ASSIGNEMENT 1

Write the answer to the following questions:

1.
Identify three macroeconomic and three microeconomic topics.
Macroeconomic :Inflation , GDP , Unemployment
Microeconomic:Supply and demand,market equilibrium,
2.

Provide some explanations for why prices might be sticky in the economy.

the tendency of prices to remain constant despite changes in supply and deman is due to firms
unwilingnes to change, implement and advertise new prices
3.

Discuss what is meant by the Classical belief that the economy is self-correcting.

It is the belief that no matter how hard someone tries to contol the market to, for example
eliminate unemployment the market will balance itself out
4.

Assume that the demand for construction workers declines because of a slump in the
housing market. Explain using Classical reasoning why this will not cause
unemployment.

Because that will promt the contruction owners to start their own business in a different
domaint, and because it will drive the market to be more efficient and more competitive
5.

Make a case for why deflation may actually affect the rich more adversely than it
affects the poor.
During deflation, when ,prices are falling rapidly but the cost of production does not
fall correspondingly, producers incur heavy losses, therefore the rich who are the
business owners suffer the grunt of the impact of falling prices for thei products while
production costs remain the same, while the employee just suffers a pay cut of a few
percent and the employee also does not incur operating costs

6.

Empirical evidences seems to suggest that many economic expansions have occurred
during times of war. Explain why this might be true. Does your answer necessarily
support war as a means of achieving economic expansion?

War creates demand for heavy industry wich in turn pulls behind it the rest of the
economy creating a temporary boom in the economy, but it is only short lived because of the
overextertion of human and economic resurces imposed by war wich eventualy lead to a
deficiency in the economy, as the soldiers are not producig for the economy anymore on the
contrary they are consuming.
Therefore if it is a short term war akin to international policing it may provide a boost to the
economy contrary to a long term war wich would sap the ecomy dry as it hapened with the
cold war between the usa and ussr which ended due to excesive debpt on both sides
7.
What are transfer payments? Provide at least three examples.
non-exhaustive payments that do not absorb resources or create outputs, a redistribution of
income example:welfare, social security , subsidies

8.

Explain why labor markets are different from goods markets. Make sure to include in
your answer who is doing the demanding and who is doing the supplying
In the goods market,firms supply to the goods and services
market.Households,the
Government and the firms demand from this market while in the labor market,
Households supply labor and firms and the government demands labor.

9.

List and briefly explain the three market arenas.

I-Goods-and-Services Market :Households and the government purchase goods and
services from firms
II-Labor Market:Interaction in the labor market firms and the government purchase
labor from households
III-Money Market:In the money market households purchase stocks and bonds from
firms ,in the expectation of earning income in the form of dividends on stocks
10.

Related to the Economics in Practice: How did John Steinbeck describe the method
by which workers competed against one another? Is this a Keynesian or Classical
view of how markets work?
John Steinbecks description of how workers competed agains one another is acording
to a keynesian view of how markets work ,ccording to Keynes, it is not prices
and wages that determine the level of employment, as classical models had suggested;
instead, it is the level of aggregate demand for goods and services, therefore the
unemployment that lead to Migrant families roaming roamed the countryside looking for
workwould not auto corect itself without help for the goverment