Microeconomics U4 IP

Part 1: Sometimes market activities (production, buying, and selling) have unintended positive or negative effects outside the market's scope. These are called externalities. As a policy maker concerned with correcting the effects of gases and particulates emitted by and local power plant, answer the following questions: What two policies could you use to reduce the total amount of emissions? Why do you think they each would work? What would the benefits of each action be (besides emissions reduction)? What would the costs of each action be? How would you decide what was the best level of emission reduction? NO WIKIPEDIA PLEASE -----------COURSE MATERIAL--------------------------- (THIS MAY AID IN DEVELOPMENT OF THIS PAPER) Presentation Concepts and Problems in Macroeconomics Macroeconomics is a part of our everyday lives. If the macroeconomy is doing well, few people do not have jobs who want one, people's incomes are generally rising, and profits of corporations are generally high. Whereas microeconomics focuses on the factors that influence the production of particular products and the behavior of individual industries, macroeconomics focuses on the determinants of total national output. Macroeconomics is concerned with the sum, or aggregate of industries' performaence, including the consumption of all households in the economy, the amount of labor supplied and demanded by all individuals and firms, and the total amount of all goods and services produced. Macroeconomics was born out of the effort to explain the Great Depression of the 1930s. Since that time, the discipline has evolved, concerning itself with new issues as the problems facing the economy have changed. Through the late 1960s, it was believed that government could "fine-tune" the economy to keep it running on an even keel at all times. The poor economic performance of the 1970s however, showed that fine-tuning does not always work. There are three very important macroeconomic concerns. These include: Inflation, an increase in the overall price level Output growth, the short-term ups and downs in the economy. And, Unemployment, which is the percent of the labor force that is unemployed. Macroeconomics is concerned with both long-run trends and with short-run fluctuations in economic performance. Since 1970, the U.S. has seen three recessions and large fluctuations in the rate of inflation. Gross Domestic Product (GDP) is the key concept in the national income and product accounts. It is the total market value of a country's output, the market value of all final goods and services produced within a given period of time by factors of production located within a country. There are other useful concepts besides GDP: Gross National Product (GNP), GDP plus factor income earned by U.S. citizens from the rest of the world and subtracting factor income earned in the United States by foreigners. NNP or Net National Product , which is GNP less depreciation. National Income (NI), which is NNP less indirect business taxes plus subsidies. Personal Income (PI), which is the total income of households, and is found by taking NI and subtracting corporate profits minus dividends and social insurance payments, and then adding personal interest income from the government and consumers and transfer payments made to persons. Finally, Disposable Personal Income, which is PI after personal income taxes are paid. An ideal economy is one in which there is rapid growth of output per worker, low unemployment, and low inflation. However, there can be times of slow growth, high unemployment and high inflation. Several macroeconomic concerns include: A recession, which is a period where real GDP declines for at least two consecutive quarters. A depression, which is a prolonged and deep recession. Unemployment, which is the ratio of the number of unemployed people to the number of people in the labor force. One final macroeconomic concern is inflation. Inflation is an increase in the overall price level. It happens when many prices increase simultaneously. A deflation is a decrease in the overall price level. Whether a person gains or loses during a period of inflation depends on whether his or her income rises faster or slower than the prices of the things he or she buys. Article Article:Economic Growth and Employment How accurate is the unemployment rate? It depends to whom you talk. Liberals and conservatives see the same statistics but are diametrically opposed to each other's interpretation. Liberals say the true unemployment rate might be two or three percentage points higher if all jobless people who were ready, willing, and able to work were counted. Currently, the Bureau of Labor Statistics does not count people who are discouraged. These are people who have been looking for work for a long period of time but have given up. They are no longer looking for work; therefore, they are not counted in the unemployment rate. Conservatives see it differently. They contend that the unemployment rate is overestimated significantly. Millions of illegal aliens are currently living and working in the United States. The latest estimate of the illegal alien population is about 20 million. Most of them are working, and many are in jobs that do not show up on employers' books. Many citizens also work off the books, do not report their income, and are not counted by the Bureau of Labor Statistics. The Four Types of Unemployment Frictional unemployment is made of those people who are between jobs or just entering and reentering the labor market. These people usually are unemployed for short periods of time. At any given time, it is estimated that about 2–3% of the labor force is frictionally unemployed. Structural unemployment is made of people who are out of work for long periods of time—sometimes months and occasionally years. People in this category are often employed by industries that are struggling and sometimes failing. The prospect of being reemployed in the same industry or job is slight. Normally these people will have to be retrained in something completely different. For example, the U.S. auto industry is shrinking, and tens of thousands of autoworkers have lost their jobs. Companies in the garment industry, steel companies, and almost all electronics firms have moved many of their jobs offshore. Cyclical unemployment follows the ups and downs of the business cycle. When the economy falls into recession, the unemployment rate may go as high as 10%. The current unemployment rate is approximately 4.5%. Seasonal unemployment includes people who are employed in industries that depend on good weather such as construction, farming, and tourism. For example, the tourist season in Florida is slow during the hottest months of the summer. Natural Unemployment Rate Society has come to expect a level of natural unemployment; however, if you are one of the unemployed, there is nothing natural or expected about it. Politicians are extremely concerned about the unemployment rate, and when it climbs above 6%, they generally start making noise about it. How does the unemployment rate in the United States compare with other industrialized countries? Unemployment rates in Europe are usually significantly higher than in the United States. As a rule of thumb, rates in Europe are three and five percentage points more than the U.S. unemployment rate. Certain economists argue that this number is significantly higher than that because of the European habit of hiding millions of unemployed people in permanent training programs and keeping them off the official unemployment roles. Resource Links Macroeconomics (http://economics(dot)about(dot)com/cs/macroeconomics/) Stories, news, links and analysis on the topic of macroeconomics. EconWeb (http://www(dot)econweb(dot)com/) This website provides microeconomics and macroeconomics online textbooks and study guides for purchase. Selected portions of the material are available as free samples. Macroeconomics Collection (http://www(dot)helsinki(dot)fi/WebEc/framee.html) Review a collection of articles about macroeconomics and the latest economic publications and news on a macro scale. Macroeconomics of Healthcare (http://www(dot)icep(dot)org/edsurvival/index.htm) An article that explains healthcare economics. Click “Macroeconomics of Healthcare” Economics U$A - Video Instructional Series (http://www(dot)learner(dot)org/) A video instructional series on economics for college and high school classrooms and adult learners; 28 half-hour video programs, audiocassettes, and coordinated books. Explore the fundamentals of economic history, theory, and practice, including microeconomics and macroeconomics, through interviews with Nobel Prize-winning economists. In each program, case studies of major economic events show how economic theory relates to the real world. To find this series, type Economics into the search box in upper right corner and click the Go button. In the list of results, click on the link that says Resource: Economics U$A. Note that viewing requires a free registration with the website. U.S. Department of Commerce (http://www(dot)doc(dot)gov/) The U.S. Department of Commerce reports regularly on economic indicators as well as gross domestic product by quarter. The front page provides links to Department of Commerce bureaus and subdivisions such as Economics and Statistics Administration. OECD Statistical Profile of the United States of America - 2005 (http://www(dot)oecdwash(dot)org/DATA/online.htm) More than 100 indicators covering a wide range of areas. Click on the red i beside each indicator to obtain the unit of measure, a definition of the indicator and a list of references. To compare with other OECD countries, tables and charts are provided at the end of each row. Frequently Requested Data: Gross Domestic Product, Standardized Unemployment Rates, Population