Macroeconomic

Chapter 9

1. Discuss the issue of whether in the US or the developing world, which countries are affected by growth the most?

Answer: Growth affects the developing nation most compared to other nations; the population growth in the developing nation has led to an increase in GDP. Most developing nation especially the African nation’s show a higher compared to the US. The GDP in the developing countries is faster compared to the population growth rate, the GDP per capita is low compared to the developed nation thus in the long run the gap between the rich and poor nations will increase.

2. Since the 911 incident of 2001, in Real World Applications, how has Terrorism or better put, the threat of terrorism affected the US' Growth? In Added Dimension, discuss the five waves and in which Wave are we in today?

Answer: The security threat posed by terrorism affects the economy negatively. Terrorism has scared investors investing in the US; this has affected trade in the economy thus the slow economic growth rate in the US. The first wave is the economic growth wave; the second wave involves strategies involves strategies for increasing worldwide competition. The third wave involves increasing industrialization and human capital, the forth wave is sustainable economic development and it is the wave that the US is currently. The last wave is ensuring that there is comparative advantage in the economy.

 3. Finally, how does the idea and application of Micro credit help the growth of families in the developing world?

Answer: Micro credit provides funds for families to develop in the developing nations. The families in this nation are able to develop through investments.

Chapter 10

1.  What is the Classical School of Macro Economics?

Answer: It refers to the basis of economic theories that were formulated recently. It is used to gain understanding on the performance and structure of the economy. It helps the economist to make key decisions about the factors affecting the economy.

2.  Why did Keynesian Economics become a necessary part of present day view economics today?

Answer: Keynesian theories changed the perception of modern economics, the theory evaluates the effects of government intervention through monetary policies on the market and how they influence growth rate.

3. What is the creation of Demand Side economics mean and how does it relate to the Aggregate Demand Curve?

Answer: the theory defines economic growth as a variable of demand. The increase in demand through economic stimulation will be achieved by increasing demand. The demand curve has a positive gradient and increase in demand increases price of the commodities. The demand curve under this situation shifts to the right.

4.  How do the banks in the money creation process create the Multiplier Effect?

Answer: this is where by the federal government aims to increase money in the economy; it is achieved by giving loans for investments.

5. How do US firms selling products both within the US and abroad affect the Aggregate Supply Curve?

Answer:  Sales affect the supply curve as it affects the quantity supplied and pricing of goods. The aggregate supply curve moves to the right with increase in sales.

6. Which of the two curves do you suppose Fiscal Policy of either Government Spending or Taxation effect?

Answer: Demand curve

7. On the other hand, if you heard of the idea of Reaganomics and Supply Side economics, what do you suppose with Reagan’s decentralization of business, was the curve that his administration was trying to affect, and bring about huge business resources available to the US public and more reasonable prices. Over the past 10 years, what has happened to the prices of both long distance telephone and airline services?

Answer: The prices have dropped due to increase in the service providers in the economy. Supply side economy has resulted in economic growth by increasing the sales.

Chapter 11

1. Investigates how banks create money (add to the money supply). Also, discuss how changes in the money supply (whether desired or not) explain changes in interest rates, changes in borrowing, and therefore changes in aggregate expenditures, output, employment and income levels. Answer, does Money really matter?

Answer: Money matters in the economy; money controls the spending habits of the people in the economy thus the need to control money. The change in the levels of money in the economy is affected by the federal government. Increase of money in the economy enables the people to spend more thus economic growth. Money facilitates trading and exchange in the market thus it is important.