Saudi Electronic University E

I’m trying to learn for my Macro Economics class and I’m stuck. Can you help?

Q1. (4 Points)

Consider an example of the vehicle tires; if the supply and demand are:

Qs = – 500 + 8p ;Qd = 500 –2 p 

Solve:

  • Equilibrium price and equilibrium quantity and calculate total revenue?
  • If there were a price celling equal to 120 SAR per each tire imposed, calculate the price elasticity of demand? Does this consider elastic, inelastic or unit elastic?Also, calculate the total revenue? 
  • Now consider the vehicle battery; if the supply and demand is:
  • Compare the total revenue for the tires and the total revenue you found for the battery.Which one of product’s total revenue has been increased after the price have been increase and why?Explain in words and show the difference in numbers as well.
  • Recall part a (The tires) Calculate the CS & PS. Hint; you need to set Qs=0 & Qd=0 to find the intercept and calculate the CS, PS.you need to set Qs=0 & Qd=0then solve for P to find the intercept and calculate the CS, PS. Where the CS is the area between the intercept for demand and the equilibrium price you found on part a.Do not forget that this area is a triangle so carefully calculate the area.The same thing for PS.
  • Now, if the government impose sales tax equal to 5%, what is the CS, PS, government revenue and DWL and show this on the graph?Hint; price paid by the buyer equal 104 SAR and price received by seller equal 99 SAR, the difference is the tax per tires.The intercept points for the supply and demand on this part are the same as the ones on part e. To find the quantity, plug either the price for the buyer on the demand curve formula or the price for the seller on supply curve formula.Also, remember CS, PS & DWL have triangle area, whereas tax revenue has rectangular area.Graph this manually so you can easily find the answer. 
  • Without calculation, would you expect to have higher/ lower government revenue and DWL on the vehicle battery and why?

i.Qs = – 100 + 3p ; Qd = 1100 – 9p, calculate the equilibrium price and equilibrium quantity.Also, calculate Total Revenue.

  • If there were a price celling of 120 SAR imposed per each pair of battery, calculate the price elasticity of demand? Do the battery prodduct consider elastic, inelastic or inelastic or unit elastic? Also calculate total revenue.

Q2. (1 point)

Assume that Saudi Arabia produce only two products; cupcakes and TVs where are the price and quantity produced are:

  

Year 

Cupcake

TV

 

2018 (base year)

   

P= 6 SAR

Q= 10,000

   

P= 2,000 SAR

Q= 500

 

2019

   

P= 6 SAR

Q= 11,000

   

P= 2,000 SAR

Q= 550

 

2020

   

P= 8 SAR

Q= 9,500

   

P= 2,200 SAR

Q= 450

Calculate GDP deflator for the years 2018, 2019 and 2020.Also, calculate the Nominal and real GDP growth on 2019 & 2020, compare between them by explaining why they are different.Calculate the 2019 & 2020 inflation rates.

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Saudi Electronic University E

Unemployment

A country’s economic performance is measured using three key indicators, one of which is the unemployment rate. When adults who are willing and able to work cannot find a job, it may be a sign that an economy is producing less than it could. On the other hand, unemployment is also a natural phenomenon that even healthy economies experience. While the official unemployment rate is helpful in representing the state of a nation’s workforce, it does have some shortcomings that should be considered, such as excluding discouraged workers.

There are three types of unemployment that economists describe: frictional, structural, and cyclical. During recessions and expansions, the amount of cyclical unemployment changes. Cyclical unemployment is closely related to the business cycle, and causes the deviations of the current rate of unemployment away from the natural rate of unemployment.

The labor force participation rate (LFPR)

The labor force participation rate (LFPR) is another measure of labor market activity in the economy. The LFPR is the percentage of the adult population that is in the labor force. The labor force includes everyone who is either employed or unemployed. The adult population is defined as anyone who is over the age of 16 who potentially could be part of the labor force. Anyone who is less than 16 years old, is in the military, or is institutionalized is not considered to be potentially part of the labor force and is excluded from this calculation.

When people enter the labor force the LFPR increases, and when people exit the labor force the LFPR decreases. A decrease in the LFPR that occurs at the same time as a decrease in the unemployment rate can signal that there are more discouraged workers.

Limitations of the unemployment rate

The unemployment rate as it is measured officially is often criticized for understating the level of joblessness because it excludes anyone working at all or people who aren’t looking for work. In particular, the official unemployment rate leaves out discouraged workers and the underemployed. People who have given up looking for work because they are convinced that they cannot find jobs are considered discouraged workers. Some people are counted as employed because they are working part-time, even though they really want full-time work.

Three types of unemployment

Economists primarily focus on three types of unemployment: cyclical, frictional, and structural. Cyclical unemployment is the unemployment associated with the ups and downs of the business cycle. During recessions, cyclical unemployment increases and drives up the unemployment rate. During expansions, cyclical unemployment decreases and drives down the unemployment rate.

The natural rate of unemployment

The natural rate of unemployment (NRU) is the unemployment rate that exists when the economy produces full-employment real output. NRU is equal to the sum of frictional and structural unemployment. When an economy is producing an efficient amount of output (meaning it is operating on its PPC), the unemployment rate will be equal to the natural rate of unemployment. Even though an economy may be operating efficiently, there will still be some unemployment. Because of that, the natural rate of unemployment is never equal to zero.

Changes in the natural rate of unemployment (NRU)

The natural rate of unemployment (NRU) can gradually change over time due to events such as changes in labor force characteristics. The NRU can change due to changes in structural and frictional unemployment. For example, a firm may want to hire fewer workers because the skills of those workers are not needed as much as they used to be. That will cause more structural unemployment, and the natural rate of unemployment will increase.

Discussion Topic # 2

Explain with relevant data sources from https://www.statista.com/statistics/262524/unemployment-rate-in-saudi-arabia/ .

If a decrease in the unemployment rate isn’t necessarily a sign of an improving.

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Saudi Electronic University E

Select a country of your choice (other than Saudi Arabia) and discuss its comparative advantage. What are the sources and the challenges? What is the role of the government? What policies should the government implement to enhance the comparative advantage?

Embed course material concepts, principles, and theories, which require supporting citations along with at least one scholarly, peer-reviewed reference in supporting your answer unless the discussion calls for more. Keep in mind that these scholarly references can be found in the Saudi Digital Library by conducting an advanced search specific to scholarly references.

POST 1

Comparative advantage When a country produces a good or service at a lower opportunity cost than other countries, it also can generate larger sales and profit margins (U.S. Bureau of Labor Statistics). Firms hire three methods to compete successfully. First, they could be the low-cost provider. Second, they could offer a better product or service. Third, they could focus on one type of customer.

In the 1990s, India initiated a series of economic reforms aimed at opening the economy. Notable among these has been the extensive effort to liberalize its international trade which projected to have resulted in changes in the composition of exports to reflect India’s comparative advantage in the global economy. The continent is endowed with abundant natural resources, including coal (4th biggest reserves in the world), iron ore, manganese ore (7th largest reserve in the world as of 2013), mica, bauxite (5th largest reserve in the world as of 2013), chromite, natural gas, diamonds, limestone, and thorium. (Nagpur, India. Reuters).

India should also improve its education system and modify its labor laws and worker protection legislation. These have a significant impact on firms’ competitiveness. The latter protects people who have work while discouraging job development in the economy’s organized sector (From John Wes). Priority has been placed by the government on increasing work opportunities for younger generations while concentrating on rapid economic growth (Peter F. Drucker).

References:

(U.S. Bureau of Labor Statistics). Bureau of Labor Statistics Forms

John West is Adjunct Professor at Sophia University. He is author of Asian Century… on a Knife-edge (Palgrave Macmillan, 2018).

“Manganese Ore India plans to up production, invest Rs 1,200 cr in phases”. The Indian Express. Nagpur, India. 8 January 2013.

“UPDATE 2-India’s top court keeps bauxite mining ban, eases some iron ore curbs”. Reuters. 18 April 2013.

Peter F. Drucker (1909–2005) Author and management consultant

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“The COVID-19 Pandemic has spread rapidly across countries in the world. It has disrupted the lives and livelihoods of all communities and is causing major challenges to vulnerable people. It also has a far reaching and negative impact on the economy and the well-being of the population”

1- what are the real economic effects of the COVID-19 pandemic on the Saudi Arabian economy?

2- Are the economic effects temporary or persistent?

3- Does it have economic costs (i.e. lose jobs), or do policies that slow the spread of the pandemic also reduce its economic severity?

First one

  1. As we know, the economy is the basic system on which the country is based. The GDP is measure of a country’s income. During the pandemic, we notice that the economy as a whole has been affected and the GDP was reduced as all. From table 4 we can see the real affect in GDP in each quarter for several different sectors, for example in agriculture, forestry and fishing we can see the growth will affect in quarter2 by (-0.4) in year 2020 more than other quarters because the pandemic was in its strongest stage, and it recover in the first quarter in year 2021 by (6.2), but in fact, it was not affected as much as other sectors because fishing and agriculture are internal factors that are in demand at all times. On the other side, we can see a large affect in mining and quarrying sector in all quarters especial in quarter2 by (-59.6) which is a big different than last years and in the all year it fell by (-35.7) but it is recovery in first quarter in year 2021 by (-7.1) this happen because the global economy was negatively affected and thus their import of oil from our country was reduced. Also, due to the curfew, local gasoline consumption has decreased, as a summary of the entire economic growth in 2020, it was affected by a shortage of 11.7.

Second one

The Saudi Vision 2030 is a framework for reducing Saudi Arabia’s reliance on oil and diversifying the country’s economy. The framework’s objectives include increasing non-oil trade, promoting a more secular image of the Kingdom, and increasing military spending.

The objectives are expected to generate new revenue streams for the government, such as taxes, fees, and income for the sovereign wealth fund. Another major component of the Kingdom of Saudi Arabia’s Vision 2030 is to increase private sector participation and create more job opportunities.
Non-oil sector growth from 2018 to 2021. Saudi Arabia will be able to meet its targets by 2030 if current trends continue. Table 16 demonstrates that the oil sector has been contracting since the first quarter of 2019, indicating that Saudi Arabia is gradually weaning itself from its reliance on it.

Table 16 so, with the exception of two quarters, indicates the non-oil sector’s growth to be stable. When compared to the oil industry, the non-oil sector’s growth is more stable, which is in line with Saudi Arabia’s goal of diversifying production by 2030.

Only the fourth quarter of 2020 had positive growth of nearly, 2.6 percent, but the first quarter saw negative growth of 8.7 percent. Nonetheless, the non-oil sector, both private and public, grew at a good rate in the third quarter of 2020 and 2021. As a result, it can be seen that the Kingdom is progressing toward its 2030 objective of shifting away from reliance on oil and toward other products. This goal will help to keep the Kingdom’s economy healthy and stable it. 

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productivity & production and GDP growth & GDP components.

COLLAPSE

What happened to the GDP in general and the GDP by economic activity on table 1 or table 4 during the pandemic? Which sector has been affected more during the pandemic and why would you think this sector has been affected more?

According to the preliminary estimates, Gross Domestic Product (GDP) of Saudi Arabia at recorded a increase in growth rate of 1.6% in the first quarter of 2021, compared to -3.2% in the same quarter of the previous year. There is negative growth originated mainly from the contraction in the Oil Sector by 3.7%, while the Non-Oil Sector recorded a positive growth rate of 3.4%. Within the Non-Oil sector, the Private Sector growth by 6.2% and the Government Sector decreased by 2.4%.

In fact, there are Increasing signs of a sustained recovery of non-oil economic growth.

More specifically, we see an expansion in the ‘Wholesale & Retail, Restaurants & Hotels’ sector, Especially since the restrictions on social spacing is gradually being eased and there is a constant recovery in entertainment activities and internal tourism.

The strong level of growth in the non-oil sector will do enough to keep imports at appropriate levels, albeit lower than levels before the pandemic. At the same time, it is assumed that the annual increase in both oil exports and non-oil revenues lead to the payment of the current account to a surplus of 2.5% of GDP.

Transport, storage and communications sector fell by -1.4 per cent in 2021 as a result of the ongoing travel restrictions, suspension of tourist visas, and the prohibition of Umrah, Hajj and reduce considerably. Although the reopening of Umrah during the fourth quarter of last year, there are still restrictions on the number of pilgrims in force.

At the same time, it is likely to be the best performance of the telecommunications sector sub, especially during the closure, which led to work settings from home. Indicative of this is that most listed telecommunications companies reported strong earnings growth during the year.

One of the most important targets for the Vision 2030 is to switch the production in Saudi Arabia from mostly depending on Oil to diversify its production, would you think we are going into the target of diversifying production through looking at the tables 15 & 16 from 2018 to 2021

The Saudi economy has enormous possibilities to accomplish the objectives for vision 2030. by 2030 the Gross domestic product could twofold again after its first leap during the period from 2003-2013. It is assessed that eight sectors other than the oil area will produce over 60% of the development and make occupations; these areas are Mining and Metals, Petrochemicals, Manufacturing, Retail and wholesale trade, The travel industry and hospitality, Finance, Construction, Medical services. The significant elements that the policymakers should think about are: First, the diversification should be outside oil, that is, the development requires exercises outside the oil area. Other than this, it is important to spend more on human resources, schooling, preparing and wellbeing to the degree that should contribute to higher output and productivity

Reference:

A. Guendouz, A., & M. Ouassaf, S. (2020, October 13). The Economic Diversification in Saudi Arabia Under the Strategic Vision 2030. Academy of Accounting and Financial Studies Journal. https://www.abacademies.org/articles/the-economic-… 

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