Non Specific Topics - Essay Example

Economics Economics Question What is the difference between anticipated and unanticipated inflation? How do they differ in their effects on economic agents? Does inflation have no effects on the economy if it is anticipated? ExplainAnticipated inflation occurs when businesses and people make accurate inflation predictions. Individuals are now able to protect their interests from inflation effects. In Unanticipated d inflation, businesses, and individuals are unable to predict inflation rates. This is because of volatile inflation from year to year.

If economists make errors in forecasting then inflation occurs. In anticipated inflation, actual inflation will be significantly above expectations or well below. This will result in losses in incomes, and income and wealth is redistributed from one society group to another. Households are able to switch savings into deposits for higher nominal rates in anticipated inflation. Companies will readjust prices and lenders adjust rates of interest. Both of this inflation will affect the economy.Question 2: What is meant by industrial policy?

Discuss the strengths and weaknesses of an industrial policy. Industrial policy is an economic program that is government sponsored where public and private sectors combine efforts to come up with technological and industrial innovations. The government provides the capital and financial support to the private sector. Industry policy enhances cooperation between banks, governments, employees, and private enterprises for strengthening the national economy. Industry policy will focus on positive elements.

It will focus on innovation, to come up with better and effective methods of production and business as the product. Industrial policy has clear goals on the short and long term. These goals are to be accomplished through institutional structures set up by the industry policies. Industry policy will also have their weaknesses including its incompatibility with macroeconomic policies. There will also be deficiencies in the infrastructure system. Industrial policy will at times be incoherent with economic instruments.

Question 3: Explain how the law of diminishing marginal returns is related to the per-worker production function The law of diminishing returns is a principle of short run production. It states that as a firm will continue combining more of an input that is variable with an input that is fixed the marginal product of the input variable will decline eventually. The amount of output per worker and capital per worker relationship is the per-worker production function. In the per-worker production function, there will be a point where there are increasing profits no matter the input by the workers.

The output increases at an increasing rate. It will do so up to a point where even with increased input the output remains the same (Bade, & Michael, 2002). However, the firm still experiences profits. It will do so up to a point where now output will decrease at an increasing rate where the firm experiences losses.Question 4: What is meant by “quality of labor”? How does improvement in the quality of labor affect economic growth? Under capitalism, quality of labor will be reflected in wages spontaneously.

Under socialism, quality of labor will be expressed in wages, both in the rate means and system of bonus. Quality of labor, therefore, will be described as the degree of intensity complexity and labor difficulty. Labor is described as a resource that can be increased or decreased in its quality. When quality of labor is increased, quality of goods and services also increases. This will in turn drive up the demand for goods and services. Supply is improved as businesses can now produce more due to quality of labor improving (McEachern, 2012).

The effect of this is that GDP will rise. This will give an economic growth that fuels trade and employment.Question 5: Describe the four types of unemployment. How do the four types differ in their effects on the economy and on the unemployed? Fictional unemployment is a type of unemployment that will be because of workers taking the time to switch from one job to another. It lasts for a short time. From an economic view, it is not problematic Structural unemployment will occur when some labor markets will have fewer jobs available compared to workers available.

For some reasons, wages do not decrease to bring equilibrium to the market. Here, there is a mismatch between employer’s needs and workers skills. It affects the economy negatively as it is a long term and retention of workers is an expensive undertaking. Cyclical unemployment is higher during recessions and lower when there is economic growth. Economists will focus on addressing causes of economic downturns rather than correcting this type of unemployment. Seasonal unemployment will occur because some worker’s demand will vary throughout the year.

It is not problematic because it is not long term and its pattern is predictable.ReferencesBade, R. & Michael, P. (2002). Foundations of Microeconomics Boston, MA: Addison-WesleyMcEachern, W.A. (2012). ECON Macro 3 (3rd ed.). Mason, OH: South-Western