Non Specific Topics - Essay Example

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How do they differ in their effects on economic agents? Does inflation have no effects on the economy if it is anticipated? Explain
Anticipated inflation occurs when businesses and people make…
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Download file to see previous pages 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.
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.
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 ...Download file to see next pagesRead More
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