Chapter 6: The Macroeconomic Perspective
Macroeconomics has an extensive scope that it focuses on when it comes to different economies. One of its primary application is where it gets used to analyze how various economies interact in different areas. It is important to note that macroeconomics focuses on examining the economic activities carried out by all the households in a specific region or country as well as the businesses that people carry out in the markets available to decide the overall demand and supply in the economy under scrutiny (Mankiw, 2014). Three different perspectives help understand the above scope better. These aspects include the goals of the macroeconomics, the frameworks used by economists to carry out analysis of the macroeconomy and lastly the policy tools formed and implemented by government bodies to manage and regulate the macroeconomy.
The goal perspective focuses on the economic growth of the region, the rate of employment and lastly the low inflation witnessed in the area. The rate at which price levels rise should be equal to the wages in the economy to avoid inflation. Secondly, the country should ensure there are enough employment opportunities to prevent the wastage of labor and thus the high rate of unemployment. Secondly, the frameworks for analysis include a number of theories and models used in understanding and classifying the type of economy. That consists of the aggregate demand and aggregate supply theory, the Keynesian theory and also the neoclassical theory. It is important to note that these two approaches have their versions of total demand and aggregate demand and that helps in determination of elements that drive the economy. In the policy perspective, we focus on the two main classifications of policies, and they include the monetary policy and the fiscal policy.
Chapter 8: Unemployment
Unemployment is the rate at which human labor gets utilized in an economy. Good economies have a high speed of employment while bad economies have a low percentage of work. Lack of such opportunities leads to wastage of labor which is also an economic resource. In most economies, the small rate of employment is always a public policy priority as it also has its costs. As a result, that leads to the emergence of the opportunity cost of unemployment which represents the output that the workers with no employment could have produced in a given period. The labor force of an economy comprises of various people with the exclusion of children, the elderly and also full-time students who are yet to join the job market.
Additionally, the labor force plays a significant role in helping to calculate the unemployment rates in the economy. We can thus conclude that the unemployment rate gets calculated by adding the number of employed and unemployed persons and dividing the result with the labor force. The unemployment pattern is never constant as the economy is always fluctuating and never stagnant. There are instances where an economy goes into recession and out of it thus influencing the patterns. That leads to the rise of different types of unemployment that include cyclical unemployment, frictional unemployment, and structural unemployment. There are also diagrams to help show the presence of sticky wages in the labor market. Sticky wages affect the equilibrium, the number of people seeking jobs and even the available job openings.
Chapter 9: Inflation
On the other hand, inflation represents the rise in the level of goods and services prices in the whole economy. Inflation gets caused by different factors, and if not curbed, it has many severe adverse effects on the economy. Inflation happens when there is a lot of pressure on the prices I the economy thus making them rise. Inflation affects the cost of living as it increases the costs incurred when acquiring something yet there is no change in the wages. There are a few measures of inflation the most common one being the consumer price index. It emphasizes measuring the prices that affect household expenditure the most. Other indexes are the producer price index, international price index and the employment cost index and lastly the GDP deflator.
Mankiw, N. G. (2014). Principles of macroeconomics. Cengage Learning.
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