Real_Gdp

Basic Economics Assessment 2: Individual Assignment 1) Take year 2010 as a reference year, find out the GDP both real and nominal of China, USA and Singapore. Using the rule of 70, calculate and explain the years that China and Singapore would take to reach the per capita GDP of USA for year 2010. The table below shows the Real and Nominal GDP figures and real GDP growth rates for USA, China & Singapore in 2009 & 2010: |2009 | |Country |Real GDP (US$ bn) |Nominal GDP (US$ bn) | |USA |13,939 |13,939 | |China |5,069 |5,069 | |Singapore |183.3 |183.3 | |2010 | |Country |Real GDP (US$ bn) |Nominal GDP (US$ bn) | |USA |14,527 |14,527 | |China |5,824 |5,824 | |Singapore |222.7 |222.7 | Growth per capita of China Years for China to double GDP/Capita: Economic Growth Rate / year: Present real GDP per capita – Previous real GDP per capita x 100 = Previous real GDP per capita 5,824 - 5,069 X 100 = 14.89% growth per year 5,069 Rule of 70: 70 / Growth Rate = 70 / 14.89 = 4.7 years per doubling period Doubling-period – China |Year |GDP per Capita (US$ bn) | |2010 |$5,824 | |2014.7 |$11,648 | |2015.6 |$14,527 | |2019.4 |$23,296 | |2024.1 |$46,592 | [pic] In accordance to the table and above by using the Rule of 70, China will take an approximate 5.6 years to reach the per capita GDP of USA in 2010 at the growth rate of 14.89%. Growth per capita of Singapore Years for Singapore to double GDP/Capita: Economic Growth Rate / year: 222.7 – 183.3 X 100 = 21.49% growth per year 183.3 Rule of 70: 70 / Growth Rate = 70 / 21.49 = 3.26 years per doubling period Doubling-period – Singapore |Year |GDP per Capita (US$ bn) | |2010 |$183.3 | |2013.26 |$366.6 | |2016.52 |$733.2 | |2019.78 |$1,466.4 | |2023.04 |$2,932.8 | |2026.30 |$5,865.6 | |2029.56 |$11,731.2 | |2030.34 |$14,527 | |2032.82 |$29,054 | [pic] Also in accordance to the table and above by using the Rule of 70, Singapore will take approximately 20.19 years to reach the per capita GDP of USA in 2010 at the growth rate of 21.49%. Conclusion Given the higher GDP per capita worth of China, it will be able to reach the GDP per capita of USA, 2010, in 3.6 times faster than Singapore; even if the economic growth rate of Singapore is 44% stronger. 2) Calculate and explain the economic growth rate of Singapore for years 2009 and 2010. What is the real GDP per person for these years' Explain cost of living and standard of living. Argue on the pros and cons of having a large population with regards to the real GDP per capita, using Singapore and China as reference nations. 2009 Real GDP Growth Rate (Singapore) = (183.3 – 189.4) X 100 189.4 = -6.1 X 100 189.4 = -3.22% 2010 Real GDP Growth rate (Singapore) = (222.7 – 183.3) X 100 183.3 = 39.4 X 100 183.3 = 21.49% From the calculations above, a contraction of Singapore’s economy is seen. This is due to global financial crisis between 2008 and 2009 (Thangavelu, 2009); however, its economy is seen above to have increased to a positive growth in 2010. This rebound was contributed largely due to exports and the opening of two casinos in 2010 (Asher, 2010; Eastasiaforums, 2010) that boosted its services sector largely. Real GDP per person of China & Singapore respectively: |Country |2009 |2010 | |China (US$ at PPP) |7,030 |7,804 | |Singapore (US$ at PPP) |39,830 |45,305 | Population of China & Singapore respectively: |Country |2009 |2010 | |China (million) |1,305 |1,312 | |Singapore (million) |5 |5.1 | The data above shows that although Singapore’s population is smaller than China’s by an average 259 times, the real GDP per person of the former is 5.73 times averagely higher than the latter. This tells us that the financial status of individual Singaporeans is stronger. Also, due to a larger population in China, there is higher competition for jobs that leads to lower salaries and wages. This influences the economy to be labour-driven, which then attracts foreign investors looking at labour-intensive set-ups into the country. Such establishments bring in knowledge, culture and usually positively build the infrastructure of the host country. However, being labour-driven mirrors the general education level of its population – where an average Chinese has a lower standard of education compared to an average Singaporean. Due to the low population and higher salaries in Singapore, this opens up to the need for foreign migrants to full up excess jobs created. In such, taxes contributed by foreign migrants are contributed mainly through indirectly. 3) Summarize and explain the computation of Singapore’s GDP for 2010. What approach did the government take to come up with the figure – Expenditure or Income' What will be the likely discrepancies you foresee and show and explain how the government addresses them' The GDP for Singapore in 2010 has been compiled as and detailed with the following factors below with other income account to form an integrated set of national accounts. These numbers are representative of the sum of income generated by the domestic production of goods and services (Cheung, 1998). The result was computed using the income approach and consists of the following factors: 1) Compensation of employees – Payment for labour services - this includes net wages and salaries that employees receive plus taxes withheld on earnings plus fringe benefits. 2) Gross Operating surplus – Total of all other factor incomes. It has the following components: a. Net Interest – Interest households receive on loans they make minus the interest households pay on their own borrowing. b. Rental income – Payment for the use of land and other rented resources. c. Corporate profits – Profits of corporations of which some of which are paid to households in the form of dividends and some that are retained by corporations as undistributed profits. These dividends are considered as profits. d. Proprietors Income – Income earnt by the owner-operator of a business, which includes compensation for the owner’s labour, use of the owner’s capital and profit. 3) Taxes on production and imports – Taxes payable on goods and services when they are produced, delivered, sold, transferred or otherwise disposed of by their producers plus taxes and duties on imports that become payable when goods enter the economic territory by crossing the frontier or when services are delivered to resident units by non-resident units; they also include other taxes on production, which consist mainly of taxes on the ownership or use of land, buildings or other assets used in production or on the labour employed, or compensation of employees paid. 4) Net Domestic Income at factor cost 5) Indirect taxes 6) Less subsidies 7) Net Domestic Income at market prices 8) Depreciation When using the Income Approach to compute and report GDP figures, any mis-declaration by entities will cause under-declaration of the GDP numbers (Parkin, 2012). With that, there may also be instances where sum of expenditures exceed the sum of incomes. They are considered as Statistical Discrepancies and also include most incomes estimated and unreported to the Inland Revenue Authority on tax returns. References The Economist Intelligence Unit. (2012). Annual data and forecast. Available: International Enterprise Singapore Thangavelu, S. (2009) Riding the global economic crisis in Singapore. Retrieved 05 Feb, 2012 from http://www.eastasiaforum.org/2009/01/05/riding-the-global-economic-crisis-in-singapore/ Singapore tops the world with record growth rate. (2010). Retrieved 05 Feb, 2012, from http://www.asianews.it/news-en/Singapore-tops-the-world-with-record-growth-rate-18934.html Asher, M. G. (2010) Singapore: Economy bounces back, but…' (2010). Retrieved 05 Feb, 2012, from http://www.eastasiaforum.org/2010/12/31/singapore-economy-bounces-back-but/ Cheung, P. (1998). Department of Statistics, Ministry of Trade & Industry, Republic of Singapore. Retrieved 03 Feb, 2012 from http://www.singstat.gov.sg/pubn/economy/gdi.pdf Parkin, M. (2012). Economics. (Tenth ed., pp. 493-494). Essex, England: Pearson Education Limited.