Data Exercise
Part 1
As the table above shows, the Nominal GDP is always higher than real GDP (Bureau of Economic Analysis, 2016, Table 1.1.5). The difference is attributed to the inflation that is accounted by real GDP. Thus, in other words, real GDP is a nominal GDP adjusted for the inflation. This adjustment is measured by GDP deflator that reflects the price change in the current year comparing to the base or previous year. The percentage change of the nominal GDP in the last quarter analyzed compared to the previous period was 1.2 %, while the percentage change of the nominal GDP was lower, only 0.8 %. This means that the inflation in the third quarter of the last year was higher than in the previous one that explains this difference.
Part 2
The table above represents the relation of such macroeconomic indicators such as GDP, GNP, Net National Product, National Income and Personal Income in the US for the last year, quarterly (Bureau of Economic Analysis, 2016, Table 1.7.5.) The first two indicators both represents almost the same measures – the amount of final goods and services produced by the US economy. However, as an evident from the Table 2, these two indicators are different; particularly, GNP had been higher than GDP over the entire period analyzed. The reason of such difference is the determination of the goods and services to be accounted. Thus, GDP includes only goods and services produced (for final use) on the territory of the country, both by residents and non-residents; while GNP includes all goods and services produced by residents of the country, regardless of the location of production. In the case of the US, the GNP larger than GDP means, that US residents outside the country (an American company operating in China, for example) produce more than foreign residents (Chinese company in the US) in the US actually do. Therefore in order to determine GNP from GDP we should add income receipts from the rest of the world and deduct income payments to the rest of the world.
The next indicator, national income measures the total amount of new goods and services produced by country for the final use over the particular period of time. The national income is often measured by the income method by adding the incomes received by all factors of production: labour (salaries, wages), capital (firms’ incomes, interests etc.) and land ( rents). Over the last year, National income was lower than GNP by almost $ 2.9 billion (for the third quarter of 2016). In order to calculate national income from GNP we should deduct consumption of fixed capital. The largest portion of NI is Personal incomes, such as salaries, wages, interests from personal investments and other incomes received by individuals.
Part 3
Thus, among eight countries selected, Australia has the highest GDP with $ 56 500 per capita in 2015. Another developed countries has GDP per capita ranged from $ 32,5 up to 43.9 thousand – Australia is followed by the UK, Canada, Germany, France and Japan. Developing countries, China and Brazil, has significantly comparatively low indicators, with $8 and $8.5 thousand accordingly, that is almost 7 times lower than in Australia.
However, GDP per capita ranking is quite different from GDP ranking. The highest GDP has China, with more than $ 11 trillion GDP, however, because of the highest population in the world (≈ 1,37 billion), per capita GDP is the lowest among 8 countries. Conversely, Australia, the country with the lowest total GDP ($1339), has the highest per capita GDP, because the country’s population in the lowest in the list. Therefore, GDP per capita not only on GDP, but on population also. Therefore, in the general (global) ranking countries with low population and/or high GDP are likely to be in the top (like oil rich Qatar, Kuwait or small countries like Luxembourg and Macau), and poor and/or high populated countries are likely to be at the bottom (like CAR and Afghanistan).
Part 4
As for another two freedoms summarized in the table, business and trade freedoms, the direct relationship with GDP per capita is not so evident. However, the two countries with the lowest GDP per capita (Brazil and China) has the lowest ranks either, in both freedoms. Thus, the country with the highest business freedom, Germany, is the forth in GDP per capita ranking, while the country with the highest GDP per capita in the list, is the third in business freedom, and 12th in the general ranking. In general, trade freedom also has positive relationship with GDP per capita, except Australia, which has lower freedom than in the UK, Canada and Germany. However, in the general ranking, Australia has the higher economic freedom. Therefore, these exceptions might be explained by other factors, that were not mentioned in the table.
Reference list:
Bureau of Economic Analysis, U.S. Department of Commerce. (2016). National Data, Table 1.1.5: Gross Domestic Product [Billions of dollars] Seasonally adjusted at annual rates. Retrieved from: https://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=5
Bureau of Economic Analysis, U.S. Department of Commerce. (2016). National Data, Table 1.7.5: Relation of Gross Domestic Product, Gross National Product, Net National Product, National Income, and Personal Income [Billions of dollars] Seasonally adjusted at annual rates Retrieved from: https://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=43
The Heritage Foundation. (2017). 2016 Index of Economic Freedom, Country Rankings. Retrieved from: http://www.heritage.org/index/ranking
The World Bank. (2017). World Development Indicators. Retrieved from: http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators
