Answer to Question #89017 in Macroeconomics for Tofiga

Question

c. Explain the combined effects of these events on Fiji’s real GDP and the price level, starting from a position of long-run (full employment) equilibrium.

Answer 1

This picture shows the dynamics of change in GDP Fiji.

As can be seen, the greatest changes occurred in 2009, 2011, 2014 and 2016. Consider what happened and what affected the GDP.

The economy of Fiji is built on agriculture, forestry, fishing, gold mining and gold export, as well as tourism.

This means that natural disasters strongly affect the economy and GDP of Fiji (such as tsunamis, earthquakes and so on).

The value of nominal GDP is influenced by two factors: change in real production and price level change.

Due to natural disasters, production is falling. Due to the volume of production, demand is changing. Due to a change in demand, the price changes. And all this leads to a change in GDP.

Below full employment equilibrium is a macroeconomic term used to describe a situation where an economy's short-run real gross domestic product (GDP) is lower than that same economy's long-run potential real GDP. Under this scenario, there is a recessionary gap between the two levels of GDP (measured by the difference between potential GDP and current GDP) that would have been produced had the economy been in long-run equilibrium. An economy in long-run equilibrium is experiencing full employment. When an economy is not in full employment, it cannot produce what it would have were it in full employment. That output gap is caused in part by the employment shortfall.

the graph shows the dynamics of unemployment in Fiji

So, a recessionary gap between the two levels of GDP (measured by the difference between potential GDP and current GDP) that would have been produced had the economy been in long-run equilibrium as a percentage will be equal to the unemployment rate.

https://translate.google.com/translate?hl=ru&sl=ru&tl=en&u=https%3A%2F%2Fknoema.ru%2Fatlas%2F%25D0%25A4%25D0%25B8%25D0%25B4%25D0%25B6%25D0%25B8%2F%25D0%2592%25D0%2592%25D0%259F

https://www.rbf.gov.fj/getattachment/393377b1-7106-4dd0-9eca-3bba775bd42a/Forecasting-Economic-Growth-in-Fiji-11-November,