The Goals of Macroeconomics - Essay Example

1. What are the goals of macroeconomics?

Macroeconomics helps people understand the economy in general. It talks about inflation, unemployment, business cycles, growth, and more. It also aims to help people understand aggregate relationships. For instance, it seeks to explain how household consumption is linked with income and how government policies affect the country’s growth.

2. What are the sources of economic growth? Describe each.

The sources of economic growth are generally actions and inactions the government takes in order to influence economic conditions. Government actions are some economic policies that would give the government an opportunity to create a good economic atmosphere for the country. However, some of them might also lead to the country’s stunted economic growth. Should a government-run a budget deficit? Running it would be government action. Not running it would be inaction on the part of the government. Government inactions could either be a good or bad move which could be justified in the resulting output. In other words, investment and accumulated capital, available resources, compatible institutions, technological growth, and entrepreneurship are either specific government actions or inactions that are potential sources of economic growth. 3. What factors affect productivity?

Factors that would embolden productivity are economic policies. These include policies to Embolden savings and Investment, growth through import investment, policies to control population expansion, policies to build up education level, policies to technologically innovate, policies to provide funding for research, and policies to maximize the economy’s openness to trade. 4. What are the key topics in macroeconomics? The key topics in macroeconomics are growth, business cycles, unemployment, and inflation. 5. Describe fiscal, monetary, and structural policy.

Fiscal policy is regarding changes in government spending or taxes, to make more active or slow down the economy. Monetary policy helps influence the economy by initiating changes in the banking system’s reserves that would affect money supply and credit availability in the economy. Structural policy on the other hand focuses in general on economic productivity and growth. 6. Describe the factors that will affect demand and supply (in other words, what factors will shift the supply and demand curves).

Factors such as income, prices of other goods, tastes, and expectations are factors affecting demand. Those factors affecting supply are prices of inputs, technology, taxes and subsidies, and expectations. Factors affecting the demand are mostly those that consumers are looking forward to prior to their purchase. Factors affecting supply are in general would affect the creation of certain product or service offerings. 7. a. Explain thoroughly what the supply and demand curves represent. The supply curve is a representation of the relationship between price and quantity supplied while the demand curve represents the relationship between price and quantity demanded.

Assuming everything is constant; the supply curve will have the slope upward to the right. So, the quantity supplied should increase in response to the rise in price, in the absence of shift factors. Assuming other things constant, the demand curve slopes downward to the right, which means the rise of price makes the quantity demanded to go down. b. Draw a supply and demand curve for petroleum. Be sure to label all curves and axes. c. Draw the effect of a ban on petroleum imports on the graph drawn in part (b).

Show the effect on price and quantity. Assuming the demand is constant, there would be a decrease in supply when there is a ban on petroleum imports. The result would be an increase of price due to lack of supply as clearly stated based on the characteristic of the supply curve. d. Explain the difference between demand and quantity demanded.