EC4006 Intermediate Macroeconomics Assignment Example UL Ireland
Macroeconomics is the study of general economic principles, focusing on inflation, employment, production, and growth. The course will consider both short-run and long-run issues in macroeconomics that affect the national economy as a whole. The course will cover the major concepts of macroeconomic theory, with an emphasis on applications.
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The main objectives are to provide an understanding of the interaction between real factors and monetary forces in determining economic activity; to provide knowledge of how policy objectives are achieved by government intervention through fiscal and monetary means; to develop skills in the use of macroeconomics models and to gain a knowledge of the problems that have faced policymakers in both developed and developing countries.
You will have a deep understanding of the key macro models, including IS-LM and AD/AS framework. At the same time, you will be able to apply basic macroeconomic models in order to understand current economic issues. By the end of the course, you should gain an insight into a number of macro models, their relative strengths and weaknesses, and their policy implications.
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In this course, there are many types of assignments given to students like individual assignments, group-based assignments, reports, case studies, final year projects, skills demonstrations, learner records, and other solutions given by us.
On successful completion of this module, students will be able to:
Assignment Activity 1: Describe and distinguish between the main economic indicators.
The ten most common economic indicators are the Gross Domestic Product (GDP), Unemployment, Inflation Rate, Consumer Price Index (CPI), Money Supply M1, Industrial Production Index (IPI), Interest Rates, Stock Market Performance, Total Personal Income, and Spending by State.
The GDP is a calculation of the total value of all finished goods and services produced within an economy in one year. The CPI and CPI-U measure changes in general price levels on consumer goods and services that people typically buy every day at stores. IPI measures growth trends in manufacturing production for durable and non-durable goods industries. Interest rates are the cost of borrowing money over a given period of time through loans or credit cards. Money supply M1 measures the total amount of cash circulating in a country. The Personal Income and Spending by State measures income, consumption, and savings levels that are happening daily. The stock market performance is a measure of how stocks have been performing on the market over a given period of time. Finally, the Unemployment Rate calculates the percentage of workers within a country that are unemployed but are actively looking for work.
Distinguishing between the main economic indicators is important because no single measure provides a complete picture of an economy, yet people may often hear about only one indicator in the news without any further explanation. For example, the GDP may be mentioned frequently on television or in newspapers reporting recent business conditions, but it’s often necessary to understand how the GDP is calculated, what components make up the GDP, and what time periods are being measured before a true understanding of the data can be reached. Without this context, a number on its own may not provide much information.
Assignment Activity 2: Identify short-run and long-run issues in macroeconomics.
Macroeconomics is the study of the issues that affect whole economies.
- Short-run issues will differ across an economy, but usually, they are arising because some kind of resource shortage has caused a spike in values for some good or service, which can cause some other goods to be more expensive too. “Price inflation” would be what economists call this rise in prices.
- Short and long-run problems are both very important due to the fact that any problem arising in either of these times will affect all other economic factors. Short-run problems are changes that occur over a short period of time, these include seasonal fluctuations in supply, demand, and employment. Long-run problems are issues that have persisted for long periods of time or occur frequently. These types of problems can be seen as being structural or cyclical.
- Short-term issues arise largely due to external factors such as demographics, natural disasters, or technological advancements. Short-run problems can have a significant impact on an economy because there are only a few factors that can be controlled by the government. This means that most issues must be addressed within the private sector and by the public, rather than through governmental policies. Some examples of short-term problems include shortages in supply or demand for goods and services, increases in unemployment rates due to economic recessions, domestic price movements caused by changes in currency values, technological progress, and seasonal fluctuations.
- Long-run issues are related to population growth and the allocation of resources once all resources are accounted for – so capacity utilization, or how much each resource is being used at any given time; rates of college enrollment; unemployment rates among different age groups; how fast new industries grow relative to old ones (known as structural change); pollution rates by sector. Long-run issues tend to come up when you analyze the economy in different time periods; short-term issues can change within a year or two, but long-term issues generally remain constant over several years.
- Long-run issues are usually more difficult to address because they are the result of long-term trends in an economy. Problems arising from these issues can seem insurmountable, however proper government intervention and legislation may be able to address them. For example, unemployment rates have been a concern for many years as it continues to persist across generations. Unemployment is a topic that has been researched extensively by economists all over the world in order to mitigate the impact it has on the economy and in turn the pockets of citizens.
- Long-term problems can be addressed by implementing governmental policies that regulate factors such as minimum wage, government taxation, and spending, tariffs, free trade agreements, or public education. For example, if a country was experiencing high rates of pollution coming from factories and certain sectors of the economy, the government could provide tax incentives for plant owners to invest in environment-friendly technology so that they can minimize pollution.
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Assignment Activity 3: Describe and distinguish between the Keynesian and Classical schools of economic thought.
For the purpose of our discussion, Keynesian economics is associated with notions of government interventionism to correct market imperfections, whereas Classical economics is based on models of price discovery by both firms and consumers through the interaction of supply and demand.
Economic theory has traditionally been divided into two major schools-Keynesian economics and Classical economics. While their approaches to solving problems might seem identical on the surface, there are important differences in methodology that have significant implications for policy-making. One major difference is an epistemological one – whether economic knowledge comes from human reason or observation of data supplied by experience. The other concerns how economists think about prices – if they can be freely set according to individual preferences or if they act as signals to coordinate the activities of groups.
Classical economics focuses on a laissez-faire system in which individuals make their own decisions about what to produce and how much to consume. In this world, prices vary from person to person and firms add people when demand is high and take away workers when demand is low. These fluctuations cause wages to adjust to the equilibrium rate of employment and prices will freely adjust to equate supply (the quantity producers wish to provide at a given price) and demand (the quantity consumers wish to purchase at a given price).
Individuals in Classical economics make decisions based on preferences and their level of utility. The market is an aggregation of individuals with different preferences attempting to maximize their utility. They observe the price of a good and make decisions based on what they desire to consume. Firms make decisions based on the amount of marginal revenue that a product will yield and how much it costs to produce a unit of that product, or at least this is what Classical economics assumes.
Keynesian economics derives from John Maynard Keynes and his theory of aggregate demand. It assumes that the economy never reaches full employment and is always driven by consumption. Consumption drives production as firms produce what they think will be demanded, as illustrated in the circular flow diagram. Rather than letting prices adjust to equate supply and demand as Classical economics suggests, Keynesian theories suggest that laws of demand and supply are not always sufficient to bring markets into equilibrium. Keynesian economics argues that demand is driven by household consumption and that factors such as confidence, expectations about future prices, and the availability of credit determine what goods households wish to purchase.
Assignment Activity 4: Analyze economic growth, the natural rate of unemployment and inflation in the long run, and the effects of savings and government debt.
Generally, economic growth increases inflation. The higher the growth rate of an economy, the higher the level of demand for goods and services, which causes prices to accelerate upwards. This is called Demand-Pull Inflation. Economic Growth can also boost employment rates because there are more job opportunities available when companies are rapidly expanding. So while unemployment levels drop during periods of economic growth, so too does the ability for wages to increase at a sustainable pace during these same periods.
Ultimately this leads to in-built institutional weaknesses that undermine future potential gains in output in any one country – i.e., it’s hard for countries who have grown in recent years to “run on all cylinders” because they’re experiencing these built-in limitations that prevent sustained future growth. This is one of the reasons why some economists believe that the natural rate of unemployment is the most important long-run factor in the economy because it acts as a “speed limit” on an economy. Inflation is a long-run phenomenon.
It takes time for the factors that cause inflation to take hold: primarily, the acceleration of aggregate demand. In the long run, inflation is caused by an increase in aggregate demand that is not matched by increases in real output. In the long run, inflation can also be caused by increases in the money supply. Inflation can also occur if costs of production are rising at a faster rate than the rate at which prices are increasing.
Assignment Activity 5: Construct and manipulate the IS /LM model as a framework for macroeconomic analysis in the short-run
The IS-LM model is a monetary macroeconomic tool that explains the relationship between interest rates, investment, liquidity preference, and output. It was first proposed by John Hicks in 1937. The IS/LM model was an important contribution to macroeconomics because it established stability as the natural state of the economy.
According to this theory, markets are always efficient just like they are always free which is why companies should be more concerned with efficiency than with fair production practices. Whether any company realizes it or not their responsibility is just too spread out – there isn’t one person who can maintain all business responsibilities at once so many different roles need to fulfill specific tasks on different pieces of equipment for example; these diverse jobs make up what we know as a company. The company is just too big to be unified as a single entity.
There is also a theory that is believed to be the opposite of the rational expectation theory, it is called the adaptive expectations theory. This theory assumes that people form their expectations of what they think the economy will look like in the future by taking into consideration the past and the current information they have on the economy. Rational expectations theory takes into consideration people from their expectations of what they think the economy will look like in the future without considering the past or the current information they have on the economy which is why rational expectations theory is much more difficult to implement than adaptive expectations theory.
Assignment Activity 6: Demonstrate how these models can enhance our understanding of real-world experience.
The models help us understand the real world by providing a simplified view of complex interactions.
The mathematical models used in epidemiology are very complex, but they can provide powerful insights into the workings of disease transmission. For example, they can help us to understand how viruses spread and how interventions can halt or slow their spread.
Similarly, climate models can help us to understand the effect of human activities on the climate and to predict future changes. By breaking down the complex process of climate change into simpler equations, we can get a better understanding of what is happening and what might happen in the future.
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