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Aggregate Expenditure Model

Macroeconomic Analysis – Aggregate Expenditure Model

Purpose

To assess your ability to undertake a macroeconomic analysis of a selected country.

Overview

Throughout the second half of the course you are asked to analyze a country’s economy through the application and analysis of economic data.

In this week’s assignment you are asked to select a country and apply its GDP data to the expenditure model.

Action Items

  1. Review chapters 11 and 12 in Farnham (2014).
  2. Select a country to analyze (Canada).
  3. Go to The World Factbook. Click on https://www.cia.gov/library/publications/resources/the-world-factbook/.
    • In the upper right dropdown click on “Please select a country to view”
    • Once on your chosen country’s page, click on “Economy” and use the data there to complete the Country Economic Data Worksheet.
    • (Please note specific data requested for this and future assignments appear in red on the Worksheet.)
  4. ​​Using data from the Worksheet, complete the Excel document for your chosen country.
  5. Review Business Brief Guidelinesand Critical Thinking Process.
  6. Write 2-pages business brief describing the results, follow these guidance:
  • Provide relevant background on your country
[Type a quote from the document or the summary of an interesting point. You can position the text box anywhere in the document. Use the Drawing Tools tab to change the formatting of the pull quote text box.]
  • Not history!
  • Current economic situation*, for example, appropriate comparisons might include:
This requires a little research and then critical thinking and synthesis between economic concepts from Chap 11 & 12 and research on current economic situation of country.
  • Size of GDP and place in the world’s GDP
    • g. Top 10%, bottom 10%, middle 50%
    • g. It’s like the size of the GDP of Texas
  • Size of population, but then compare to something
  • Current economic situation
    • Venezuela – can’t feed its people due to . . .
    • Price of oil impacting Saudi Arabia
    • Impact on Russia of International (US/EU) sanctions/embargo
    • Government debt situation in Greece
    • Age of population in Japan
    • Etc, etc
  • Provide economic definition(s) for appropriate economic topics covered in business brief*, e.g.
    • GDP
      • Components of GDP
    • Circular Flow
    • Expenditure approach = Income approach = GDP
    • Marginal Propensities (to Consume, Invest, Import)
    • Multiplier effect
      • Equation 12.20 from textbook
    • Describe the data you entered into the spreadsheet (the green input boxes)*
      • GDP (PPP) $ Values, GDP component percentages
    • Describe the two Scenarios and the resulting forecast for 2017 GDP*
      • What are the $ values? What are the % growth values?  What’s the multiplier value?
      • Why are they different?
    • Describe the multiplier effect * (* = Required)
      • Benefits
      • Limitations

 

 

  • Important to create a cohesive “story” / argument describing your country and the data entered into the spreadsheet and the results of the spreadsheet.

 

Note: We will be using a “proxy variable” approach to estimating the impact of fiscal policy using the GDP data for each country.