The Nottinghamshire Research Observatory in England calculated that students who attend Nottingham Technical University spend about £2,760 each in the local economy for a total of £50.45 million. The total impact of student spending on the local economy is £63 million. Calculating the student spending multiplier using the formula, the multiplier is found to be 5.48.

1. The Nottinghamshire Research Observatory in England calculated that students who attend
Nottingham Technical University spend about £2,760 each in the local economy for a total of
£50.45 million. In total, the impact of their spending on the local economy is £63 million.
Calculate the size of the student spending multiplier.
The formular for Multiplier is
Multiplier=Change (Real GDP demanded at each price)/initial change (component of AD)
Number of Students that contributed $50.45=50.45m/2760 =18279 students.
Fore the total of 63m spending at the same contribution of £2,760 students will be
63m/£2,760=22863 student
Therefore AD= 22863
Therefore Change in GDP=63-50.45=£12.55
change in AD in AD =22863
Multiplier==£12.55/=22863
=548
Learning Journal Chapter 22
Respond to the following question: Give three reasons (write one well composed paragraph for
each) for the downward slope of the aggregate demand curve.
Relation Between Real Wealth And Consumption
This is the first reason that I would like to mention in order to explain the down ward slop of the
demand curve. Real wealth is the abundance of valuable resources or possession and can
mean stock, bonds income or any asset that the people possess. On the other hand
consumption one of the four aggregates of the four components of aggregates demand is the
use of the income on house hold needs. It could be buying of the car, Farm, house, foods,
clothes etc. When the prices of good and services fall, the wealth of the people increases. What
this means that if my income for example is $100. And the price of the shoe is $100 as well, I
can only buy one pair of shoe in my income. However should the price fall to $50, it means I can
buy one pair of shoe and still remain with an extra $50 to spend on other goods. There by
increasing my wealth. Though this example is on individual basis, and can fit well in the Micro
economics, the concept in the Macro is the same. As the Prices of Goods and servces tend to

2. go up, the wealth of the people tend to reduce, hence the consumption is reduced which may
lead to the lower Real GDP, on the other hand as the prices of goods and services are lowered.,
the wealth will increase and the buying power is high which will Ultimately increase the real
GDP, The wealth effect in this relationship, makes the demand curve slopes down ward.
INTEREST RATE AND INVESTIMENT
From the law of Supply and demand we can say that if the demand of certain good and
services is reduced, with all other things remain unchanged the price of that good and service
will reduce, the demanded money will be less. Therefore when it comes to the interest rates,
the low prices will reduce the interest rates. When the interest rates are low, the cost of doing
business is low as well. The firms will be encouraged to borrow from the bank and build
factories and equipment because the mortgage payment is low. This will in turn mean increased
investment in the economy. However if the interest rates are high, it will be difficult for the firms
to borrow because of the high lending rates and the investment will be slowed. With this
relationship the demand curve assumes the down ward slope.
NET EXPORT.
This is the difference between the exports and imports. For example Zambia is the big exporter
of Copper. At the same time it’s a bigger importer of many goods and services such as vehicles,
machinery, expatriatesetc. The difference in the amount of money that we get from the Copper
to the amount that we use to import the mentioned good is what referred to as a NET EXPORT.
In our Economy there are other goods and services apart from Copper that can be export,
there are other goods also that can be produced locally and may not need to be imported. For
example the textile products, farming produce such as maize, rice, Sugar, tea, coffer are goods
that are either exported or imported here. If we have got lower prices on the goods mentioned,
they will make foreign goods to be expensive and less attractive and the imports on these goods
will reduce, at the same time we may export more depending on how the other countries view
the prices(Whether attractive or expensive) Again if our goods here are expensive, and foreign
goods are on lower prices ,the imports will increase as foreign goods will be attractive.
Therefore this international Trade effect leads to the Demand curve slope down ward.
LEARNING JOURNAL Chapter 22
Respond to the following question in three well composed paragraphs: Suppose that virtually
everyone in the United States decides to take life a little easier, and the length of the average
workweek falls by 25%. How will that affect GDP? Per capita GDP? How will it affect economic
welfare?
In answering the questions raised here we need to explain a bit what GDP mean. This is the
acronomy of Gross Domestic Product which is the official measure of the total value of all final
goods and services produced during the particular period or year. Its value is measured based
on four components of GDP, namely Consumption, Private investments Government Purchases
and Net exports. Consumption in this case refers to measure of the value of goods and services
purchased by the household during a particular year or period. This may be Groceries, food

3. staffs, automobiles, cell phones etc. Private Investment refer to the good produced during a
period or year for use in the production of other goods and services. This could be Heavy duty
machines used in the mines, Sewing Machines, Printers etc. Government Purchases refer to
the purchases done by Government agencies, that may include, military equipment, vehicles
buildings etc. Lastly Net export refer to the difference between the exports and the imports.
Having breifly explained briefly what GDP is in the first Paragraph, I can now answer the
questions asked. How does the average workweek falls by 25%.affect GDP? GDP is the
measure of the total output within the period of time. How is output affected with the 25% fall of
work week. We put it this way, if a firm was producing the 100 Jackets in a week, the reduction
in the working hours by 25 % may mean a reduction in the number of jackets produced. If all
firms in the economy follow the same partten there is going to be a reduction in all good and
services produced in the country. Because of this reduction, the house hold consumption will be
affected, their will be less consumption because there is no enough goods and services
produced to consume. The private investment will stall as well, since the expected out put by
the firms bringing in the investment has been reduced by the 25 % work week reduction,. This
will as well affect the the government agencies purchases and lastly this economy’s net export
will be affected as less exports will be produced. The a forgoing means that the GDP will reduce
How then does this affect the per Capita GDP?. Per Capita GDP is a measure of the total output
of a country that takes the gross domestic product (GDP) and divides it by the number of people
in the country. For example Zambia with its 13million, people if its GDP is $1billion then the per
capita GDP is 1billion divided by the 13 million people. Therefore if there is a reduction in the
GDP as explained in paragraph 2 above it means the per capita GDP will as well reduce. The
economic welfare in this regard will be affected negatively. The economy will shrink instead of
growing. Poverty will be induced on the people, since there will be no enough produce for
consumption, no private investment to enable people get employed, no revenue from the
exports.In the long run inflation will go up to hyperinflation that may cause the economy to
colapse.