Individual assignment introduction to macro economics

© Ol Aggregate supply AS is explained as the total supply of goods and services that firms in a nation planning to sell in a particular time and at a given price level.. c H1 For the p

INTERNATIONAL UNIVERSITY

INDIVIDUAL ASSIGNMENT

INTRODUCTION TO MACRO ECONOMICS

Instructor: Bui Thao Hi&

Total words: 2379 words

a) The value of the country’s gross domestic product (GDP) at market prices:

Y=C+I1+ G+ NX= 1,205 + 680+ 1,150 + (850 + 1,100 — 940 — 1,700) = 2,345 ($ billion)

b)

O_ Increased economic activities improved economic well- being definitely in these decades

with many prominent achievements The living standards of people are concerned and

developed at the cost of long- term sustainability However, environment issues go with

the development and improvement of the increased economic activities The cost of

trading off improving economic well- being is the environments pollution, climate

change, global warming, natural disasters, extinction of many species, health issues and new diseases, losing social class balance

c)

To determine the true work- life balance is not a simple issue to explain, the value of work-

life balance differs from each individual The relationship between work and life may be relative, they depend on each other to existence of human

the ambitions, potentials, satisfactions and other elements Some estimates by social tatus, power and wealth; meanwhile the others only want to work and earn enough money for day-

by-day expenditures or some finds out their passions into the work and dedicate all their lives

for the work However, the work- life balance is extremely essential that affects both mental

and physical states and cause many serious problems if it biases too much on one orientation

of two According to Amber P (2020), the poor work- life balance is defined by burnout,

hating job, depression, poor productivity, weak health, chronic stress In the article, some

methodologies are given to improve the unbalanced state between work and life, they are

listening ourselves (realizing our stress levels, finding ways to recover mental and physical pains ourselves, putting ourselves first); working and living for present (trying do small

things to reduce stress and completing all responsibilities in the present instead the future);

being intentional (having clear communications or sharing with our partners for the situations

and problems of work or life to reduce pressure); searching the help from the other around to handle issues effectively

d)

Business taxes increase influence the consumption, wages that leads reducing supply So,

business taxes raising will decrease the Aggregate supply on short run and make the

0 Aggregate supply shift to the left

©)

Ol Aggregate supply (AS) is explained as the total supply of goods and services that firms in

a nation planning to sell in a particular time and at a given price level Meanwhile, Aggregate demand (AD) is defined as the total expenditure of the domestic economy

Therefore, if there are changes in AS and AD, the domestic economy will be influenced For example, Consumption, Investment, Net Exports of AD affect the quantity of goods

and services provided (AS) to national market or the domestic economy

f)

Oh Aggregate Demand depends on the fluctuation of 4 factors Consumption, Investment Expenditure, Government Spending and Net Exports If any factors of these change, AD

will be affected then modifying AS For the case of a global financial crisis, the Net

Exports may become negative, Consumption also declines, which tend to manufacturing

goods and services for supply be reduced, all processes are delay to adapt the crisis The

4

the global financial crisis

8)

a Net exports (Price index 128) = Exports — Imports = 6 — 10 = -4 ($bn)

b (128) Y= C+1+G+NX =20+4+5-4= 25 ($bn)

(124) Y= C+ 1+ G+NX =22+6+7-2=33 ($bn)

(120) Y= C+ 1+ G+ NX = 24+ 8+9-0=41 ($bn) [real national output = AS]

(116) Y=C +1+G+NX = 26+ 10+11 +2 =49 ($bn)

c We have: AD formula is similar to the formula of real output

O(116) AD=C +1+ G+ NX =49 ($bn) — When the AD is 49 the price level (price

index) is 116

d We have: AD formula is similar to the formula of rea output

(124) AD =C+1+ G+ NX =33 ($bn) — At the price index 124, AD is 33 ($bn) and the

value of investment expenditure is 6 ($bn)

Question 2:

a) A‘megacity is a very large city, typically with a population of more than 10 million people

Data from the World Economic Forum and United Nations suggest that Tokyo will remain

were 34 megacities in 2020, and this is expected to increase to 43 megacities by 2030 Discuss the economic opportunities and threats of higher population density in very large

cities

Economic opportunities:

Large population is the great labor resource for industries in megacities, there are more jobs with the higher wages that enhance the living standard for the resident there Moreover, the

quality of education, facilities and health services is better These elements motivate the

development of the market in the megacities and competition in working and conducting

stronger and elastic economic systems

Threats:

The more the number of citizens is, the many problems will occur Some particular issues

relevant to economy are commonly observed in the megacities including: civil war,

unemployment, traffic, environmental pollution, social stratification Although there are many job opportunities, the competition is extremely strict and hard adjusted The

unemployed will be the press of the development of the economy as well as create social

stratification Besides, the wastes from large population in the megacities cause

environmental issues for health of the people there and money of governments and firms

and facilities in the megacities in rush hours

b) Explain two reasons why it might be difficult at times to determine the exact rate of

unemployment in a country

There two main reasons that determining unemployment rate is pretty complex

Estimating to long-term unemployment rate is not clearly, there are some inadequacies for

measuring how long they are jobless

Considering the reasons leading to the unemployment and arranging to appropriate types of

unemployment

Explain two likely consequences of low unemployment based on the example of

Pakistani economy

O_ Based on the example of Pakistani economy, the low unemployment influences the

promotion of GDP Reducing unemployment rate will raise the value of GDP and make

decrease the portion of poverty in society

O The low unemployment rate creates the state of reaching full capacity or near it that mean the employers have no choice for finding the right talented worker for vacant position,

productivity and the growth of the business

Please explain the difficulties in measuring unemployment List at least four difficulties

O The data is not exactly accurate, not all states of unemployment are recorded because some of the unemployed are eligible for benefits the other may not bother to inform the

authorities, and this unemployment goes unrecorded

O Not considering the quality of jobs whether part-time, temporary or full- time jobs

O Not capturing the long-term unemployment rate, it is impossible to measuring how long

the people have not had jobs to classify

LH The figures do not reflect the reality of the job market and there are mistakes in

correcting and survey It ignores the marginally attached workers in the official

unemployment rate can make it seem as though there are fewer unemployed people

c)

H1 For the personal cost, the economic cost of unemployment is including lost income, loss

of sense of value, lower on-the-job training Losing jobs will lead to no earning and

poverty, the unemployed may lose their knowledge about their major, labor skills leading to lose of human capital

occurs and lost GDP Many people are jobless, government have to pay unemployment benefits that reduce the growth of national GDP

O Lower GDP affects the economy dramatically in many aspects The unemployed are

unable to purchase as many goods, so will contribute to lower spending and lower

output which narrow down the market and manufaturing goods and services

d) a The year in which Vietnam experienced its highest gain in nominal GDP is 2018 with

the data is 245.21

b We have:

(2015- 2014): 193.24 — 186.2 = 7.04 (billions)

(2016- 2015): 205.28 — 193.24 = 12.04 (billions)

(2017- 2016): 223.78 — 205.28 = 18.5 (billions)

(2018- 2017): 245.21 — 223.78 = 21.43 (billions)

O The year in which economic growth was at its highest is 2018

©)

O The CPI do not account the changes in qualities of products and services that raise the status of consumer living standard Cost of one type of goods does not change in

several years, even the new one has the new technologies, the cost does not change,

products when estimating inflation

The CPI has different importance to different products, when the price of a certain

goods increases the consumers may reduce consumption or change to other goods

with the same usage CPI cannot measure accurately the change in consumer

preferences

The CPI serves as a baseline indicator of overall inflation, but it may not accurately

reflect the inflation rate experienced by any given individual A person's real mix of

goods and services may differ from the CPI

There are 6 reasons causing inflation including: demand-pull inflation, cost-push

inflation, increased money supply, devaluation, rising wages, Policies and regulations Demand-pull inflation occurs when the demand of goods and services is more than

possibility of economy meet the demand When demand is over supply that raises the price and causing inflation, the price of the products is lifted higher several times of

the original price For example, Bearbrick is the limited product line, when a collection is released, there are in a certain amount, who buy first will pay the good

price, then the collectors want to own these they have to pay higher price may be

twice or more

these costs will transfer into the price of products and the consumers have to afford the higher costs for the products For instance, the price of electronic devices is higher

these days because of the shortage of chips and microelectronics, which is result in

inflation

Question 3

a)

O Uncertainty: When the inflation is high, consumers confuse about spending and the firms reduce investment, they cannot predict what will happen in the future of prices,

costs, and profits Inflation high will lead to lower rates of economic growth over the

long term

O Redistributive Effects: The high inflation will decrease the value of saving that reduce the interest rate and real income For example, there is a saving for 10 years but the

inflation declines the interest rate, the saver will be lost

O The Effects on Saving: High inflation will reduce the value of the interest of the

saving that means being received larger amount of money but the buying power is the same or less than ever If the savings do not grow at the same rate as inflation,

effectively losing money will be obvious For example, in the US where medical costs

b)

the retirees cannot adapt for the same standard of living if inflation cuts into your purchasing power with every passing year

Damage To Export Competitiveness: The high inflation reduces the value of the unit

of currency that is a source of pressure on the competitiveness of exports

Economic Growth: The high inflation affects the levels of income and business investment in the medium and long run, it is a significant negative correlation

Economic growth is limited by soaring of inflation

A deflationary gap occurs when overall spending falls short of what is needed to create full employment, this is known as a deficit It's the gap between what you

expected and what you received During a recession, for example, the deflationary

deficit may be rather substantial, suggesting high unemployment and underused

resources

Deflation When the inflation rate falls below 0%, goods and service prices drop

drastically When an economy’s money supply is fixed, deflation develops naturally

Money and earnings have more purchasing power during deflationary periods than

they had previously If the money supply is not controlled, deflation decreases the nominal costs of capital, labor, goods, and services

©)

Ol In the long-term, deflation creates higher rates of unemployment and can eventually

cause consumers to default on their debt obligations

O Inthe long run, a broad drop in prices is a highly serious and unfavorable condition for economic growth and stability Consumers and the economy suffer as a result of

the elements that lead to deflation over time

O In the deflation period, the national economy will be threatened, businesses are

shutting, and residents in their town are losing their jobs

d)

O When the CPI falls, it results in deflation since it is the slowing of inflation that

produces deflation Deflation refers to a drop in overall price levels across an

economy, whereas disinflation occurs when price inflation stops momentarily

©)

Ol Price stability plays a dual role in modern central banking Price stability is an aim, or goal, of policy, as it is one of the Fed's stated purposes Fundamentally, price stability

protects the currency's integrity and purchasing power People may store money for