

Part II

Go to the Bureau of Economic Analysis on the 

Department of Commerce Web site

, and look up the latest new release for real GDP. Address the following questions after reading the latest release:

• Where are we in the business cycle?
• What is the real GDP today?
• What is the largest component of GDP?
• What is the smallest component of GDP?
• What is the fastest growing component of GDP and why?
• What components of GDP were involved in the change from last month to this month?
• What is the price index today?
• What caused the change?