economic assignment due in 36 hours

a) What is the real GDP growth rate? ____________________________

b) What is the current-price GDP index? ______________________________

c) What is the price index? _______________________________

d) What is the implicit price deflator? _______________________________

2. Suppose the production function is Cobb Douglas, i.e., . The annual GDP growth is 10%, labor growth is 2%, and capital stock growth is 7%. If and (For full credit, please show your work):

a) What is the TFP growth? _________________________________

b) How much of GDP growth is due to TFP growth? __________________________

c) How much of GDP growth is due to labor growth? _________________________

d) How much of GDP growth is due to capital growth? ______________________

Part 2. Readings

You need to read Holz, Carsten, “The Quality of China’s GDP Statistics,” China Economic Review 30(2014) in section II.A.(2) of the reading list (skip section 5 on Benford’s Law), which I posted on OWL, in order to answer Part 2 questions. Please summarize and answer the questions in your own words instead of copying the exact words from the paper, otherwise you may lose points.

3. Holz discusses a range of problems with China’s GDP statistics before the benchmark revision. One problem he mentions is that the sum of provincial GDPs is larger than total national GDP. What are two explanations that Holz gives for this inconsistency? (The explanations should fit on the lines provided.)

1. ______________________________________________________________________ ________________________________________________________________________

2. ______________________________________________________________________ ________________________________________________________________________

4. Holz points out that the industrial value-added data in 2007 are problematic. Why does he say so, i.e., what is the data fact that leads him to this conclusion? Also, what are the three reasons that data on DRIE VA could be problematic? (Your answer should fit on the lines provided.)

Data fact: ______________________________________________________________________ ________________________________________________________________________

Reasons:

1. ______________________________________________________________________ ________________________________________________________________________

2. ______________________________________________________________________ ________________________________________________________________________

3. ______________________________________________________________________ ________________________________________________________________________

5. Holz mentions that NBS can calculate value-added (VA) from gross output value (GOV) in two ways. List them and also the potential problem with using each of them. (Your answer should fit on the lines provided.)

1. ______________________________________________________________________ ________________________________________________________________________

2. ______________________________________________________________________ ________________________________________________________________________

6. Holz discusses the scope for falsification of nominal GDP. He mentions that sometimes official GDP may underreport actual GDP. Why would he say that? Give two reasons that official GDP may underreport actual GDP. (Your answer should fit on the lines provided.)

1. ______________________________________________________________________ ________________________________________________________________________

2. ______________________________________________________________________ ________________________________________________________________________

7. After reading the paper, what do you think about the author’s attitude towards the quality of China’s GDP statistics? Is he more positive or more negative on the reliability of the statistics? Do you agree or disagree with him? Why? (Your answer should fit on the lines provided.)

______________________________________________________________________ ______________________________________________________________________________________________________________________________________________ _______________________________________________________________________