Part A
Describe three (3) ways we can use macroeconomic analysis, with one(1) original example for each way.
You are running a small yard maintenance business for the summer. What do you expect to happen to the number of yards you can maintain in a day as you add workers if you don't purchase more capital equipment (like mowers and leaf blowers)? Provide at least two(2) supporting facts to support your response.
Part B
Using the real business cycle theory, explain two(2) effects of an adverse technology shock on the labor market and on the output market.
Suppose you were interested in increasing technology progress in your country. Suggest two (2) ways to do this.
Macroeconomics
Assignment 04,
Macroeconomics and its effects
Macroeconomics is the study of the behavior and performance of an economy as a whole. It concentrates on the movement and activity of the aggregate economy. Macroeconomic observes economy of the nation like changes in national income, gross domestic product(GDP), unemployment, price levels and inflation. Macroeconomic analysis relates to the action of exercising macroeconomic factors and policies in the analysis of the economy and it helps economists and financial analysts to evaluate the economy of a country. It mainly target on: national output, unemployment and inflation. At first, national output which is measured by gross domestic product (GDP). GDP means the total amount of final goods and services a nation produce in a given year. Relating to GDP, macroeconomists developed the concept of real GDP, which controls for changes in prices as opposed to nominal GDP. Nominal GDP means the value of GDP in recent prices. The reasons to increase nominal GDP are: increasing in the production of goods and services or increasing in the prices of goods and services. To define the idea of real GDP, for example, In year 1, 50 pens were produced and each sold for $10. In year 2, 60 pens were produced, and each sold for $15. Nominal GDP in year 1 is $500 and year 2 is $900. But by measuring real GDP, the production in year 1, 50 pens × $10 per pen = $500 and in year 2, 60 pens × $10 per pen = $600. The main idea is that we develop a measure using the same prices for both years by that changes in price effects on account.
Secondly, it comes unemployment to analysis macroeconomic. Unemployment means the number of people who are not working or have not a job. They are called unemployed people and are actively looking for a job. The higher unemployment rate creates a critical situation in an economic condition of a country. The unemployment rate explains to the macroeconomists that how many labor force are unemployed and searching for a job. In most of the country labor force is the main reason to change the economic condition of the nation. Such as, rising in (real) GDP means the higher level of output and more labor force are needed to produce it. It explains higher in GDP, lower in unemployment rate and higher in unemployment rate, lower in GDP. Another factor which macroeconomists use to analyze is inflation. Inflation is defined as the increase level of price of a product. Inflation rate measures the percentage rate of change of price index. It is measured through Consume Price Index (CPI) and the GDP deflator. The CPI shows the current price of a product and the GDP deflator is the ratio of nominal GDP to real GDP. If the rate of real GDP is lower than the nominal GDP rate, it clearly shows that the price of a products are rising. The main causes of inflation are demand-pull, cost-push and money supply expansion. For example, in 2010 the price of a pizza carbonara was €4.60 in Portugal but in January of 2014 the price of the same pizza was €11. Thus, in the 4 year period, the pizza increased €6.40.
To run any kind business, either its for temporary or permanent, in the beginning there needs a capital to invest. According to the question, if I am running a small yard maintenance business for summer, I prefer to hire more workers rather than to buy equipment to maintain a number of yards in a day. It is true that it takes more physical effort without proper equipment in a work but by hiring a number of people in a work I can help in decreasing unemployment rate in a society. Nowadays, machines are taking a space in the place of humans because they are fast and long lasting in a work than humans. It affects very badly in a environment. But I like to give a job to peoples rather than buying machines. It can help to increase the economic condition of a worker. If there are too many hands and minds together, it makes work easier and faster. There are too many students who wants to utilize their time by doing some work in their summer vacation. It can also help them. If I invest my money in a equipment, it will not be in use in winter because this business of maintenance only runs in summer. If a person who do not have anything to do or if he is unemployed, many imaginary and unnecessary thinking comes in mind which can lead to crimes. That’s why, I believe if a person is busy in doing any work, he do not get a time to think unimportant things and of course it will rise in employment rate and gives a experience to share ideas to a lot of peoples.
In 21st century, human beings are replaced by machines. Wherever we go we see machines (which is the invention of technology) doing its work continuously, honestly and restlessly. Invention of technology brings a new kind of lifestyle and it has become a basic needs in everyone's life. Even in an organization, in a factory or in a company it has occupied its space permanently. Nowadays, people believes more in machines than human beings. Technology plays a very important role in an organization. Technology creates to improve the quality and quantity of a product in a reasonable price to the customers, which leads a profitable business. The output of a product by a machine is very qualitative, quantitative and timely. It means labor market is vastly affected by the invention of technology. It is also one of the main reason of increasing in unemployment rate. For example, if a company is paying in hourly basis to the workers to produce goods, a labor force always cannot produce the needed or ordered goods to the company in a given time or if a company needs to produce more product than the daily basis to satisfy their customer, labor force will fail to do this. Because every day every one cannot do work. Some of them might be sick and some might have their own personal problem. Human body needs a rest and peace mind. In this case, machines are the best choices. Goods that are produce from the machines are more in quantity and cheaper in price. That’s why labor market are replacing by invention of new technologies. Similarly, if an unemployment rate increases in a country, an economic growth decreases. New technologies are badly affecting on the labor market, output market and on the economic growth of the population.
Technology has a lot of advantages from all point of view for a profitable business. It can save time and money. Goods that are produce by machines are cheaper and high in demand. In my personal view, invention of technological process is the best way to develop a country. By increasing in the number of machines a country can take a steps of success. A country can increase the output of final goods and services and improve the living standard of peoples by technological progress. Government must be ready to make an investment to bring a technological progress in a country. One time investment can make a lot of profit and increase the economic condition of a country. To buy machines and its needed parts, to hire professionals to use machines, right investment in a right time is very important for the better future of a nation. For a technological progress in a country, education is very important. Education helps a person that how to use a technology, its advantages and disadvantages and its effects on an environment. An experienced and educated person knows the detail of the machine and brings it in use to make work easy and rapidly. Government should arrange a system to provide sufficient knowledge and education about the technologies to run it continuously in a country.
References
O'Sullivan, Steven M. Sheffrin, & Stephen J. Perez (2014). Macroeconomics (8th Ed.). New Jersey: Pearson.
N. Gregory Mankiw (2011). Principles of Macroeconomics (6th Ed.). Kentucky: South-Western Cengage Learning.
Peter Sorensen & Hans Whitta-Jacobsen (2010). Introducing Advanced Macroeconomics: Growth and Business Cycles (2nd Ed.). New York: McGraw-Hill Education.
