Question

To solve the following problem, it is recommended to use Excel.

Table 1 provides the GDP components expenditures and the current account balance amount at constant price 2010 (in Million US Dollars)

Table 1.UAE Expenditure, 2017 - 2019 (Million Dollars) at constant Price 2010

EXPENDITURE	2017	2018	2019*
Final Consumption Expenditure :	173792.00	179416.00	203809.00
Government Expenditure	44964.00	42732.00	48829.00
Private Expenditure	128827.00	136684.00	154981.00
Fixed Capital Formation	71019.00	73579.00	73595.00
Change In Stocks:	49343.00	32889.00	38067.00
Gross Fixed Capital Formation	120362.00	106468.00	111662.00
Export of Goods And Services :	372072.00	414864.00	402704.00
Imports of Goods And Services :	272884.00	302726.00	313476.00
Current Account Balance at Constant Price	27474.00	40493.00	29645.00

Requirements:

1. Complete table 2, based on in table 1 data.

Table 2

			GDP at Constant Prices
			Net Transfers
			GDP Growth Rate
			GNP

2. Complete Table 3 based the following statistics and your results in table 2 (GDP at constant price).

Table 3  United Arab Emirates Economic Variables, 2017– 2019

Economic Variable	2017	2018	2019*
Population ( in number)	9,304,000	9,367,000	9,504,000
Gross Domestic Product at Current Prices (Nominal, in Million $)	385,606	422,215	421,142
GDP ( At Constant price calculated in table2)( Real in Million $)
GDP Deflator
Inflation rate (based on deflator)	-
C.P.I (2014 = 100)	107.8	111.1	109
Inflation rate (based on CPI)	-
GDP Per Capita in thousands.
Annual Average Salary at current price (Nominal in $)	20,523	21,077	21,054
Average Nominal Interest rate on credits		5.50%	5%
Average real Interest rate on credits
Average Nominal Interest rate on deposits		1.80%	1.60%
Average real Interest rate on deposits
Annual Average Salary in 2019 $

3. A worldwide recession (-4.5%) is expected during 2020 due to Covid-19. Assuming that the UAE experiences the same slowdown as the average for the world, what would be the UAE GDP in constant prices in the year 2020. (1 Mark)

4. Explain the different inflation rates obtained based on the CPI method and the inflation rates based on the GDP deflator method. (1 Mark)

.

5. (Bonus question) Illustrate graphically the GDP fluctuation during the period 2017-2020. (1 Mark)

Answer 1

GDP= Private Consumption + Private Investment + Government Investment + Government Spending + Exports - Imports

GNP = Private Consumption + Private Investment + Government Investment + Government Spending + Exports - Imports + Current Account balance

As Current Account Balance = (Exports - Imports )+ Net income + Net Transfers

It Implies, Net Transfers = Current Account Balance - (Exports - Imports)

GDP Growth Rate = GDP (current year ) - GDP (previous year) / GDP previous year *100

Inflation Rate (GDP deflator) = GDP deflator (current year) - GDP deflator (previous year) / GDP deflator (previous year) * 100

Inflation Rate (based on CPI) = CPI (current year) - CPI (previous year) / CPI (previous year) *100

Table 1	2017	2018	2019
Final Consumption Expenditure	173792	179416	203809
Gross Fixed Capital Formation (Investment)	120362	106468	111662
Export - Import of Goods & Services	99188	112138	89228
Gross Domestic Product at Constant Prices 2010	393342	398022	404699
Current Account Balance	27474	40493	29645
Gross National Product	420816	438515	434344
GDP Growth Rate %		1.18980429	1.677545462
Net Transfers		-71645	-59583
Table 3
Economic Variable	2017	2018	2019*
Population ( in number)	9,304,000	9,367,000	9,504,000
Gross Domestic Product at Current Prices	385,606	422,215	421,142
(Nominal, in Million $)
GDP ( At Constant price calculated in table2)( Real in Million $)	393342	398022	404699
GDP Deflator	98.03	106.07	104.06
Inflation rate (based on deflator)	-	8.20%	-1.89%
C.P.I (2014 = 100)	107.8	111.1	109
Inflation rate (based on CPI)	-	3.06%	-1.89
GDP Per Capita in thousands.	41.45	45.07	44.31
Annual Average Salary at current price	20,523	21,077	21,054
(Nominal in $)
Average Nominal Interest rate on credits		5.50%	5%
Average real Interest rate on credits		2.44%	6.89%
Average Nominal Interest rate on deposits		1.80%	1.60%
Average real Interest rate on deposits		-1.26%	3.49%
Annual Average Salary in 2019 $			21451.92