Macroeconomics Assignment 4

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Curtis Ware
C11E Macroeconomics
Assignment 4_04
January 19, 2016

Part A
1. Describe three (3) ways we can use macroeconomic analysis, with one (1) original example for each way.

There are three principles that describe how the economy as a whole works. First, a country’s standard of living depends on its ability to produce goods and services. Second, prices rise when the government prints too much money. Third society faces a short-run tradeoff between inflation and unemployment.

A country’s standard of living depends on its ability to produce goods and services, which in turn depends on its productivity. The productivity which is a function of the education of workers and the access workers have to the necessary tools and
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Understanding why economies grow, allows governments to better provide for its citizens through evaluating public policies. More educated decisions by government allows for a good economy. A good economy allows citizens to save a larger percentage of their earnings. The citizens are then more likely to spend money on goods and services. Macroeconomic analysis allows businesses to understand how economies fluctuate, therefore providing the correct products at the right prices to their customers. Businesses make more money due to the spending of the citizens. Macroeconomic analysis allows businesses to make more informed business decisions. Businesses use their knowledge of macroeconomics to predict the effects of current public policies on interest rates, they then decide how and where to borrow the funds saved to purchase machinery and equipment that make their workers more productive and educated. Well-educated workforces allow firms to quickly adopt new technologies that increase worker…show more content…
When productivity falls, the growth rate of real GDP turns negative as the technological shock is felt throughout the economy. If the return on labor is less after a technology shock, people will work less. People will substitute leisure time for productivity time and unemployment will rise if labor rates cannot be reduced. Output will also be affected by a negative technology shock. Reduced labor rates will cause reduced demand for goods. Reduced rates for goods will cause financial frictions and loan losses which could possibly restrict future credit supply.

2. Suppose you were interested in increasing technological progress in your country. Suggest two (2) ways to do this.

Governments have long sought to subsidize technological growth as a way of improving the standard of living for all of its citizens. Subsidizing private sector invention, by protecting the effort through tax credits and patent protection, provides incentives for new products and services to be brought to market. Supporting innovation, allows for larger increases in the technological progress. Government tax credits, patents, licenses to support the entrepreneurial effort are all techniques that can positively support
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