Keller Graduate School of Management

Project #2

Keller Graduate School of Management

Business Economics ECON545

November/December 2012

Professor: Guerman Kornilov

Chapter 15 Question #11

YEAR GDP C I G X-M C% I% G% (X-M)%

1965 719.1 443.8 118.2 151.5 5.6 61.72% 16.44% 21.07% 0.78%

% change 1.42% -2.39% 0.77% 0.20%

1975 1638.3 1034.4 230.2 357.7 16 63.14% 14.05% 21.83% 0.98%

% change 1.32% 3.39% -1.01% -3.71%

1985 4220.3 2720.3 736.2 879 -115.2 64.46% 17.44% 20.83% -2.73%

% change 2.80% -1.98% -2.32% 1.49%

1995 7397.7 4975.8 1144 1369.2 -91.4 67.26% 15.46% 18.51% -1.24%

% change 2.93% 1.05% 0.54% -4.52%

2005 12455.8 8742.4 2057.4 2372.8 -716.7 70.19% 16.52% 19.05% -5.75%

I used Excel to calculate the information listed above.

A) From looking at the table it is the G are the most stable

B) From looking at the table above the most volatile is the Export-Imports component of the GDP

C) From looking at the table above the fastest is the Consumption component of the GDP as we ignore the net exports.

Chapter 16 Question 6

In order to get started, we need to define what Hyperinflation is. According to our textbook, it is expressed "Hyperinflation is an extremely high rate of inflation. Historically this was defined as an inflation rate of at least 50% a month. Today, however, most economists refer to an inflation rate above 100% a year as hyperinflation. But in most episodes of hyperinflation, the inflation rates dwarf 100% a year" (Stone 436). The main cause of hyperinflation is the government spending, it is out of control and the expenditure are over the tax revenues coupled with the printing of money. The government starts to print money to pay for their fiscal spending. This will begin to devalue their currency; therefore, because of these prices to buy any product will increase, making it harder to buy things. For the banking system, the money that they loaned before the hyperinflation would lose value as they money that they are getting back is less what they loaned. If they loaned $1,000 before, now the value could be worth a $10 due to the 100%inflation rate. Alternatively, the consumer is trying to buy some bread when the price was $1 dollar before, now after the hyperinflation it might cost $100 for the same