DISCUSSION 2

Basic Economic Models and Comparative Advantage

The Discussions includes the differences between microeconomics and macroeconomics, the two basic economic models of the circular-flow diagram and the production possibility frontier, and comparative advantage, which is the main force behind interdependence in the market economy and the gains from trade.

Read Chapters 2 and 5, and remember to include references and links to the websites that are important contributors to your posts.

The theory of comparative advantage states that there are gains from trade if countries specialize and optimize their opportunity costs.

a. Why is comparative advantage a driving force behind trade behind trade between regions and countries?

b. Why does specialization lead to welfare improvement? Why engaging in trade is better than trying to be self-sufficient?

DISCUSSION 3

Supply, Demand, and Government Interventions in Markets

This Discussion topic includes the market forces of supply and demand, supply and demand model, and supply and demand curves.

Read Chapters 3 and 4, and remember to include references and links to the websites that you feel are important contributors to your posts (comments).

Supply and demand is the foundation of the market economy and the basis of the study of economics.

a. Why supply and demand is considered as factors that make market economies work? Why supply and demand drives the market economy? Provide an example of the role of supply and demand in business decision making.

b. What is the difference between a movement along and a shift of the demand and supply curves? What are the factors that lead to shifts in supply and demand curves?

DISCUSSION 4

National Income Determination (GDP)

This Discussion focuses on how a nation’s income is measured using the gross domestic product (GDP)/ The specific areas of discussion include the various components of the GDP, the difference between nominal and real GDP, GDP and business cycles, and the limitations of the GDP in measuring economic welfare.

Read chapters 6 and 7, and remember to include references and links to the websites that you feel are important contributors to your posts (comments).

Economists use Gross Domestic Product (GDP) to measure the economic activity and the national income.

1. What are the major components of the USA GDP? Explain the contribution of each component to the GDP with data.

2. What is the difference between real Gross Domestic Product (GDP) and nominal GDP? What is the relationship between the real GDP and the business cycle?

DISCUSSION 5

Effects of Unemployment and Inflation

This Discussion focuses on how to measure the cost of living and rate of unemployment in the economy. Specific discussion areas include the various forms of unemployment and how they are measured, debates on measuring unemployment rate, and the imperfections of official unemployment rate. Moreover, consumer price index (CPI), rate of inflation, and their impacts on the cost of living.

Read Chapter 8, and remember to include references and links to the websites that are important contributors to your posts (comments).

There are various forms of unemployment. There are also ongoing debates on the effectiveness of measuring the rate of unemployment and its policy implications.

a. What are the different types of unemployment and how are they related to the condition of the economy during a given period? Is it possible for the number of employed workers to increase while the unemployment rate rises? Explain

b. Does an increase in the minimum wage rate result in a higher unemployment rate? What is your opinion on the relationship between unemployment benefits and labor market participation of the unemployed people?

DISCUSSION 6

Long Term Economic Growth

This Discussion focuses on the long term economic growth. The specific discussion areas include measuring economic growth and natural resources.

Read Chapters 9 and 10, and remember to include references and links to the websites that are important contributors to your posts (comments).

The long-run growth is measured as the increase in real GDP per capita and this measure has changed over time and it also varies across countries. A country’s standard of living depends on its ability to produce goods and services (productivity).

a. How do we measure long-term economic growth of a country? What are the key determinants of long-run economic growth?

b. What is the relationship between economic growth and productivity? What is the major source of growth in labor productivity?

DISCUSSION 7

How Money Affects the Economy

This Discussion deals with the various forms and uses of money, the roles of the Federal Reserve System, money supply, money demand, and monetary policy instruments.

Read Chapters 14 and 16, and remember to include references and links to the websites that you feel are important contributors to your posts (comments).

The Federal Reserve may increase or decrease money supply depending on the economic condition.

a. What policy instruments does the Fed use for the monetary policy?

b. What are the pros and cons of using expansionary and contractionary monetary policy tools under the following scenarios: depression, recession, inflation, and robust economic growth? Which do you think is more appropriate today?

DISCUSSION 8

Aggregate Demand and Aggregate Supply

This Discussion deals with aggregate demand and aggregate supply, and the introduction to basic concepts in open-economy macroeconomics. The specific areas of discussion are the AS-AD model, AS and AD curves, shocks in AS and AD demand, and key concepts in open-economy macroeconomics.

Read chapters 11 and 12, and remember to include references and links to the websites that you feel are important contributors to your posts (comments).

Aggregate supply (AS) and aggregate demand (AD) models, and AS/AD curves are essential to understanding macroeconomic fluctuations (business cycles).

a. Discuss the importance AS-AD models are in explaining the macroeconomic conditions of the economy and business cycles like recessions.

b. What factors shift AS and AD curves? How do you explain macroeconomic fluctuations using AS-AD models and AS/AD curves?

DISCUSSION 9

Monetary and Fiscal Policy Applications

This Discussion focuses on the effects of monetary and fiscal policy instruments on the aggregate demand in the economy. The specific areas of discussion include how monetary and fiscal policy instruments are used to change AD, the differences between monetary and fiscal policy, and their respective instruments.

Read chapters 13 and 15, and remember to include references and links to the websites that are important contributors to your posts (comments).

Monetary and fiscal policy instruments are used to affect the aggregate demand (AD) in the economy.

a. What is the difference between contractionary and expansionary monetary policy? What is the difference between contractionary and expansionary fiscal policy? How does each policy affect the AD in the economy?

b. What are the benefits and major problems of the fiscal policy and monetary policy?

DISCUSSION 10

Debates in Macroeconomics

This Discussion deals with the debates over macroeconomic policy, which include stabilization policy, monetary policy on rules versus discretion, zero inflation target, public debt, and reforming tax laws.

Read chapters 17 and 18, and remember to include references and links to the websites that are important contributors to your posts (comments).

There are pros and cons of using monetary and fiscal policy tools to stabilize the economy.

1. Explain the main arguments in favor of economic stabilization during recessions. Explain why policy lags could make stabilization policies counterproductive.

2. What are the justifications given in favor of more government involvement in the market economy? What are the reasons given in favor of less government involvement in the market economy?