Student’s Name
Institutional Affiliations
Course
Date
Part 1: GNP and GDP
a).Nominal and Real Gross Domestic Product for last four quarters
2015
Nominal Gross Domestic Product I II III IV
17,645.2 17,914.5 18,060.5 18,148.6
Real GDP 16,175.4 16,335.5 16,414.6 16,455.5
b).Nominal and Real Gross Domestic Products:
Nominal Gross Domestic Product (GDP) is a figure that has not been adjusted for inflation/deflation.
Real Gross Domestic Product (GDP) is a value of economic output adjusted for inflation/deflation.
i) In each quarter shown above, Nominal GDP is higher than Real GDP because Real GDP is adjusted for the country's inflation, thereby the value of GDP has decreased. The difference between Nominal and Real GDPs must be equal to deducted value of Nominal GDP through inflation (Ramey & Zubairy,2018).
ii) The percentage change in Nominal GDP for the most recent quarter compared to the previous quarter is:
Change = 18,148.4-18,060.2 = 88.2
The percentage change = 88.2/18,060.2×100
= 0.4882
The percentage change in Real GDP for the most recent quarter compared to the previous quarter is:
Change = 16,455.1-16,414.0 = 41.1
Percentage change = 41.1/16,414.0×100
= 0.2515
The calculations are made in the appendix section in to put up a simple and clear picture of should the business expect as the returns on the invested capital. Considering that fact that government bond has substantially changed as well the amount charged per week. The study intends to give the business the business owner the direction on what need to be done as far as real estate investments are considered. The bond, which needs to be deducted from the earnings, is given as $1520 while the weekly rent is $380. Comparing with that in the essay, the value is expected to be lower since the weekly rent is lower than that in the essay. The bond is a tax by the government in its course to raise revenue.(Kunanuntakij et al. 2017). It is thus to be subtracted from the total earnings of the business. Using this price will earn low returns on the invested income amount since as predicted in the above introduction. Which implies that this is likely not to be an economically viable business opportunity hence the advice could be that the client should make appropriate changes. The changes may include improving the appearance of the house through necessary renovations. Assuming all as used in the calculations of the rates and profitability of the real estate remains the same in the workings of this case at hand, the workings will appear as those below in the appendix below.
The difference between percentage change in Nominal GDP and Real GDP is 0.4883-0.2503 = 0.238. The percentage change in inflation (price change) accounts for the difference between these two values.
Part 2: Income Approach to Calculating GDP
Information on GDP in billions of current dollars for the past four quarters is given as follows:
2013 2012
Quarter-II Quarter-I Quarter-IV Quarter-III
GDP 16,661.2 16,535.2 16,420.4 16,356.3
GNP 16,907.8 16,772.5 16,677.6 16,603.6
NNP 14,276.2 14,168.8 14,102.2 14,048.6
NI 14,438.4 14,324.4 14,204.1 13,962.1
PI 14,065.5 13,925.3 14,073.4 13,701.4
. A low price of $380 per week attracts the customers who are in this case the tenants. The price is relatively lower than it is in the essay, which has an implication that risks of loss due to lack of the tenants is reduced (Kunanuntakij et al. 2017).
In the case of bad tenants, the business owner can make a loss. Bad tenants include those that cannot all pay the rent in time. Some can even move away unnoticed without paying the rent of the house. This will always economically inconvenience the business owner.A real estate is one of the businesses that requires management of daily activities. It, therefore, means that the client will have to assign another person to this person to take care of the company. The managing costs increases the costs, which can make business less profitable as it reduces the profit.The building can be sold at a lower price than the much it was bought. The liquidity value of such real estate can earn a loss to the client due to depreciation over time in question.
Another reason why the client should embrace rentals investment is that in time of inflation the value of the rentals will go high. A higher income is guaranteed such times hence increasing the profitability of the investments. Considering the tax benefits that are accrued to the real estate investments is another reason why the client should venture in Yarrabilba Qld investments. The tax benefits allowable on the real estate are one big source of strength as many such investments are concerned.
Part 3: GDP in Different Countries
Calculate the sale in five years
Bought property = $359 000
Sold property = $718 000
359 000 x 2 x 5 = 718 000
Apparent Return
P = 359 000
A = 718 000
I = ?
N = 5
Use growth rate to determine apparent return
A = 〖P(1+i)〗^n
718 000 = 〖359 000(1+i)〗^5
〖(1+i)〗^5= (718 000)/(359 000)
〖(1+i)〗^5= 2
1 – I = √(5&2)
1 – I = 1.148698355
I = 1 – 1.148698355
= 0. 148698355
The apparent rate is 14.9%
359 000 x 2 (double the sale in the next five years ) = $718 000
Increase = selling – buying price
= 718 000 – 359 000
= $359 000
Apparent Rate calculation
I = PRT/100
359 000 = (359 000 x R x 5)/100
(359 000 x 5)/(359 000 x 100)= R
R = 1795000/(35 900 000)
R = 0.05%
The apparent rate of return was about 50%.
Actual Return
Duty = buying price x 2/100
= 359 000 x 2/100
= $7180
Buying Cost = 7180 + legal fee
= 7180 + 0 (because a friend of the client is a solicitor)
= $7180
Commission (pay for agents) = 5 % x 18 000 + 2.5 % x (718 000 – 18000)
= 0.05 x 18000 + 0.025 x 700000
= $ 18400 ( This is the charge that have to paid for real estate)
Expenses during 5 years = renovation + rates
= 30 000 + 1250 x 5
= $36250
Amount Received = Sale price – commission price – Expenses
= 718 000 – 18400 – 36250
= 699600 – 36250
= 663350 + 182 000(Rental money)
= $845350
$845350 is the amount the client will received
Actual Profit = Amount received – Actual cost.
= 663350 – 366180
= $297170
Actual Profit rate
I = $297170
P= 366180
N = 5 years
I = PRN/100
297170 = (366180 x R x 5)/100
R = (297170 x 100)/(366180 x 5 )
R = 29717000/1830900
R = 16.23 %
16.23% is the actual Profit rate.
Rental House Investment
Calculate
$700 per week x 52 x 5
= $182 000
Calculate Apparent return rate for rental
I = 297170
P = 366180
R = ?
N = 5
I = PRN/100
182 000 = (359 000 x R x 5)/100
R = (182 000 x 100)/(359 000 x 5)
R = (182 00000)/(179 5000)
R = 10.14%
A real estate is one of the businesses that requires management of daily activities. It, therefore, means that the client will have to assign another person to this person to take care of the business. The managing costs increases the costs which can make business less profitable as it reduces the profit (Proietti, Marczak & Mazzi, 2017). The building can be sold at a lower price than the much it was bought. The liquidity value of such real estate can earn a loss to the client due to depreciations over the time in question.
Part 4: Index of Economic Freedom
Country Ranking
United States 9
Japan 23
China 15
Mexico 49
Russian Federation 140
Switzerland 4
Sweden 19
Luxembourg 14
name index year overall score property rights business freedom trade freedom financial freedom
China 2011 40.50 22.50 40.50 70.5 31.0
Japan 2011 70.2 81.0 83.0 80.5 51.0
Luxembourg 2011 75.4 90.0 75.0 86.2 81.0
Mexico 2011 68.5 49.0 88.0 83.2 62.0
Russia 2011 52.0 26.0 51.0 69.0 42.2
Sweden 2011 70.2 91.0 94.0 85.0 70.0
Switzerland 2011 80.2 90.0 82.0 56.0 82.0
United States 2011 78.0 84.0 90.1 30.5 60.0
Ethical considerations for costing methods
Businesses should put in place mechanisms that would help in determination of fair costing structures for their commodities. The main reason for ensuring ethical issues in the market for the case of the business in question is to keep consumers safe from scrupulous business activities that aims at exploitation through hike in prices of the business products. The last and most important aspect in ensuring ethicality in business is to ensure that it complies to the moral standards in pricing as put out by the government in place (Proietti, Marczak & Mazzi, 2017). The above help the business not to risk seizure of its operation permits by the governing bodies in question.
References
Kunanuntakij, K., Varabuntoonvit, V., Vorayos, N., Panjapornpon, C., & Mungcharoen, T. (2017). Thailand Green GDP assessment based on environmentally extended input-output model. Journal of Cleaner Production, 167, 970-977.
Linden, M., & Ray, D. (2017). Aggregation bias-correcting approach to the health-income relationship: Life expectancy and GDP per capita in 148 countries, 1970–2010. Economic Modelling, 61, 126-136.
Proietti, T., Marczak, M., & Mazzi, G. (2017). Euromind‐D: A Density Estimate of Monthly Gross Domestic Product for the Euro Area. Journal of Applied Econometrics, 32(3), 683-703.
Ramey, V. A., & Zubairy, S. (2018). Government spending multipliers in good times and in bad: evidence from US historical data. Journal of Political Economy, 126(2), 850-901.