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Macro Economic Basics Essay

Homework on Macroeconomics Shank Meat; Roll no 26 1 List and describe four determinants of productivity Innovation: Regionally available innovation resources positively influence productivity growth. Taxation: The two indicators for taxation, the tax burden on investments and the tax burden on highly qualified employees, both influence productivity growth negatively. Regulation: Labor market regulation has a strong positive impact on productivity growth.

Tighter regulation can indeed increase the productivity of the working population, but at the price of reducing the participation of the population in the working process. Labor: Skill level of the human capital is an important determinant of productivity. Highly qualified employees would result into high productivity. 2 In what ways is your (soon-to-get) MBA degree a form of Capital? The (soon-to-get) MBA degree is a form of capital from the perspective of knowledge and skills that is has allowed us to harness.

While simultaneously being employed allows us to practice our learning in office environment from Business communication to CARS our (soon-to-get) MBA degree has covered it all. Amount of investment (fees for MBA) is the quantifiable basis that we would Capitalize and accrue dividends benefits in our work life) in the form of accelerated career growth 3 Explain how

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higher savings leads to higher standard of living. What might deter a policymaker from trying to raise the rate of saving The act of saving is similar to a farmer who does not eat all his corn at harvest time but instead, puts some aside to plant next year.

He could eat better today if he ate everything, but it would come at the expense of sacrificing the future. Higher savings converts to higher spending power (discretionary spending) allowing individuals in an economy to see higher quality odds in effect increasing their standard of living. A recessionary environment would deter the policymaker from trying to raise the rate of saving as the policy maker would to increase the overall spending in the economy public spending and private spending. Suppose that society decided to reduce consumption and increase investment. A How would this change affect economic growth? B What groups in society would benefit from this change? What groups might be hurt? Reducing consumption would reduce GAP and hence affect economic growth adversely. This is assuming increase in investment referred to in the question does to refer to Investment (l) as in the GAP equation; Y = C + I + G + Net exports (X – M) Doing so will definitely affect the cash flow within the community making it hard for companies to gain profit.

Prices will surely be lowered down, and stocks might be put to waste since there are so much available Groups of people who are obviously into saving but at the same time risk takers would most likely be happy on increasing their investment. These are the type of people who are always frugal and will always have second thoughts on acquiring things. Those with businesses that is in the odds-consumption industry, which is the main source of their income, would not be so happy with this kind of incident.

Corporate doing business in India would be hurt as lower consumption or reduced domestic consumptions will affect revenues of Macro Economic Basics By shoemakers in capital? Do you think a country can “overdrives” in Capital? Do you think a country can “overdrives” in Human Capital? Explain The opportunity cost of investing in capital is the loss of consumption that results from redirecting resources toward investment. Over-investment in capital is possible because of diminishing marginal returns.

A country can “over-invest” in capital if people would prefer to have higher consumption spending and less future growth. The opportunity cost of investing in human capital is also the loss of consumption that is needed to provide the resources for investment. A country could “over-invest” in human capital if people were too highly educated for the Jobs they could get%for example, if the best Job a Ph. D. In philosophy could find is managing a restaurant It is prudent to invest in capital and human capital but eventually the law of diminishing marginal returns sets in and other aspects of the economy start to get hit.

The craft of macroeconomic management is finding that ideal level of capital investment that promotes the economy without causing inefficiencies or diminishing 6 Describe some forms of private spending that represent consumption and some forms that represent investment. The national income accounts include tuition as a part of consumer spending. In your opinion, are the resources you devote to your education a form of consumption or a form of investment? Private spending that represents consumption includes buying food and buying clothes.

While, private spending that represents investment includes people buying houses and firms buying computers. Many other examples are possible on this analogy. Private spending includes acquiring those needs, egg. Food, clothing, medicine. Investment for me always includes something that would make your spending much worthwhile and you would gain something out of it. It could be a health insurance, a house or some shares in a small company Education is both consumption and investment. Consumption because you use money to pay for your tuition, and it reduces your cash on hand. Investment because with all that spending, you gain something

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