Homework Question on Economic Issues
Question 1
The term unemployment refers to unemployed people who in the last one month searched for jobs but did not find any. Alternatively, it may be defined as the unused labor force that, if used, would increase GDP and improve standards of living in an economy (Hubbard et al., 2014). Unemployment rate, on the other hand, is an economic instrument used to measure the percentage of unemployed people. Mathematically, it is expressed as the number of people that do not have jobs and are actively looking for them divided by the total workforce. Total workforce in this case comprises of people already working and those looking for jobs.
The labor force participation rate on its part is calculated by taking the number of people in the labor force and dividing that number by people aged sixteen years and over in the population. In terms of costs, unemployment results in the loss of GDP and loss of human capital due to deterioration of unused skills and increased retraining costs. Regardingthe government, it might be forced to pay unemployment benefits to its unemployed citizens. This obviously affects budget. At a personal level, people lose income and their skills are not utilized (Hubbard et al., 2014).
Question 2
In economics, inflation refers to a persistent rise in the prices of commodities whereas purchasing power of money refers to the number (quantity) of commodities that a specified amount of money can purchase at a given period. As one can see, the number of commodities that one can buy with a certain amount of money at any given time is dependent on the prices of the commoditiesas well as the changes of that prices.
The statement above means that if the price of a commodity increases, then the number of commodities that one can buy with a specific amount of money decreases. Conversely, if the price of the commodity decreases, then the number of commodities that one can buy with the same amount of money increases. Based on this fact, the two economic aspects are related by the change in each other, but inflation has significant effect on the purchasing power of money (Brux, 2015).
Question 3
The circular flow concept refers to the rotational process that takes place in an economy as far as economic growth is concerned. This process starts with firms investing in an economy by hiring people and paying them salaries and wages. People spend some of that money on goods and services. They also save part of the money in the financial market. Once people save money, firms borrow part of that money from financial market to invest in their manufacturing activities. The process comes back to where it started with firms spending part of the money they borrowed to pay salaries and wages as they engage in manufacturing activities. The process continues on as firms focus on making profitsand people focus on earning salaries and wages (Brux, 2015).
Question 4
The gross domestic product, simply referred to as GDP, is a monetary measure of all final goods and services produced in a country or in an economy at a specified period. Its major components include government purchases, net exports, consumption, and investment (Hubbard et al.,2014).
Usually, one can determine GDP using three approaches. First, one can use production approach that involves determining the value added to a product. Second, one can use the income approach that includes the money earned from production of final goods. Third, one can use the expenditureapproach that includes money spent on producing goods and services (Brezina, 2012).Countries are interested in measuring GDP to estimate economic conditions of their citizens.
Question 5
Looking at the definition of GDP, it would be correct to argue that the 1,000 units of goods produced and stored in a warehouse should be included in GDP. This argument is based on the fact that GDP concerns itself with measuring the market value of all goods and services produced in an economy. Therefore, given that the units of goods in question come from a particular sector of the economy, then they should be included in GDP. Under normal circumstances, these goods would affect output coming from manufacturing industry and it should be added into inventories (Brezina, 2012)
Homework Answer on Economic Issues
Question 1
The term unemployment refers to unemployed people who in the last one month searched for jobs but did not find any. Alternatively, it may be defined as the unused labor force that, if used, would increase GDP and improve standards of living in an economy (Hubbard et al., 2014). Unemployment rate, on the other hand, is an economic instrument used to measure the percentage of unemployed people. Mathematically, it is expressed as the number of people that do not have jobs and are actively looking for them divided by the total workforce. Total workforce in this case comprises of people already working and those looking for jobs.
The labor force participation rate on its part is calculated by taking the number of people in the labor force and dividing that number by people aged sixteen years and over in the population. In terms of costs, unemployment results in the loss of GDP and loss of human capital due to deterioration of unused skills and increased retraining costs. Regardingthe government, it might be forced to pay unemployment benefits to its unemployed citizens. This obviously affects budget. At a personal level, people lose income and their skills are not utilized (Hubbard et al., 2014).
Question 2
In economics, inflation refers to a persistent rise in the prices of commodities whereas purchasing power of money refers to the number (quantity) of commodities that a specified amount of money can purchase at a given period. As one can see, the number of commodities that one can buy with a certain amount of money at any given time is dependent on the prices of the commoditiesas well as the changes of that prices.
The statement above means that if the price of a commodity increases, then the number of commodities that one can buy with a specific amount of money decreases. Conversely, if the price of the commodity decreases, then the number of commodities that one can buy with the same amount of money increases. Based on this fact, the two economic aspects are related by the change in each other, but inflation has significant effect on the purchasing power of money (Brux, 2015).
on Australia.