Question

"Sound economics requires that we consider long-run effects and all people, not simply short-run effects and a few people.”

Explain what this quote means, and give a unique example for each one to help demonstrate its meaning and significance.

Must be a paragraph

Answer 1

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When Lyndon Johnson cranked up the Great Society in the 1960s, the thought was that some people would benefit from a welfare check. We now know that over the long haul, the federal entitlement to welfare encouraged idleness, broke up families, produced intergenerational dependency and hopelessness, cost taxpayers a fortune, and yielded harmful cultural pathologies that may take generations to undo. Likewise, policies of deficit spending and government growth “while enriching a few at the start” have eaten at the vitals of the nation’s economy and moral fiber for decades.

This principle is actually a call to be thorough in our thinking. It says that we shouldn’t be superficial in our judgments. If a thief goes from bank to bank, stealing all the cash he can get his hands on, and then spends it all at the local shopping mall, you wouldn’t be thorough in your thinking if all you did was survey the store owners to conclude that this guy stimulated the economy.

We should remember that today is the tomorrow that yesterday’s poor policy makers told us we could ignore. If we want to be responsible adults, we can’t behave like infants whose concern is overwhelmingly focused on self and on the here-and-now.

Key Points

• Economic growth is the increase in the market value of the goods and services that an economy produces over time. It is measured as the percentage rate change in the real gross domestic product ( GDP ).
• Determinants of long-run growth include growth of productivity, demographic changes, and labor force participation.
• When the economic growth matches the growth of money supply, an economy will continue to grow and thrive.
• Inflation occurs in an economy when the prices of goods and services continue to rise while the purchasing power decreases.
• When the GDP growth is only caused by increases in population, the growth is excessive.

Long-Run Growth

Economic growth is the increase in the market value of the goods and services that an economy produces over time. It is measured as the percentage rate change in the real gross domestic product (GDP).

Long-run growth is defined as the sustained rise in the quantity of goods and services that an economy produces. The GDP of a country is closely tied to the growth of the population in addition to prices and supply and demand.

Example of Long Run Effects and all people involvement

Determinants of Long-Run Growth

There are specific determinants that impact the long-run growth of an economy:

• Growth of productivity: is the ratio of economic outputs to inputs ( capital, labor, energy, materials, and services). When the productivity increases the cost of goods is lowered. Lower prices increase the demand for the product or service. An increase in demand can lead to higher revenue.
• Demographic changes: demographic factors influence economic growth by changing the employment to population ratio. Factors include the quantity and quality of available natural resources. Age structure of the population also influences employment and long-run growth.
• Labor force participation: the amount of labor force participation and the size of economic sectors influence economic growth. The labor force participation is the amount of workers available. In countries with high development and industrialization, labor force participation is high because of low birth and death rates.

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