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    Please can some help me answer this question!Name:  50188FB4-5364-4226-BB24-5AD70E6F6061.jpg.jpeg
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    Thank you!!!!
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    (Original post by Leah_Phillips)
    Please can some help me answer this question!Name:  50188FB4-5364-4226-BB24-5AD70E6F6061.jpg.jpeg
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    Thank you!!!!
    The image isn’t clear
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    It’s about the aggregate demand curve and it’s saying if the government reduce interest rates would the curve shift left/right/not at all?

    And the same question but this time higher prices leading to higher interest rates cause it to shift left/right/not at all?
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    Higher prices lead to higher interest rates is a stupid wording of the question.

    The answer is leftward shift anyway.

    Leftward shift = Demand goes down
    Rightward shift = Demand goes up
    Shift down the demand curve = Quantity demanded goes up
    Shift up the demand curve = Quantity demanded goes down

    An increase in prices (and a subsequent increase in interest rates) will cause the demand curve to shift to the left

    Higher interest rates decrease the viability of consumers, governments and firms to purchase goods and services on credit, thus decreasing aggregate demand.
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    Name:  496D9BEE-1C66-44B8-8F1D-C8B82C7A1400.jpg.jpeg
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    Thank you also, don’t suppose you could explain how to work out GDP and GVA but in basic terms?
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    By the way my answer was to question 6 which is where you had your cursor. Question 5 is a rightward shift since a decrease in interest rates makes credit a more viable option (as its cheaper) thus expanding aggregate demand. I hope that was clear from my explanation anyway.
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    Name:  BAE2ED94-FC6F-47FF-BAB1-C563057C50D1.jpg.jpeg
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    All them figures should be up one!


    Thank you so much for helping! Your explanation is a lot easier than a textbook! 😩😂
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    (Original post by Leah_Phillips)
    Thank you also, don’t suppose you could explain how to work out GDP and GVA but in basic terms?
    Bit of a broad question, is this an algebraic equation, are you looking for the GDP equation or are you looking to do linear maths?

    The GDP 'equation' is GDP = C + I + G + (X - M)
    or Consumer spending + Investment + Govt spending + Net export/import
    where X = exports and M = imports

    The GDP deflator is nominal GDP divided by real GDP multiplied by 100
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    GDP equation but I’m not sure what bits to add together to get the GDP and then I thought you just added the taxes and minuses the subsidies ?

    I’m so confused? Could you please use the figures from my picture so I can use the figures to relate to the equation? Sorry, you’re actually being so helpful!
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    (Original post by Leah_Phillips)
    Name:  BAE2ED94-FC6F-47FF-BAB1-C563057C50D1.jpg.jpeg
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    The difference between GVA and GDP is that GVA is

    GDP + Subsidies - Tax

    In your image this is

    GDP =
    Consumer expenditure
    plus Government final consumption
    plus Gross domestic fixed capital *
    plus exports of goods and services
    minus imports of goods and services

    so GDP = (missing) + 1050 + 600 + 500 - 850

    GVA is the above number + 500 - 950

    * I assume this means investment in fixed capital instead of existing fixed capital. If the latter, the calculation is wrong

    Net income from abroad is something that you would add to the GDP figure if the question was about GNP (gross national product) or GNI (gross national income). Ignore it, has nothing to do with GDP or GVA. GVA and GDP are measures of added value in a national economy. Foreign income/interest is not part of the national economy, it is part of the circular flow of money though.

    Capital consumption (depreciation) doesn't quite make sense. It's either capital consumption, in which case it's 'investment' that should be replaced with the * gross domestic fixed capital * figure above for GDP, or it's depreciation of fixed assets in the country, in which case it's a trick to put you off your track as that doesn't go anywhere.
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    Name:  F9387B71-4A3B-4BAA-9CFA-28164A5BE6D5.jpg.jpeg
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    So I’ll just go with what you’ve said as I also believe that the question has been worded to ‘trick’ me.

    Thank you so much!
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    Although, sorry the numbers should be up a line, so consumer expenditure is £1050 etc.... is that still right and I’m confused as to why GVA is -£950?
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    (Original post by Leah_Phillips)
    Name:  F9387B71-4A3B-4BAA-9CFA-28164A5BE6D5.jpg.jpeg
Views: 7
Size:  21.2 KB this is all the question states.

    So I’ll just go with what you’ve said as I also believe that the question has been worded to ‘trick’ me.

    Thank you so much!
    In that picture GDP is $2050 and GVA is $1600

    You missed the 'formation', pretty crucial :P It basically means net investment, or just 'investment' in that GDP equation.

    Also in the context of the question it does look like your lecturer wants you to know the difference between gross national product and net national product, and the difference is depreciation. But I don't expect that in undergrad economics.

    In which case the answer would be $2050 + Depreciation because once 'depreciation' is involved, the equation technically becomes an NDP equation and not a GDP one.

    Anyways even if the answers are wrong you should hopefully know at least broadly how to calculate it.
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    Name:  654A2257-9553-4216-9308-1A8E56CFDF25.jpg.jpeg
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    (Original post by Leah_Phillips)
    Although, sorry the numbers should be up a line, so consumer expenditure is £1050 etc.... is that still right and I’m confused as to why GVA is -£950?
    How did you get this number?

    GVA would be the GDP figure plus subsidies minus tax.

    (minus) 950 is the tax that you wrote on the notepad, its not the answer, it's part of the equation
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    So what did you add together to achieve £2050?
    And then deduct to achieve the GVA?
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    (Original post by Leah_Phillips)
    Name:  654A2257-9553-4216-9308-1A8E56CFDF25.jpg.jpeg
Views: 9
Size:  26.1 KB I re wrote it 😂
    Yeah as above, GDP is $2050 OR $1930 depending on how your lecturer wants you to answer it. Have you been taught about capital depreciation or NDP?

    Consumer expenditure (1050)
    plus government spending (600)
    plus net investment (500)
    plus exports (850)
    minus imports (950)

    = 2050

    could be minus capital consumption (120)
    for = 1930
    but depends on what your lecturer has taught you.

    GVA is
    Gross domestic product (2050 or 1930)
    plus subsidies (50)
    minus tax (500)

    for 1600 (without depreciation) or 1480 with it.
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    Can I just say a huge thank you! I got 70% in my test today which wasn’t bad considering I find economics extremely hard (business student)!
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