Instructions
this is basically the paper alike last time (discussion paper) just this time it goes up to 4 pages. YES, need in-text citation (I don’t know why more citations get better grade – so Please put as many as possible)
Sorry for assigning you only 2-page (initially pay for 2-page because I accidentally left my card under 100 USD) hope you understand this. And by tomorrow or (the next 12 hours I will create a new order (2-page) to make up 4 pages as the paper is really assigned.
So, instruction: There are 2 parts again:
• Part 1: (just 2-3 sentences each – not so important on this part)
1- Explain a business cycle and express it graphically.
2- List the changes in the business cycle that are caused by changes in aggregate demand (total spending) and aggregate supply.
3- Describe the four phases of the business cycle.
4- Apply the problems associated with the recessionary and recovery phases of the business cycle.
5- Recognize some leading, coincident, and lagging economic indicators.
6- Interpret Full employment and the full employment unemployment rate.
7- Explain why the AD curve slopes downward in terms of the real balances effect, real interest-rate effect, and the net exports effect.
8- Identify an increase (decrease) in AD and explain what could cause this.
9- Identify an increase (decrease) in AS and explain what could cause this.
• Part 2: (1 and half page)
Part 2 is to write the focus on the benefits and tradeoffs of using unemployment and Real GDP measures to compare the prosperity of a nation over time or the prosperity of different nations. (maybe provide example of country).
Free Term Paper
Discussion Questions
Part 1
A business cycle refers to the periodic increase and decrease of economic growth. These fluctuations are caused by contractions and expansions in the rates of economic activities as the economy as whole targets a long-term growth. It is depicted by wavelike up and down fluctuations that are caused by economic factors such as production, investments, wages and prices. The four stages of a business cycle are prosperity, recession, recovery and depression (Lumen, n.d.).
Source: Lumen (n.d.)
Changes in the aggregate demand cause the recession phase of the business cycle. This is because business activities slow down and the demand for various commodities fall. Producers are, therefore, compelled to reduce the production of goods and services since sales decline and profits reduce (Tucker, 2008). Comparatively, the recovery stage is characterized by an increase in the aggregate supply of commodities. Businesses increase their output of goods and services in an attempt to supply an improving market. Due to this, the recovery phase is occasionally characterized by overproduction.
A business cycle, referring to the up and down movements of the levels of Gross Domestic Product (GDP) of a country, has four phases. The depression phase of the business cycle is one that the national income and economic activities decline. In the recovery phase, the economy is boosted by increased levels of income, employment and prices. The prosperity phase is the peak of an economic revival. The contraction/recession phase is qualified by another slump in the economy (Lumen, n.d.).
A common problem in the recovery phase is overproduction that leads to excessive supply. This is because this phase is characterized by the reemergence of producer businesses from the slump experienced in the depression stage. Inflation may also occur since businesses expand their operations and banks lend more to both individuals and business entities. In the recession phase, business and production reduce implying widespread unemployment and reduced incomes for the employed (Boone & Kurtz, 2010).
Indicators refer to things that can be used by investors and business people to anticipate economic or financial trends. Leading indicators signify future events; for instance, bond yields that help bond traders to predict and anticipate economic trends. Lagging indicators, such as unemployment, succeed an event and their main role is that they confirm occurring patterns in the economy. Coincident indicators occur concurrently with the events they signify. For instance, personal income coincidentally signifies the condition of the economy (Griffis, 2011).
Full employment refers to a situation in which every person in need of a job can work for as many hours as they need at fair wages (Beveridge, 2014). However, this does not mean that every person in an economy is employed; some people are voluntarily unemployed. Other examples include the dependents such as children and the elderly. Full employment-unemployment rate refers to the rate at which the persons willing to work cannot secure employment.
The aggregate demand (AD) curve slopes downwards due to effects from real balance, real interest rates and net exports effects. Real balance effects can be attributed to Pigou’s wealth effect; in which a fixed nominal value of money exists but the actual value relies on the price levels. Concerning interests, the AD curve slopes downwards since consumers deposit a lot of money in banks, thus increasing the supply of loans and consequently reducing interest rates on loans. This situation is explained in the Keynes’ interest-rate effect. Finally, the net exports effect is experienced when domestic interest rates are lower as compared to those of foreign countries that are partners in exports and imports (Mankiw, Ghent & Croushore, 2002).
Aggregate demand’s increase is signified by a shift to the right while a decrease is depicted by a shift to the left (Kennedy, 2000). The shift factors of aggregate demand include fluctuations of foreign incomes, exchange rates, fiscal policies and distribution of income. An increase in aggregate supply is characterized by the SD curve shifting to the right while a shift to the left portrays a decrease. Crucial factors that influence increase of decrease of aggregate supply are the levels of productivity growth and the input prices.
Part 2 is to write the focus on the benefits and tradeoffs of using unemployment and Real GDP measures to compare the prosperity of a nation over time or the prosperity of different nations. (maybe provide example of country).
Real Gross Domestic Product (GDP) has been used to measure the economic performance of nations since 1934 (Tatzel, 2016). This is done by measuring the market values of the final goods and services produced within a country in a given period, usually one year. One benefit of using GDP as a measure of a country’s economy is that it records the output levels within the economy. This is functional since a country’s ability to produce commodities is usually a measure of the country’s resources, technological power, ability to export goods and ability to satisfy needs and demands of consumers within the country. Moreover, GDP is beneficial since it acts as a reliable benchmark for the living standards of citizens of the country.
Real GDP has been criticized as an unsuitable means of measuring and comparing the prosperity of countries due to various reasons. One of the criticisms is that GDP measures do not consider the value of cash economy (Victor & Dolter, 2017). Additionally, using GDP implies that the valuation lacks accounts of non-material factors that could be crucial measures of the prosperity of a country. Good examples are the pollution levels, crime rate, health and education factors. Domestic production of food for household consumption is also not regarded during the computation of GDP valuations. Critics regard this as a weakness of the GDP method.
Unemployment can also be used to measure the prosperity of a country. It refers to the rate at which citizens of a country have access to jobs and fair wages. Almost all countries in the world are affected by unemployment as the job opportunities are usually fewer than the jobless people. All countries are in constant search of ways in which to achieve full employment. Due to this, a country’s ability to deal with unemployment is widely regarded as a measure of how that country is prosperous when compared to others (Power, 2015). Similarly, a country that has a high unemployment rate is regarded as a relatively less prosperous nation.
One reason as to why unemployment is unsuitable for measuring the economic strength and prosperity of countries is that some citizens may be voluntarily unemployed. It is also challenging to compute figures for people who are in self-employment. Moreover, using unemployment disregards the valuation of commodities produced within a country despite this being a more feasible way to measure and compare the prosperity of nations. Domestic products are not also accounted for, nor is the expenditure on services such as health, housing, education and security.
References
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Beveridge, W. H. (2014). Full Employment in a Free Society (Works of William H. Beveridge): A Report (Vol. 6). Routledge.
Boone, L. E., & Kurtz, D. L. (2010). Contemporary business. Hoboken, N.J: Wiley.
Griffis, M. (2011). Economic indicators for dummies. Hoboken, N.J: John Wiley & Sons.
Kennedy, P. E. (2000). Macroeconomic essentials: Understanding economics in the news. Cambridge, Mass. [u.a.: MIT Press.
Lumen. (n.d.). Reading: The Business Cycle: Definition and Phases. Retrieved from https://courses.lumenlearning.com/introbusinesswmopen/chapter/reading-the-business-cycle-definition-and-phases/
Mankiw, N. G., Ghent, L. S., & Croushore, D. D. (2002). Principles of economics: Instructor’s resource manual. Mason, Ohio: Thomson/South-Western.
Power, T. M. (2015). Economic Development and Environmental Protection: Economic Pursuit of Quality. Routledge.Bottom of Form
Tatzel, M. (2016). Consumption and Well-being in the Material World. Springer.
Tucker, I. B. (2008). Survey of economics. Mason, OH: South-Western Cengage Learning.
Victor, P. A., & Dolter, B. (2017). Handbook on growth and sustainability.
