1. Real GDP and the GDP deflator: In this exercise, you will generate a graph of nominal and real GDP in Hong Kong, calculate the growth rate of real GDP, and compute the inflation rate based on the GDP deflator. This exercise is designed to enhance your data-handling skills and to review the relationship between major macroeconomic variables. (a) Download data on nominal and real GDP in Hong Kong from the following page (https://www.censtatd.gov.hk/hkstat/sub/sp250.jsp?tableID=030&ID=0&productType=8). You can click "Customise Table / More Data," select "At current market prices - HK$ million," "In chained (2019) dollars - HK$ million," "All" under Year, and "GDP" for GDP expenditure components, press "Submit," and use the download menu. Create a chart similar to Figure 2-1 in our textbook using the downloaded data for Hong Kong. (b) Compute the growth rate of real GDP from 1962 to 2020. Express them in percent by multiplying 100. What is the growth rate of real GDP in Hong Kong, on average, during the period? (HINT: Use 'average' function in Excel.) (c) Calculate the GDP deflator, Pt, and the inflation rate, It, which is defined as = Pt-1 Pt-1 Sometimes, economists use A In(P.) = In(P.) - In(Pt-1) to compute the inflation rate, where In(.) is a natural logarithm. Derive the inflation rate using both methods and compare the results. Do you find that they are similar?2. The composition of HK GDP, 2019: (a) Using data provided by Census and Statistics Department, the Government of the Hong Kong Special Administrative Region, fill in the following table. Specifically, you may want to look at "Table 032: GDP and its main expenditure components at current market prices." (https://www.censtatd.gov.hk/hkstat/sub/sp250.jsp?tableID=031&ID=0&productType=8) Millions of HKD, 2019 Percent of GDP GDP (Y) Consumption (C) Investment (1) Government spending (G) Net Exports (NX) Exports (X) Imports (IM) Inventory investment (b) Among C, I, G, and NX, what is the largest component of GDP in Hong Kong? (c) A widely used measure of trade openness is the openness index, which is given by X+IM Y Calculate the index of the Hong Kong economy in 2019. Compare your answer with that of the US economy in 2019, 26%. (d) (Industry-wise decomposition) Check out "Table 036 : Gross Domestic Product (GDP) by major economic activity - percentage contribution to GDP at basic prices." (https://www.censtatd.gov.hk/hkstat/sub/sp250.jsp?tableID=036&ID=0&productType=8) What is the most important industry in Hong Kong among the five sectors listed in the table
