265). An increase in the real investment or in components of consumption will cause a rise in the real GDP and a decrease in real spending will cause a decrease in the real GDP. To calculate the multiplier one takes 1 and divides it by 1 minus the marginal propensity to consume, which is equal to one divided by the marginal propensity to save. Therefore, the “smaller the marginal propensity to save, the larger the multiplier” and the “larger the marginal propensity to consume, the larger the multiplier” (Miller, 2012, pg. 266).
The diagram above shows that real GDP has increased from Y1 to Y2 which means that economic growth has increased. As a result, unemployment falls as we are getting closer to the inelastic part of the AS curve, which is much needed as “unemployment has shot up” in this economic crisis. However, inflation has risen from P1 to P2 which means that our exports become less competitive so our trade deficit gets worse. However, the rise in inflation is needed as inflation is falling below the 2% target. The changes in the government’s macroeconomic objectives depends on where we are on the AS curve as shown below.
When companies can produce more due to demand they are able to hire more workers, which can lower the unemployment rate. Lowering the unemployment rate will provide more income tax revenue to the government and fewer citizens taking unemployment benefits. Conversely, when exports decrease consumers pay less money for products causing domestic profits to decline and companies are unable to maintain or increase their workforce causing the unemployment rate to
Recession- The recession is an opposite of boom stage. The unemployment increase, most of firms are losing confidence and stops invest or expand. They may change their planning and started to survive. The customers are likely to save money then spend and the percentages of loans are high and may increase. Individuals are losing jobs and the government have to spend more money of benefits.
Productivity, as measured by the output per hour by the business sector, grew at a lower rate during the Reagan years than the 7 years prior. The growth rate of 1.3% during Reagan’s tenure was .2% higher than the 6 years afterwards, but .3% lower than the years preceding (Niskanen & Moore 1996). Inflation is an increase in the average price level and is not a positive occurrence. When Reagan took office, the REAGAN-SIDE ECONOMICS consumer price index (CPI) was at a high 13.5%, by the end of his terms, the CPI had been decreased to 4.1% (Niskanen & Moore 1996). Those who are critical of Reagan’s policy speak of the explosion of the United States’ budget deficit during the 1980s.
Decreasing the interest rate effectively increases consumer and businesses consumption. Lower interest rates also increase investments and net exports (Hubbard, 868). These increases push true GDP back in line with potential GDP and, as a result, production increases. This increase in production also increases the need for workers, ultimately increasing employment. Conclusion The Federal Reserve is a very powerful entity and has a large amount of influence on how our nation’s economy performs.
Answer | | a tank purchased by the federal government | | | welfare benefits | | | teacher's salaries paid by a local government | | | a bridge purchased by the state government | 10 points Question 5 1. In periods when prices are falling, on average, Answer | | real GDP will grow as fast as nominal GDP. | | | real GDP will grow faster than nominal GDP. | | | real GDP will grow slower than nominal GDP. | | | one cannot calculate real GDP.
?? Step Six The greater decline of Profit Margin compared to Gross Profit Margin may have been caused of the increasing expenses over the years. Based on the analysis, Expenses has been increasing, thus reducing Profit. Another important aspect may have been because the Income Tax has been increasing, reducing the profit margin even more. Since Profit Margin are calculated using EBIT, Income Tax plays a great role to affecting the results.
D. convex to the origin because of increasing opportunity costs. 20. Which of the following will shift the production possibilities curve to the right? A. an increase in the unemployment rate from 6 to 8 percent B. a decline in the efficiency with which the present labor force is allocated C. a decrease in the unemployment rate from 8 to 6 percent D. a technological advance that allows farmers to produce more output from given
Thus to entice labor wages must be high. Extrapolating Franklin’s assessment of the relationship between the colonies and Great Britain, what are the long-term consequences of such population growth on business? As the population increases colonial production might eclipse that of Great