Hello. I am trying to verify my answers. I would appreciate an appropriate detai
ID: 1249566 • Letter: H
Question
Hello. I am trying to verify my answers. I would appreciate an appropriate detailed answer. Thanks!!!Short Answer
22. Under what conditions might government intervention in a market economy improve the economy’s performance? (10 pts)
23. Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run. (5 pts)
25. GDP is defined as the market value of all final goods and services produced within a country in a given period of time. In spite of this definition, some production is left out of GDP. Explain why some final goods and services are not included. (10 pts)
Explanation / Answer
22.)If there is a market failure, such as an externality or monopoly, government regulation might improve the well-being of society by promoting efficiency. If the distribution of income or wealth is considered to be unfair by society, government intervention might achieve a more equal distribution of economic well-being. 23.) To lower inflation, the government may choose to reduce the money supply in the economy. When the money supply is reduced, prices don't adjust immediately. Lower spending, combined with prices that are too high, reduces sales and causes workers to be laid off. Hence, the lower price level is associated with higher unemployment. 25.)GDP is the market value of all final goods and services produced within a country in a given period of time. It includes only final goods and services. Intermediate goods are not included in order to avoid double counting. Some final goods are also excluded from GDP. These are • Non marketed production like services of housewives. These are not included because it is difficult to find the imputed value of goods and services which are not marketed. • Underground activities or illegal activities are production is not included because they mostly go unreported and thus they are left out of GDP. • Second hand goods are also final goods but they are not included in GDP in order to avoid double counting as they are already included once. • Economic bads such as pollution which is the result of various economic activities are also not included in GDP. • Financial transactions such as trading of stocks are not included in GDP because they do not represent any production of assets. They represent only trading of assets.
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