GAP cannot reflect positive or negative externalities Involve In the consumption and production UT these externalities do affect on people’s living standard. Negative externalities such as pollution brings environmental costs to society but not calculated by GAP. Positive externalities such as technological advance benefits to society but it is not count in GAP. Economic well-being would be under-value or over-value if GAP is the only single measure of economic well-being. 3. Leisure helps people enjoy a better life.
In countries with lower GAP, the welfare gain from leisure can compensate the welfare loss from low GAP. Explain why frictional and structural unemployment are unavoidable in most of the economies. There are always some workers without Jobs, even when the overall economy is doing well. For example, people now prefer cell phones from Apple than from Monika. Monika decides to cut down Its employees due to the decrease of revenue. It takes time for him (the worker) to search another job that is best suited for him. In this period when matching jobs and workers, he is unemployed and it is called frictional unemployment.
Another example is that now most of the textile factories decide to move to mainland China. A worker in one of these factories loses her job, however, he Is unable to learn or change new working skills or knowledge on other specialist or other field. And therefore, she cannot find a new Job In her Orlando Industry and also in other industries. This imbalance between the skills and other characteristics of some workers and the needs of workers in the labor market causes unemployment called structural unemployment.
When unemployment consist only frictional and structural unemployment, unemployment is at natural rate. In most of the economies, there are always some reasons causing frictional or structural unemployment. Employment rate never fall to zero it fluctuates around the natural rate of unemployment. Therefore, frictional and structural unemployment are unavoidable in most of the economies. What are the three major functions of money? Discuss how these functions be affected by inflation. Account and a store of value.
A medium of exchange is an item that buyers give to sellers when they purchase goods and services. When you buy a shirt at a clothing store, the store gives you the shirt, and you give the store your money. This transfer of money from buyer to seller allows the transaction to take place. When you walk into a store, you are confident that the store will accept your money for the items it is selling because money is the commonly accepted medium of exchange. A unit of account is the yardstick people use to post prices and record debts.
When you go shopping, you might observe that a shirt costs $30 and a hamburger costs $3. Even though it would be accurate to say that the price of a shirt is 10 hamburgers and the price of a hamburger is 1110 of a shirt, prices are never quoted in this way. Similarly, if you take out a loan from a bank, the size of your future loan repayments ill be measured in dollars, not in a quantity of goods and services. When we want to measure and record economic value, we use money as the unit of account.
A store of value is an item that people can use to transfer purchasing power from the present to the future. When a seller accepts money today in exchange for a good or service, that seller can hold the money and become a buyer of another good or service at another time. Money is not the only store of value in the economy: A person can also transfer purchasing power from the present to the future by holding monetary assets such as stocks and bonds. The term wealth is used to refer to the total of all stores of value, including both money and monetary assets.
What assumptions are necessary to argue that the quantity equation of money implies that increases in the money supply lead to proportional increases in the general price (a) Discuss two reasons why the GAP deflator gives a different rate of inflation than the ICP does. 1. 12 PEP (6 marks) (b) Explain the likely effect of a binding minimum wage on the unemployment rate. (5 marks) (a) Suppose an economy that is initially at full employment faces a tremendous drop n imports. I.
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