Economics Essay Sample Paper on Macroeconomics

Macroeconomics

Exercise one

a) This article is about the results of a study on the prevailing state of income inequality in the US. It talks about the relationship that exists between level of economic activities in cities and the size of the inequality gap. Economically aggressive cities such are Francisco have been established to have wide inequality gaps compared to than less vibrant cities like Ohio. Through analysis of the study, this article advances what actually causes economic inequality and what could be the effect of trying to close such gaps in the growth and development of an economy.

b) Several important facts have been presented in this article. Most importantly is that the national government is putting measures in order to curb the seemingly widening inequality gap while attempting to increase opportunities. For example, the president has promised to review the minimum wage rate. Other proposed measures by the cities would be increased taxation for high income families and while improving services for the less little income households.

Income inequality has been established as playing a key role in the economic development of the cities. Where there is a narrow income inequality gap, less economic activities take place. Such places only support low activities such as warehousing at the expensive of technology and development of financial institutions, which are the key drivers of growth. As evidenced by a series of studies, big cities in the country have a higher inequality compared to the entire country.

            Low-inequality measure in cities has also been contributed by the geographical size of the cities. The average income for the high income households in low-inequality cities is comparably lower than those of higher income households in high-inequality cities. Whereas this inequality can be attributed to accumulation of wealth by the rich, this can only be explained at the national level. At local level, the situation is different and poverty plays a great role in increasing inequality.

c) While using a national inequality scale, income inequality would differ because of the direct impact the geographical coverage has on the inequality gap.

Exercise two

Some inequalities are important within a given economy. For example, income inequality has been attributed to the increase in the level of activities in any given economy. The presence of such income inequality gaps means that there exist a big potential that if exploited, would lead to growth of the individual businesses and the economy at large. Equality prohibits aggressive need for changes in technological sector as well development of sound financial institutions. For instance, the growth of financial intermediaries such as the World Bank and IMF has been necessitated by the need to regulate financial markets thus ensuring that low and high income economies can interact freely with minimal barriers hence growth. Political inequality provides a chance for citizens to vote for their leaders based on ideologies as opposed to ethnicity. Citizens of politically undeveloped nations can look up to the strategies of the developed nations in terms of the value of economic prospective presented in the campaign manifestos. The importance of inequality is therefore existence of healthy economic competition between the parties leading to growth and development (Atkinson, Anthony & Andrea 30).

Exercise three

In arguing for the need of a narrow income inequality gap, this video demonstrates the relationship that exists between the degree of inequality and other social illnesses. Countries with huge gap have higher level of social ills such as violence, which have an economic implication on those countries. In this video, the GDP of a country is not therefore the perfect measure of the well-being of the society. What matters is the difference existing between people. Health is also related to the inequality that exists between nations. The most unequal countries experiences illnesses such as mental health and others compared to the equal countries. Thus where bigger income gaps exist, there is poor performance in social relations, health and human capital.

Exercise four

Income inequality in Brazil

Brazil is ranked one of the world’s richest countries with high levels of income inequality despite being the 7th world’s wealthiest economy (Gasparini, Leonardo, and Nora  20). However, the level of inequality has been on the decline in the last 10 years. A measure of this decline proves a slow decrease in this inequality according to Brazil’s GINI coefficient from in 0.596 in the year 2001 to 0.543 in the year 2009 as shown in the figure below.

This decrease in the income inequality is attributed to the differences that exist within the human capital such as health as well as geographical difference.

Exercise five

Tunisia is an African country that is considered well developed and quite stable. Over the past five years, Tunisia has had an average of 3.17% growth in the GDP. However, this growth rate has been on a decline since 2012 with a projected growth of 2% in 2014 as shown in the figure below.

Until 2013, post-revolutionary governments have employed expansionary fiscal policy in order to grow the economy and create employment. According to World Bank, this policy has served to ensure decrease in the level of unemployment but the rate of unemployment is still above 13%. This means that such a place is not adequate to deal with unemployment and the government should employ other mechanisms of job creation.

Works Cited

Atkinson, Anthony B., and Andrea Brandolini. “On analyzing the world distribution of income.” The World Bank Economic Review (2010): lhp020.

Gasparini, Leonardo, and Nora Lustig. “The rise and fall of income inequality in Latin America.” The Oxford Handbook of Latin American Economics (2011): 691-714.