Econ1010 Principles Of Economics- Essential Assessment Answers

Answer:

1. Consider a closed economy in which GDP equals $20 billion, consumption equals $13 billion, government purchases equal $3 billon and tax revenue equals $1 billion. Use this information to answer the following questions: 

Private savings is termed as the savings done by the private people residing within the economy after using their income for all essential and necessary activities (Larbi 2013).

Private savings= Y-T-C

Where, Y= GDP or income

C= Consumption

T= Tax paid by the citizens

Thus, Private Savings= $20 billion- $1 billion- $13 billion

           Private Savings= $ 6 billion

Thus, it can be seen from the result that private savings in the economy is $ 6 billion 

Public savings is the savings done by the government after the tax is earned and the deduction is made by the expenditure it does in a year. It is seen that if the tax earning of the government is more than the spending done by the government then there is budget surplus. This show that savings of the government is positive. On the other hand, it is seen that if spending is more than the tax amount earned then there is budget deficit. On other words, there are negative public savings. Further, if the spending of the government is equal to that of tax revenue then it is called as balanced budget (Ahmad and Mahmood 2013).

 Public savings- T-G

Where, T= Tax

G= government spending

 Therefore, Public Savings= $1 billion- $3 billion

                    Public Savings= -$2 billion

Thus, it can be seen that there is negative public savings as tax revenue is less that government purchase, which means there is budget deficit in the economy. 

oanable find is a market where the people having the fund sell to those needing the loanable funds. Howver, the loanable fund in the market is determined by the amount of national savings. The more the national saving the more will be the fund available. Thus if public savings rises means there is an increase in the amount of national savings as public saving is one of the component of national savings. Thus, any change in public savings has a direct effect on availability of loanable fund in the economy.

National savings is the combination of both private and public savings in the economy. On other words it is also consists of components such as national income, consumption and government expenditure. It answers the totals savings an economy has made in a year.

National savings= Private savings + Public savings

Or

National savings= Y-C-G

Where, Y= National income

              C= Consumption

              G= Government spending

National savings= - $2 billion+ $6 billion

 National savings = $4 billion                                   

Thus, it is seen that the national savings in a closed economy is $4 billion in a year 

The net export will be zero in this economy because it is a closed economy. This means that the country does not engage itself in any kind of trade with other countries or open to international market. Thus the export and import of the country stands at zero. As net export is calculated by deducting import from the total export and as both the variables are zero, this makes net export to be zero (Baron 2014).

Net export= Export – Import

Net export= 0-0

Net export= 0

Thus, there is no role of net export in the GDP of a closed country. 

Investment spending in economics means the total expenditure made by the economy on capital equipment that can be used for various economic activities. The capital equipment can be of various forms and size and the spending on them is incurred by the economy as a whole.  In macroeconomics investment calculation is included in the GDP formula (Coyle 2015). 

Investment spending is a component of GDP including other components such as consumption, government spending and net export.

It can also be stated in a formula such as, GDP= C+I+G+NX

Where C= consumption

G= government expenditure

NX= net export

However, it can be see that as it is a closed economy the NX will be zero. Thus, investment is only calculated using GDP, government spending and consumption.

Investment= Y-C-G

Investment= $20 billion- $13 billion- $3 billion

Investment= $4 billion

Thus, the total investment sending of the economy is $4 billion.

1. Explain how labour productivity is determined. In your answer address why human capital is considered to be so vital to lifting labour productivity levels. To illustrate your understanding provide an example. Your answer should be between ½ page and a full page. 

Labor productivity is the total amount produced by the labor in a year. However, labor productivity of a place is determined by the amount of economic growth in a country or real economic output. it can be illustrated with the help of a example, suppose the GDP of a country is $10 billion and the total labor hour is 300 billion. Then labor productivity can be calculated by dividing GDP by the aggregate labor hour.

This gives a labor productivity of $33 per hour. On the other hand, it can be stated that human capital plays an important role in the labor productivity because they are the one that work and produce labor per hour. Thus, maintaining a good amount of human capital is important to get good aggregate labor hours. For example, if the number of human capital in a country is 10 and aggregate labor productivity is 200 hours. Further, suppose the number of human capital reduces to 5 hours then the aggregate labor will automatically reduce further. This shows that in order to maintain a good amount of labor hours and productivity in a place it is important that the country have adequate supply of human capital because they are the active part in the process of production. This is because machine capital cannot work on own. They need an active support of human in order to produce anything. Thus, for productivity human capital is important.

 In the video, Hans Rosling is talking about the growth of various countries from 1880s to early 2000. During the years, it was noticed that two countries such as china and United States is increasing the gap between them. This is because United States was growing while china remains constant for a longer period. However, he stated that the high-income country such as United States will start declining in income as well as health and middle-income country such as china will continue to increase at a faster rate. This will reduce the gap between the two countries (Barone 2016).

1. trade help middle income countries or emerging economies ‘catch up’ with the high income or developed economies? Your answer should be ½ a page and include a relevant example.
2. Free trade helps the economy to produce the products in which it has exerted competencies and expertise and import the products, which it cannot produce. Thus if a country produces goods n which it has competencies and export it for goods they needs, it will increase its income in a great way. This will help them grow at a faster rate. On the other hand, trade will also help the developing countries to access the resources of the other countries. However, it can match up with the high income countries because developed countries has already exhausted its resources for producing goods it has comparative advantage and thus slowly start to diminish. Thus, both the economy will slowly catch up with each other with the help of free trade (Panayotou 2016).

The other term for income per person as stated in the y-axis of the video can be stated in other term. On the term learnt in the course for income per person is per capita income (Markusen 2013).

Inflation adjusted means that in a factor it is necessary to take the affect of inflation. Inflation affects per capita income and thus it is inflation adjusted. This is because per capital income takes into consideration the GDP of the country and an increase in inflation means that the price of factors of production increases. This leads to an increase in total cost and price of the product. This means that at this price, people will less demand the product and thus their income decreases.

1. Read the recent report released by the Foundation for Young Australians The New Work Order: Ensuring young Australians have skills and experience for the jobs of the future, not the past. Available online: file://ntapprdfs01n02.rmit.internal/eh2/E10092/https---www.fya.org.au-wp-content-uploads-2015-08-fya-future-of-work-report-final-lr.pdfor via https://www.fya.org.au/our-research/#report-downloads )

1. The report identifies one the forces shaping the future as automation. Discuss how automation may impact unemployment in years to come. In your discussion be sure to identify the type(s) of unemployment it may lead to and comment on what policy makers can do to address this. Your answer should be around ½ a page. 

The introduction of automation in recent times will help the business to complete there work fast on the other hand it will make it difficult for the people to get job easily. This is because automation means that the companies will require less of labour and all their work will be done with the help of the machine. Thus, they will reduce the amount of labour employed in their work. This in turn will increase the level of unemployment in the economy. However, the type of unemployment caused will be both disguised unemployment and voluntary unemployment. Disguise unemployment is caused when the people are willing to work and does not get suitable work. Whereas, the other type of people are not willing to work (Bessen 2016).

Globalisation in an economy creates development in the operation process of a company. The capital and machines used are of modern type and requires proper training. Moreover, with globalisation it is becoming easy for companies to work without the labour they were previously having. Thus, they reduce the amount of labour in their company and cause unemployment. One of the examples showing maximum job loss in Australia due to globalisation is the manufacturing sector. This is because with the advent of globalisation the company will start using machines for manufacture products, thus, causing unemployment in Australia. Thus, this shows that even though globalisation creates new opportunities for the industries, it increases the percentage of job loss for the workers (Owen  and Quinn 2016).

One of the most interesting thing according to me in this report was that with increasing automation the work of the industries and workers are becoming easy; however, it is stated that the working hours for the workers will increase more. Thus, it is realised that with automation and globalisation the life of the people is going to be more difficult and time consuming. They will be spending more time a work then at home.

References

Owen, E. and Quinn, D.P., 2016. Does economic globalization influence the US policy mood?: A study of US public sentiment, 1956–2011. British Journal of Political Science, 46(1), pp.95-125.

Ahmad, K. and Mahmood, H., 2013. Macroeconomic determinants of national savings revisited: A small open economy of Pakistan. World Applied Sciences Journal, 21(1), pp.49-57.

Larbi, D.A., 2013. The long run determinants of private domestic savings in Ghana: a cointegration approach. Journal of Economics and Sustainable Development, 4(4), pp.125-136.

Coyle, D., 2015. GDP: A brief but affectionate history. Princeton University Press.

Panayotou, T., 2016. Economic growth and the environment. The environment in anthropology, pp.140-148.

Markusen, J.R., 2013. Putting per-capita income back into trade theory. Journal of International Economics, 90(2), pp.255-265.

Bessen, J.E., 2016. How computer automation affects occupations: Technology, jobs, and skills.

Barone, A., 2016. Managing Global Logistics for Business Growth: A guide for small to medium enterprises pursuing the global market growth through cross-border trade (export/import). Buoyant Capital.

Baron, D.P., 2014. The Export—Import Bank: An Economic Analysis. Academic Press.