For each of your answers I want you to provide clear reasoning detailing your po
ID: 1173800 • Letter: F
Question
For each of your answers I want you to provide clear reasoning detailing your position using concepts and economic logic learned in class and from the textbook. For instance, if you think GDP is negatively affected by people not having sufficient retirement savings, than you need to provide details on how you think GDP is negatively affected using economic concepts and logic. It is not enough to just say GDP will be negatively affected without sufficient reasoning.
1. The financial industry is able to hire vast amounts of highly educated workers from elite universities. In fact, large numbers of these new graduates are from engineering, physics, and science backgrounds. How do you think productivity, technological innovation, and GDP are affected by the fact that the financial industry is able to lure these highly skilled graduates into the financial industry, and away from their respective fields?
2. Due to the exorbitant fees hidden in mutual funds, many retirees will not be able to keep the same standard of living that they were accustomed to in retirement. How do you feel this will affect GDP and governmental expenditures once people start retiring and living off their savings from their 401 (k)?
Explanation / Answer
Answer 1:
If the experst from engineering, physics and science backgrounds are employed in financial industry, then this will lead to fall in the productivity , technological innovation and GDP of the country. This is because technological innovation and rise in productivity can best be done by experts in science backgrounds. If they change their area of specialization then this will have a negative impact on overall productivity and GDP of the nation.
Answer 2:
This will reduce consumption expenditure of these employees. Government expenditure might increase to pay transfer payments to the retirees, however, this might lead to crowding out effect and fall in investment expenditure of the economy which will reduce overall aggregate demand of the economy. Thus, Gross Domestic Product will fall as aggregate demand of the economy falls.
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