Economic Ref Assignment Help Solution
Answer 1.
Economists use the word “demand” to describe the number of products or services that certain customers may purchase at each price. Demand is dependent on needs — a customer can differentiate between a need and a wish. A demand curve or supply curve has just two, variables: the horizontal axis volume and the vertical axis value. The presumption that all other economic conditions but the prices of the goods have changed behind a demand curve or a supply curve. They differentiate between the effects of supply and demand when measuring economic impacts (Buchanan, 1968). The shortages are due to a reduction of operating hours, while production or psychological consequences are largely caused by community precautionary steps to prevent infection. Some behaviours are likely to be significantly diminished such as commuting and socializing in restaurants, clubs, films, etc. The current scenario has led the world to a supply and demand shock and in the crisis, the demand will shift left and decrease in demand for Do to D1, and also the supply curve will shift left from S0 to S1 and show a reduction in supply.
Elastic is used to define a transition in purchasers and sellers’ actions in response to demand increases for a product or a service. An inelastic commodity tends to be bought by customers with the alternations at price. The elasticity of a good or service may vary based on the number of close alternatives available, the relative quality, and how long the quality shift has elapsed (Andrews & Benzing, 2010). The recent pandemic of COVID-19 has shifted the elasticity of many products, like most sectors that previously were elastic are now inelastic like home delivery, groceries. The shift in demand and supply is due to the importance of social distancing.
The cumulative monetary or retail value of all finished goods and services produced on the territory of a government over a given period is the gross domestic product (GDP) (Brezina, 2011). GDP includes both public and private uses, budget purchases, acquisitions, private production additions, building costs charged in, and international exchange balance (exports will be included, imports will be subtracted). The overall impact globally would have a broad impact on the reduction in GDP as the production and exports which are a major part of the GDP is currently suffering due to reduced household income and employment.
The business cycle in the philosophical viewpoint is a rise and fall in GDP levels, relating to the time in which economic operations (market fluctuations) are expanded and contracting along a long-term pattern of growth. As discussed earlier globally the GDP will have a downward impact and be in the contraction/recession phase of the business cycle where the economy as a whole is in the decline.
The reduced GDP after the demand and supply shock has spiraled the un-employment where organisations across globally face a crisis on how to keep its operations, the unemployment has surged, employment is highly linked to a positive GDP and normalisation of demand and supply. The current shock has a domino effect on the GDP, employment, and changing the face of how businesses are operating.
In a contraction phase, the central banks will reduce the interest rates to increase the supply of money to keep stabilization in the market, these measures in the monetary policy will help businesses sustain into fighting closures.
Answer 2.
When they benefit more than the costs they bear, the financial theory would predict that individuals in an optimal economy would invest in exercise. This balance between private prosperity and private failure is key to free-market activity, as it usually precludes incentives and spending for the wider society. These are known as ‘externalities’ and are used to discern any positive or negative effect from a business transaction to individuals other than the buyer or producer, and by looking at both of these and the numbers of patients across the globe we can conclude that there is a massive gap between demand and supply and what will make the vaccine they are producing possible that the vaccine they can make a big profit and we can say that there is a market failure in the healthcare sector as the vaccine can now be formulated in advance and can now be used but nobody has given it any value so we can say that there is a market failure.
Answer 3.
The statement is factually incorrect as nominal GDP does not reflect upon the economic growth of a country the only true measure is the real GDP to reflect upon the growth of a country or not. Even though more products were being produced as the market value of production increased from 1.11 trillion to 1.14 trillion in just one year, we have to factor upon the rising inflation rate. To calculate the Real GDP = (Nominal GDP/GDP price deflator) x 100
In the year 2016 the Real GDP was = (1.11/104.2)x100 = 1.065 trillion
In the year 2017 the Real GDP was = (1.14/105.7)x100 = 1.078 trillion
The real GDP has shown growth as per the calculation but the basis of the statement was factually incorrect, the price level of all goods would also increase due to inflation which is due to the increasing demand for goods. The high prices and increasing demand are the contributing factors towards increased production which results in economic growth.
Economic growth represents the growth of business productive resources and the development of real domestic profits. Economic welfare is, however, a more holistic indicator of development towards improved life of populations, taking into account improvements of health and education outcomes, income and wealth disparities, and protection feelings for people and their families. In many countries, due to economic inequality, the growth will not reflect the overall improvement in social welfare which is a multi-dimensional concept.
Answer 4.
- The participation rate of the labor force refers to the number of individuals eligible for employment as a proportion of the total population. It refers to the proportion of employed / active workers. The participation rate will always be below 100% due to factors stated below
- Economic: The rate of labor force participation may be affected by short and long-term economic trends. Market cycles and unemployment rates will form the participation rate in the short term. Industrialisation and asset accumulation will affect in the long run.
- Social: The rate of women’s participation in employment may decrease due to them leaving their roles as homemakers.
- Demographics: Shifts in the working-age population across generation to generation often affect participation in the labor force
- A discouraged individual stops actively applying for jobs because he feels he can’t find employment. Discouraged workers are not working and thus are not taken into consideration in the unemployment rate calculation (Ozerkek, 2013). Because unemployment masks discouraged individuals, the participation rate in labor forces plays a key role in providing perspectives on the job market and the overall health of the economy.
Answer 5.
In the business cycle of the expansion phase where the income level is on the higher side the sales of automobiles will increase, Expansion is the market cycle period in which actual GDP may rise over two or three successive periods, going from a low to a high. Usually, this is followed by an improvement in employment, consumer trust, and stock markets. Whereas, in the contraction/recession period the overall income of the community is on a downward trend which would result in decreased sales.
Answer 6.
- The real interest rate has the adjustment for the effect of inflation to understand the real cost of funds, whereas, the nominal interest rate is the interest rate without the consideration of inflation. The consideration for the real interest rate will give the idea of real rate after factoring in inflation which will be a true reflection of the purchasing power on the amount lend.
- In the context of unanticipated inflation, a friend in turkey gave a loan of 100$ in early 2018 to a friend who was supposed to return with a 10% annual interest rate accumulating up to $120 in early 2020, the inflation rate was an average of 16% for each year, the 120$ is now worth only $88 which is lower than the actual amount given as a loan.
Answer 7.
- Types of Unemployment for Tom and Mary
- Toms Unemployment is considered frictional unemployment where he has voluntarily left the employment for a job which is more suitable for his liking which in his case is the timing aspect.
- Mary is, however, facing regional unemployment where there is a lack of employment opportunities in the area.
- The decrease in the unemployment rate by 0.2 percent to 5.9 percent which is not a true reflection of the unemployment rate as the reduction is due to the decrease participation rate, as many people are not actively seeking the job they are not considered into the unemployment rate.
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Answer 8.
The money supply, on the date calculated, is all the currency and other liquid instruments in the economy of a country. The money supply contains approximately both currency and savings and can be used just as readily as currency. The reserve bank of Australia has differentiated money as currency, M1, M3, Broad money, and base money as credit cards do not fall into any category they are not considered money it is also in line with the international norms.
Answer 9.
The federal government of Australia introduced the insolvency-related package where the job keeper program has been made to reduce the impact of unemployment in Covid-19 (KPMG, 2020) where $1500 will be given per fortnight as a wage subsidy to eligible employees, where the job Seeker payment boost is for $550 per fortnight and coronavirus supplement is also $550 per fornight.
References
- Andrews, T., & Benzing, C. (2010). Simplifying the price elasticity of demand. Journal for Economic Educators, 10(1), 1-13.
- Brezina, C. (2011). Understanding the gross domestic product and the gross national product: The rosen publishing group, INC.
- Buchanan, J. M. (1968). The demand and supply of public goods (Vol. 5): Rand McNally Chicago.
- KPMG. (2020). Government and institution measures in response to COVID-19. Retrieved from https://home.kpmg/xx/en/home/insights/2020/04/australia-government-and-institution-measures-in-response-to-covid.html
- Ozerkek, Y. (2013). Unemployment and labor force participation: A panel cointegration analysis for European countries. Applied Econometrics and International Development, 13(1), 67-76.
