1) If policies were put in place to increase investement spending by $50 billion, what would be the potential effect on RGDP if mpc =.80? Explain.
Because the mpc is so high it means that people are willing to spend a lot of their disposable income. It also means that there will be more consumption and the RGDP will go up because more goods and services will be demanded, and more money will circulate through the economy.
2) If disposable income remains the same, how can consumption change?
Disposable income and consumption are directly related. So if one goes up so too the other will. Unless there are new expectations, such a deflation of economic growth or change in disposable income people are going to change their rate of consumption. Utherwise, the consuption will rremain the same.
Tuesday, November 13, 2012
Tuesday, October 23, 2012
Inflation
Why is unexpected inflation a societal problem?
Unexpected inflation is a problem because it lowers people's persception of wealth, and includes them spending less money. Most people dont take into account inflation whent they go to the supermarket and want to buy groceries, instead sometimes they dont buy anything because they believe that the price is too high. Becuase people then begin spending less the economy doesnt flow as well as before. Also, when people give loans with interest in a time and the inflation rate goes up, the people who lent end up losing money even if there is an interest rate, unless the interest rate is higher than the inflation rate.
Unexpected inflation is a problem because it lowers people's persception of wealth, and includes them spending less money. Most people dont take into account inflation whent they go to the supermarket and want to buy groceries, instead sometimes they dont buy anything because they believe that the price is too high. Becuase people then begin spending less the economy doesnt flow as well as before. Also, when people give loans with interest in a time and the inflation rate goes up, the people who lent end up losing money even if there is an interest rate, unless the interest rate is higher than the inflation rate.
Tuesday, October 16, 2012
GDP
What does GDP measure and is it an accurate macroeconomic indicator?
GDP - Gross Domestic Product measures the wealth of a country according to the amount that is produced and consumed in the market. It only measures actions if they affect the economic market, such as buying goods or working for an employer. It takes into account inflation, but does not measure the amount of polution, happiness and demolition. It does not have a moral compass, it is just a number, a statistic. Because of this, it is a macroeconomic indicator, because from a standpoint of looking at the affects of choices, GDP is merely a number and constitutes scarcity or incentives. It is the choices of buying or selling that creates the GDP, however a decision or many descisions cannot be isolated from the GDP.
GDP - Gross Domestic Product measures the wealth of a country according to the amount that is produced and consumed in the market. It only measures actions if they affect the economic market, such as buying goods or working for an employer. It takes into account inflation, but does not measure the amount of polution, happiness and demolition. It does not have a moral compass, it is just a number, a statistic. Because of this, it is a macroeconomic indicator, because from a standpoint of looking at the affects of choices, GDP is merely a number and constitutes scarcity or incentives. It is the choices of buying or selling that creates the GDP, however a decision or many descisions cannot be isolated from the GDP.
Tuesday, September 11, 2012
Incentives
Describe three examples how incentives can result in unattending consequences.
Incentives are one of the key factors that drive the economy. One famous example of incentives has to do with the Prime Minister of England, Margaret Thatcher. The incentive was taxesm and the discrimination of the rich paying more than the poor. England thought that if you give everyone basically the same tax, that the rich would have more incentive to work and produce more. However, there were huge rebellions that resulted in bloodshed, and this tactic has not been tried again since.
Another example of incentives that can result in consequences is the poaching of black rhinos in Africa. Poachers come and kill all of the rhinos and have led them to extintion due to the selling of their costly horns. Because the price is so high, it raises incentives to go and kill all of the rhinos until there are none less. Now the black rhino is almost at the brink of extinction even with the efforts to help save them.
In Australia, only fishermen with permits are allowed to fish for lobster. Although this keeps the species alive because the price will remain high because there are only so many fishermen with permits who want to keep the price high, however this discriminates against all other fishermen that want to fish for lobster. Because of this the lobsters are being saved, however the other fishermen who were not born when the permits were issued are left jobless.
Incentives are one of the key factors that drive the economy. One famous example of incentives has to do with the Prime Minister of England, Margaret Thatcher. The incentive was taxesm and the discrimination of the rich paying more than the poor. England thought that if you give everyone basically the same tax, that the rich would have more incentive to work and produce more. However, there were huge rebellions that resulted in bloodshed, and this tactic has not been tried again since.
Another example of incentives that can result in consequences is the poaching of black rhinos in Africa. Poachers come and kill all of the rhinos and have led them to extintion due to the selling of their costly horns. Because the price is so high, it raises incentives to go and kill all of the rhinos until there are none less. Now the black rhino is almost at the brink of extinction even with the efforts to help save them.
In Australia, only fishermen with permits are allowed to fish for lobster. Although this keeps the species alive because the price will remain high because there are only so many fishermen with permits who want to keep the price high, however this discriminates against all other fishermen that want to fish for lobster. Because of this the lobsters are being saved, however the other fishermen who were not born when the permits were issued are left jobless.
Thursday, September 6, 2012
Power of Markets
Using Wheelan as a guide, discuss how economic decisions about what to produce, how to produce, and how much to produce are made.
In Wheelan's book, Naked Economics he explains that there is scarcity that leads to decisions on production and concumption. There are two different types of markets, one where the government decides like in communism and a market that is governed by the principe of supply and demand which is the US's market. Profits are ususally always the incentive to produce, so to produce the most inexpensively as possible is always the greatest goal, while keeping quality. If there is no quality then poeple are not going to buy, and there will only be debt.
There is such thing as the invisible hand in economics that was first explained by Adam Smith. People will always trade in order to gain whatever resource that they need, whether it be money, time, entepreneuership or labor. With this being said, supply and demand will do the rest. In the US where the government does not regulate the amount of production, this principle tells businesses what and how much to produce. Supply and demand allows producers to create whatever will five the largest marigin of profit/ gain. If a resource is scarce, they will then increase the price in order to preserve the resource and make more to sell. If nobody buys, they do not produce.
In Wheelan's book, Naked Economics he explains that there is scarcity that leads to decisions on production and concumption. There are two different types of markets, one where the government decides like in communism and a market that is governed by the principe of supply and demand which is the US's market. Profits are ususally always the incentive to produce, so to produce the most inexpensively as possible is always the greatest goal, while keeping quality. If there is no quality then poeple are not going to buy, and there will only be debt.
There is such thing as the invisible hand in economics that was first explained by Adam Smith. People will always trade in order to gain whatever resource that they need, whether it be money, time, entepreneuership or labor. With this being said, supply and demand will do the rest. In the US where the government does not regulate the amount of production, this principle tells businesses what and how much to produce. Supply and demand allows producers to create whatever will five the largest marigin of profit/ gain. If a resource is scarce, they will then increase the price in order to preserve the resource and make more to sell. If nobody buys, they do not produce.
Subscribe to:
Posts (Atom)