Question

If a durable good is produced but not sold, this transaction is assumed to be a purchase by the producer to be sold in following years. For national income calculations this is classified as investment. explain the logic.

what is CPI and what is the use of it?

Just yesterday my father told me this. In 1965, his wage was 600$, and he bought a gold coin for 33$ for a newborn child of a friend. Now a similar position’s wage is 10.000$ and gold coin costs 2000$

Mr Hevesibol grows siyes wheat in his land. Every year saves some of the harvest to replant seeds on the land again and the rest to sell. The harvest is around 10 tons every year. The (nominal) revenue rises 10% a year. What is the real interest/return how and why explain. EXPLAIN what is happening.

A country exports (X) everything that it imports (M), what is the GDP, in terms of expenditure items (C,I,G,M,X) EXPALIN

Answer 1

Producer goods, also called intermediate goods, in economics, goods manufactured and used in further manufacturing, processing, or resale. Producer goods either become part of the final product or lose their distinct identity in the manufacturing stream. The prices of producer goods are not included in the summation of a country’s gross national product (GNP), because their inclusion would involve double counting of costs and lead to an exaggerated estimate of GNP. Only the price of final consumer goods is included in the GNP. The contribution of producer goods to the GNP may be determined through the value-added method. This method calculates the amount of value added to the final consumer good by each stage of the production process. When the values added at all stages of production have been established, they are summed to estimate the total value of the final product.

The CPI measures the average change in prices over time that consumers pay for a basket of goods and services, commonly known as inflation. Essentially it attempts to quantify the aggregate price level in an economy and thus measure the purchasing power of a country's unit of currency.

Uses of CPI:

• To serve as an economic indicator: Naturally, the Consumer Price Index is a measure of the inflation faced by the end user. A consistent rise in the index indicates an overall economic growth because inflation is brought about by growth. However, an uncontrollable increase in the CPI indicates a declining growth phase where an increasing proportion of the population is unable to afford basic goods and services.
• To adjust other economic series for price changes: For example, components of national income could be adjusted using CPI.
• To adjust the cost of living for wage earners and social security beneficiaries and prevent an inflation-induced increase in tax rates.

Real rate of return is the annual percentage of profit earned on an investment, adjusted for inflation. Therefore, the real rate of return accurately indicates the actual purchasing power of a given amount of money over time.Adjusting the nominal return to compensate for inflation allows the investor to determine how much of a nominal return is real return.In addition to adjusting for inflation, investors also must consider the impact of other factors such as taxes and investing fees in order to calculate real returns on their money or to choose among various investing options.

The real interest rate adjusts the observed market interest rate for the effects of inflation. The real interest rate reflects the purchasing power value of the interest paid on an investment or loan and represents the rate of time-preference of the borrower and lender.

The real rate of return is calculated by subtracting the inflation rate from the nominal interest rate. The formula for real rate of return is

Real rate of return  = Nominal interest rate−Inflation rate

Here Nominal revenue rate 10% Total harvest = 10 ton every year.

The expenditure method is the most widely used approach for estimating GDP, which is a measure of the economy's output produced within a country's borders irrespective of who owns the means to production. The GDP under this method is calculated by summing up all of the expenditures made on final goods and services. There are four main aggregate expenditures that go into calculating GDP: consumption by households, investment by businesses, government spending on goods and services, and net exports, which are equal to exports minus imports of goods and services.

The Formula for Expenditure GDP is:

GDP = C + I + G + (X - M)

where:C=Consumer spending on goods and services

I=Investor spending on business capital goods

G=Government spending on public goods and services

X=exports M=imports​