Circular Flow Model

Course Description Principles of Macroeconomics deals with consumers as a whole, producers as a whole, the effects of government spending and taxation policies, and the effects of the monetary policy carried out by the Federal Reserve Bank. Macroeconomics is concerned with unemployment, inflation, and the business cycle. Text Required: Macroeconomics, Roger A. Arnold, 7th Edition, 2005 Recommended: Macroeconomics Study Guide, Roger A. Arnold, 7th

b) In a recession, the number of people experiencing economic hardship increases, so induced transfer payments such as unemployment benefits and welfare benefits increase. Induced taxes and induced transfer payments decrease the multiplier effect of a change in autonomous expenditure such as investments, and moderate recessions making real GDP more stable. Discretionary fiscal policy would be used in an attempt to restore full employment. The government might increase its expenditure on goods and services, cut taxes, or do some of both, increasing aggregate demand. An increase in government expenditure or a cut in taxes increases aggregate expenditure as well.

This also improves the distribution of income, a reduction in the unemployment rate with result in households yet having more spending power and yet encouraging more economic growth. An increase in employment will result in an improvement in the budget deficit as there will be a decrease in the demand for welfare benefits, thus improving the economy. The increase in the supply of goods and services (due to an increase in demand) is also expected to reduce demand pull inflation, as there is now less competition for few goods, lowering the prices to a healthy equilibrium. This can be shown in a demand and supply diagram.

The economy is known as a new emerging economy especially after entering WTO in 2007. The Foreign Direct Investment (FDI) has increase considerably and the GDP is over 8% in the period of three years (2005-2007). Nonetheless, it is clear that the economic instability occurs after WTO accession of Vietnam 1 year. Consequently, the economy has suffered surging inflation as well as trade and fiscal deficit. (Figure 1)

An economic recession occurs when the economy is suffering, and unemployment is on a rise. A drop in the stock market and a decrease in the housing market will also affect the economy due to a recession. Higher interest rates affect the economy constrain liquidly or the cash available to invest in stocks and businesses. Inflation alludes to the rise in prices of goods and services which also puts a strain on the economy further adding to a recession. Businesses were lost and consumer spending dwindled the only category that remained safe was healthcare. The economic meaning of a recession is a decline in the Gross Domestic Product (GDP) consisting of two consecutive quarters on a decline. If the economy is bad consumers are less likely to spend money on goods and service. The effects of a declining economy forced the government to create monetary

The revenues are not enough to provide for the population growth. This affects families to save less because they are spending all of their income on basic needs and cannot afford to educate their children, which produces poverty in the next generation. This results in low qualification and low chance of employment for children when they reach the working age. Due to this, industries and services cannot develop. With the increase of population, the volume of employment and unemployment increases. The number of unemployed depends on the size of the active population called the Labour Force. If the growth rate of the population is higher than the job opportunities available to the labour force, unemployment will occur. When there is an increase in population, society is solely focused on providing the basic needs. This results in the lack of obtaining education and because of this they cannot help the economy expand. Also, there are more consumers with the increase of population than producers, causing the restriction of economic expansion.

Identify two microeconomics and two macroeconomics principles or concepts from the simulation. Explain why you have categorized these principles or concepts as macroeconomic or microeconomic.

A recession is full-proof sign of declined activity within the economic environment. Many economists generally define the attributes of a recession are two consecutive quarters with declining GDP. Many factors contribute to an economy's fall into a recession, but the major cause argued is inflation. As individuals or even businesses try to cut costs and spending this causes GDP to decline, unemployment rate can rise due to less spending which can be one of the combined factors when an economy falls into a recession. Inflation is the general rise in prices of goods and services over a period of time. Inflation can happen for reasons such as higher energy and production costs and that includes governmental debt.

Although my exposure to economics consists of only two introductory classes, I am fascinated by the allocation of resources, through people’s incentives, to reach an equilibrium. From the specialized courses offered, I hope to obtain an understanding of the global economy and apply these theoretical concepts to solving real-world

o Weakness: doesn’t speak to legitimacy of initial distribution of wealth; ignores the actual distributional consequences of policies and difficulty of accurately measuring external effects.

There are 3 ways of target the allocation problem of externalities, I talked about regulations,

International trade deficits occur when a nation imports more then it exports. The Decline of Smokestack America is when there is a change from an industrial to a post-industrial economy. Finally, the conservation of energy is so that there are a sufficient amount of natural resources necessary to produce goods. General economic growth or stagnation also has an important influence on business within our society. Many factors can affect it's condition, such as war, new inventions and technology, political assassinations, the discovery of physical and natural resources, labor negotiations, government action, and many others. When the economy is strong and the demand is high, businesses can prosper. Regardless of how great the economy may become, businesses still must compete with other firms for scarce raw materials and labor.

Abstract The main purpose of this report is to make references to significant microeconomic models, in order to explain the supply, Demand, Market equilibrium, price discrimination, and Opportunity rate as well as making references to important macroeconomic aims which can be described with some examples such as growth, Inflation, Unemployment, GDP, exchange rates and many more, this two business economic topics are very relevant in today’s market as they represent the real-world meaning of the business area. This report will analyze both parties and evaluate any issues happening to date.

| Advocates of active monetary and fiscal policy view the economy as inherently unstable and believe that policy can manage aggregate demand, and thereby, production and employment, to offset the inherent instability. When aggregate demand is inadequate to ensure full employment, policymakers should boost government spending, cut taxes, and expand money supply. However, when aggregate demand is excessive, risking higher inflation, policymakers should cut government spending, raise taxes, and reduce the money supply. Such policy actions put

Discuss the role of government policy in reducing unemployment and inflation. In your discussion make use of the diagrammatic representation of the macroeconomy developed in lectures in Term 2