Question

Please choose three questions from the following options. This should be in essay form and typed. Double spaced. 12-point font. Utilize the MLA Format when citing your work. Answer the following questions completely. Define the terms and theories and make the necessary connections to the real world. I am looking for real life and professional connections. These answers must be well thought out and substantiated. Make sure that you underline the term that you are defining and give a thorough explanation. You may use examples from the text, situations you know of, or simply create the scenarios. However, you must have clear real-life examples. Full credit will only be given if this format is followed. You should assume I know nothing about the subject matter.

Question 1

Why does economic growth matter? How do resources and technology contribute to economic growth? What institutions foster economic growth?

Question 2

How do macroeconomic theories evolve? What is the Solow growth model? How does technology affect growth? Why are institutions the key to economic growth?

Question 3

What is the aggregate demand – aggregate supply model? What is aggregate demand? What is aggregate supply? How does the aggregate demand-aggregate supply model help us understand the economy?

Question 4

How does the government spend?   How does the government tax?   What are the budget deficits?

Answer 1

1. economic growth refers to the increase in the production of goods and services in the economy. economic growth matters because it is essential for the progress and development of a nation and its population. economic growth help in increase in employment and thus fall in the unemployment level of a nation. moreover, by providing jobs to the mass of the population it increase the income to the household at their disposal and thus increase their quality of life. EG is also essention to bring comptetion among the producers and thus reduce the per unit cost and achieve economies of scale and thus help peoples by reduced level of prices. It also increase the tax revenue for the government to use in various developmental activities scuh as provision of public good. overall, economic growth is essential for the upliftment of quality of life and reduce the poverty level in the economy. Resources and technology increase the per worker productivity and thus help in more production. Resource rich country can produce any amount of goods without any tradeoff and increase its revenue by exporting it to the resource deficiant countries. Technology not only increase per capital productivity but also bring growth effect instead of level effect. well established property right, contract enforcement, effective low enforcement,, effecient bureaucrats  are some exapmles of institution for enhancing economic growth in the country.

2. AD-AS model help us to detect optiamal income level in the economy. It help us to understand the problem of excess and deficit demand arising because of mismatch in AD and AS. AD shows the value of all final goods and services that all the sector of and economy are planning to purchase at a given level of income at a given period of time. AS refers to of all final goods and services that all the sector of an economy is planning to produce. AS- AD Model help us to understand the goods and service market. if AD is more than AS then economy faces excess demand thus rise in prices. similarly, if AD is less than AS then there is a problem of defecit demand and prices go down and economy faces recession as a result unemployment prevails in the market. AD-AS can help us to find the natural rate of unemployment and thus measures to reach at our potential.

3. Government spends through deficit financing or through the provision of goods and services for the population. government can tax in two ways i.e. direct and indirect tax involving, income tax, services tax etc. Budget deficit refers to  the excess of expenditure of the government over its revenue. It can also be classified into following category.

revenue defecit which shows the difference between revenue recepits and revenue expenditure

fiscal defecit, which shows the difference between total revenue and total expendiiture

primaary defecit shows the difference between fiscal defecit and intrest paymant in borrowing.