1. If policies were put in place to increase investment spending by $50 billion, what would be the potential effect on RGDP if mpc=.80
The Real GDP would increase because more spending means less saving and spending is added to GDP. The total increase in real GDP would be 1/(1-.8) x 50 Billion or 250 Billion.
2. If disposable income remains stable, how can consumption change?
If the disposable income remains stable, the consumption will change depending on certain factors. Individual household consumer spending can increase without a change in disposable income.
Tuesday, November 13, 2012
Tuesday, October 23, 2012
Inflation
Why is unexpected inflation a societal problem?
Unexpected inflation is detrimental to many people and businesses. For example, loaners are greatly effected because they lend out money and assign a given interest but if inflation increases unexpectedly then they lose money because they are unable to alter the interest. Another example that Wheelan uses is in jail, this relates to scarcity and how one can of mackerel gets you a haircut but if the guard gives out free cans of mackerel then a hair cut will cost much more. Unexpected inflation is a societal problem because interest is not altered accordingly.
Unexpected inflation is detrimental to many people and businesses. For example, loaners are greatly effected because they lend out money and assign a given interest but if inflation increases unexpectedly then they lose money because they are unable to alter the interest. Another example that Wheelan uses is in jail, this relates to scarcity and how one can of mackerel gets you a haircut but if the guard gives out free cans of mackerel then a hair cut will cost much more. Unexpected inflation is a societal problem because interest is not altered accordingly.
Tuesday, October 16, 2012
GDP
Question: What does GDP measure and is it an accurate macroeconomic indicator?
GDP also known as Gross Domestic Product measures an economy's progress overtime by calculating total production costs. GDP also measures the countries total output of goods and services produced in a year. The measurement of GDP is sometimes an accurate macroeconomic indicator because it does calculate total output but it does not incorporate some key factors. For example, GDP does not incorporate poverty and unemployment in the total calculations. Real GDP is takes out the effects of price increases while nominal GDP includes inflation in the final calculations.
GDP also known as Gross Domestic Product measures an economy's progress overtime by calculating total production costs. GDP also measures the countries total output of goods and services produced in a year. The measurement of GDP is sometimes an accurate macroeconomic indicator because it does calculate total output but it does not incorporate some key factors. For example, GDP does not incorporate poverty and unemployment in the total calculations. Real GDP is takes out the effects of price increases while nominal GDP includes inflation in the final calculations.
Tuesday, September 11, 2012
Incentives
Adam Almany
Question: Describe three examples of how incentives can result in unattended consequences.
An example of incentives resulting in unintended consequences is the crisis involving the Black Rhinos. The Black Rhino was once large in numbers but because of its extremely expensive horns, hunters have tracked them down and killed them for their horns. The hunters sell the horns on the black market for extreme profits. This resulted in a giant loss of numbers in the population of the Black Rhino's. Another example of incentives resulting in unintended consequences is when the government taxes the people. The people work to provide for their families and taxing them reduces their incentives to work because they do not earn what they work for. This causes problems because the worker at the end of the day is working for only about half his income the rest is paid to the government in taxes. The last example is how the government taxes an individual item more than others. This is unfair for consumers because they work hard in order to enjoy daily items but instead can not afford because of the extreme taxation on that item.
Question: Describe three examples of how incentives can result in unattended consequences.
An example of incentives resulting in unintended consequences is the crisis involving the Black Rhinos. The Black Rhino was once large in numbers but because of its extremely expensive horns, hunters have tracked them down and killed them for their horns. The hunters sell the horns on the black market for extreme profits. This resulted in a giant loss of numbers in the population of the Black Rhino's. Another example of incentives resulting in unintended consequences is when the government taxes the people. The people work to provide for their families and taxing them reduces their incentives to work because they do not earn what they work for. This causes problems because the worker at the end of the day is working for only about half his income the rest is paid to the government in taxes. The last example is how the government taxes an individual item more than others. This is unfair for consumers because they work hard in order to enjoy daily items but instead can not afford because of the extreme taxation on that item.
Thursday, September 6, 2012
Power of Markets
Prompt: Using Whelan as a guide, discuss how Economic decisions about what to produce, how to produce, and how much to produce are made.
The decisions on what to be produced, how to produce, and how much to produce are made by the market. People who go into stores to buy items are given choices. They choose whatever product is the cheapest yet produces the best overall outcome. As a producer, they need to recognize what to produce to fit the buyers needs, and they need to create a reasonable price. How to produce it is also up to the producer, they can outsource jobs to other countries and have it made cheaper or they can pay more for better quality in the USA. The decision on how much to produce has to be made by looking at the patterns. If customers are buying the product regularly then the producer needs to produce enough to insure that the buyers can continue to buy. If the producer over produces then he is loosing money and is wasting resources. The process of producing relates to supply and demand from customers and it is a challenging decision in Economics.
The decisions on what to be produced, how to produce, and how much to produce are made by the market. People who go into stores to buy items are given choices. They choose whatever product is the cheapest yet produces the best overall outcome. As a producer, they need to recognize what to produce to fit the buyers needs, and they need to create a reasonable price. How to produce it is also up to the producer, they can outsource jobs to other countries and have it made cheaper or they can pay more for better quality in the USA. The decision on how much to produce has to be made by looking at the patterns. If customers are buying the product regularly then the producer needs to produce enough to insure that the buyers can continue to buy. If the producer over produces then he is loosing money and is wasting resources. The process of producing relates to supply and demand from customers and it is a challenging decision in Economics.
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