Economic Growth
Text: "The Macro Economy Today,” by Bradley R. Schiller. McGraw-Hill Irwin, 2013. ISBN might be 978-0-07-741647-8 13th ed. Some people worry that increases in capital stock and increased use of machinery will bring about an economy in which everything is done by machines, with no jobs left for people. What does the model for economic growth presented in Chapter 17 of the text predict? Pay particular attention to the “In the News” section on page 367, and the web analysis referenced in the margin. Go back to the GDP growth data you used for the week 3 discussion assignment. You can find the relevant data at http://www(dot)bea(dot)gov/national/xls/gdpchg.xls . Look at the column that says “GDP percent change based on chained 2005 dollars.” During which time periods since 1980 has real GDP grown the fastest? Go back to the unemployment data you accessed in week 4 assignment. What was the unemployment during those fastest growing time periods? Then, do some historical research. Select two of the fast growing time periods. Find out what industries were growing during those time periods. Did those industries create new jobs? What kinds of new jobs? What kinds of jobs might have been eliminated or reduced because of the impact of those growing industries? The following link provides some history associated with different economic events. It doesn’t answer the question, but puts some things in perspective. http://www(dot)learner(dot)org/series/econusa/interactivelabs/economic-timeline/ After doing your research and thinking about these questions, write an essay that explains your findings. This expository paper should have a theme that captures your analysis. The theme should be supported by specific analytical items. Your conclusion should follow your argument logically Finally, make some policy recommendations: what industries could provide innovation and growth in the next 10-20 years? What actions by business, entrepreneurs, and government should be taken to support the growth of those industries? What jobs might be created? What jobs eliminated? How might the people displaced as jobs are eliminated be “reabsorbed” into the economy? You might look back to your paper on Genuine Progress Indicator, and to your research for that paper, for some ideas. Your paper of 3-4 pages (1500-2000 words) should be typed, showing proper grammar, punctuation, spelling, and sentence structure, with citations and references prepared in APA or MLA style. Reference and title pages are not part of the page or word count.
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Economic Growth
In this paper, the purpose is to explain the findings after doing research and thinking about several questions presented for this assignment. The time periods since the year 1980 in which real GDP has grown the fastest are explained, along with how unemployment was during those time periods. The industries that were growing during 2 of the fastest growing periods are explained, as well as the kind of jobs that were created, and those that might have been eliminated or reduced as a result of those growing industries. Lastly, policy recommendations are made in regards to the industries that could provide innovation and growth in the next 10-20 years, as well as the actions that should be taken by the government, entrepreneurs, and businesses to support the growth of those industries.
Economic growth is basically understood as increases in the output of services, as well as goods. Output typically increases in 2 distinctive ways, and each way has a dissimilar implication for economic welfare. These 2 ways are: Short-run changes in capacity utilization; and long-run change in capacity (Schiller 2013, p. 366). Some people are worried that increases in capital stock and increased use of machinery will bring about an economy where everything is done by machines, without any jobs left for people. In Chapter 17 of the text, Schiller (2013, p. 367) stated that policies for macro stabilization seek to move the aggregate demand curve in order to attain higher output as well as employment within the short run. However, as illustrated in the vertical aggregate supply curve in the text, such attempts would not have any long-term impacts on the natural rate of output. This basically connotes that increases in capital stock as well increased usage of machinery will not result in an economy in which everything is performed by machines. Schiller (2013, p. 367) added that in order to attain economic growth, then the long-run aggregate supply curve has to be moved to the right. Increases in capital stock and increased use of machinery are confirmation of economic progress. With time, there will be production of more services and more goods, as well as new, better services and goods. In the process, jobs would be created and rates of unemployment would drop, and people will get wealthier (Schiller 2013, p. 366).
It is of note that the easiest type of economic growth originates from increased usage of the available product capabilities. Through the use of every obtainable resource and the best expertise, people are able to produce whichever combination of services and goods on the production possibilities curve. However, people do not always make the most of their productive capacity. When the productive capacity is fully utilized, it is possible to attain more increases in output provided that the capacity is expanded. In order to do that, it is important to move the production possibilities curve outward. Shifts such as these signify a growth in potential gross domestic product – the productive capacity (Schiller 2013, p. 366). With time, increases in capacity are crucial.
In order to attain large, long-term output increases, it is imperative to push outward the production possibilities. This implies creation of new jobs given that more labor force would be required to ensure the increases in output. It is of note that the inimitable trait of economic growth could also be shown with aggregate demand (AD) and supply (AS) curves. Schiller (2013, p. 367) stated that in the short-run, policies for macro-stabilization attempt to move the aggregate demand curve to a price-output equilibrium that is more attractive. Demand-side policies such as this are not likely to alter the long-run capacity of a country to produce. They essentially shift the macro equilibrium to a point which is more desirable over the short-run. Nonetheless, the productive capacity might increase. In so doing, the natural long-run aggregate supply curve would also move. Economic growth, as per this framework, basically connotes a rightward move of the long-run AS curve. If that happens, then the country’s economy still have the ability to generate more output even when there is less inflationary pressure (Schiller 2013, p. 367). This implies that jobs will still be created in the economy.
Looking at the column that shows GDP percent change based on chained 2005 dollars, the time periods since the year 1980 which real GDP has grown the fastest are: 1983 when it grew by 4.6%; 1984 grew by 7.3%; 1985 when it grew by 4.2%; 1994 when it grew by 4.0; 1997 when it grew by 4.5%; 1998 when it grew by 4.4%; 1999 when it grew by 4.8 percent and 2000 when it grew by 4.1% (Schiller, 2013). During those fastest growing time periods, the unemployment was as follows:
Table 1: time periods since 1980 when GDP grew the fastest and the rate of unemployment in those years (Schiller, 2013).
Time periods since 1980 in which GDP has grown the fastestYearGDP growthRate of unemployment119834.6%9.6%219847.3%7.5%319854.2%7.2%419944.0%6.1%519974.5%4.9%619984.4%4.5%719994.8%4.2%820004.1%4.0%
Two of the fastest time periods are 1983 and 1984. During the 1983 time period, the industries that were growing inc...