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Showing posts with label aggregate demand. Show all posts
Showing posts with label aggregate demand. Show all posts

E-Book: Success in Macroeconomics - A Concise Companion to Core Concepts


Hi my dear readers, 

Allow me to introduce the next economics e-book in my series, "Success in Macroeconomics: A Concise Companion to Core Concepts". 


Written by myself (the editor) of the popular, useful, and relevant economics blog, JC Economics Essays, "Success in Macroeconomics" is a clear cut, concise companion to core economic concepts and theories for success in understanding Macroeconomics simply and effectively, which will help students gain an edge to excel academically in their economics examinations. 

Often, students want a clear and simple guide or effective lecture notes that provide the main arguments and explanations of key economics concepts, rather than a long, verbose textbook. They often lament that their school economics notes sometimes give a deluge of information, or an overload of economics case studies, and they are unsure of what the core economics content is, or what economics theories and concepts they should be focusing on for their studies. 

Since 2012, I have heard this common comment over and over (and as well as the reverse comment, incidentally, that some other junior college's economics lecture notes are totally in point form and need students to fill in the blanks, so as to keep them awake during econs lectures - such clever teachers). 

It's a legitimate issue: what learning resource provides a clear and simple economics guide that summarises key concepts and theories needed for the A levels? 

My e-book provides an effective solution - how

My concise guide provides simple yet effective explanations of key economics concepts, and entire arguments in paragraph form, for easy learning and retention. 

With this targeted solution, writing argumentative paragraphs or economic analysis in essays becomes simply more effective and efficient. 

Without long wordy paragraphs and additional filler information, this concise companion to core macroeconomic theories provides clear definitions, word-for-word explanations, and effective theoretical analyses of various macroeconomic issues. 

What will you learn?

In this effective yet concise guide to core A level macro-economic theories and concepts, students will learn:  

(1) Clear, concise, easy-to-memorise definitions to highly important macroeconomic concepts and theories often tested in economics tests and examinations

(2) Clear, accurate, step-by-step arguments to make a convincing economic case, either for or against an economic position, on a diverse range of macroeconomic questions and issues 

(3) Theories on major macroeconomic problems and how governments theoretically could implement impactful economic policies to address these macroeconomic problems and pursue their macroeconomic objectives

(4) The clear, step-by-step arguments to make to explain the mechanisms of the economic policies and the analysis of their limitations, with specific arguments to make for specific policies

(5) Commonly used economics diagrams, with detailed yet simple explanations, that you can draw and utilise to analyse questions 

(6) Useful and relevant, yet simple to understand, concise economic information for economic analysis on a variety of common macroeconomic issues

How a book helps students is often dependent on how it is used, so let me share some useful suggestions for your consideration. (Don't worry, I have also included a small section in the e-book to remind readers of how best to utilise the resource to reach their fullest potential.)

First, this book is an excellent complementary companion to supplement a traditional economics education, because it focuses students' attention on core macroeconomic issues and useful concepts. 

It can be used for additional reading. Usually, strong economics students already have a good understanding of the subject, so they can just read this book from cover to cover. It will still help them, a lot! 

Secondly, Success in Macroeconomics can be alternatively used effectively as a set of simple yet clear-cut notes for easy memorisation for quick success in economics examinations. 

This would make this guide more significant as a revision toolkit for examination preparation. 

With concise yet incisive arguments that are easy to understand, yet pack an impactful, powerful punch, with relevant theories and concepts, this economics book can be used for effective examination preparation. 

If you want to learn A level Macroeconomics more effectively, do click on the link and get this useful guide now. 

In Success in Macroeconomics - A Concise Companion to Core Concepts - you will be receiving: 

Pages: 68 pages including cover pages 
Chapters: 28 chapters 
Edition: 1st Edition, 2015
Details: Full colour; high resolution; with varied economics diagrams

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JC Economics Essays supports social enterprise! 


This book was kindly contributed by JC Economics Essays to Sallyforth Enterprise, and some proceeds from the book will be given to support and build up less privileged communities. Sallyforth Enterprise is a social enterprise that strongly supports social enterprises, volunteerism, and charity work. Part of the proceeds from this book will be given to charity, to build up less privileged communities, especially in less developed economies and rural communities. In particular, women and children are supported by such funding. Social enterprise can and should be a force for good. 


Thank you for your kind and invaluable support, which will definitely go a long way to greatly supporting the needy and vulnerable.  


JC Economics Essays - Here on this economics learning site, you will find economics education and learning resources for "A" levels, especially H1, H2, H3 A level Economics, and also many economics essays, also including undergraduate, and post-graduate and master's economics essays. Fundamentally, JC Economics Essays is mainly an economics essays blog that shares contributions and economics articles to help students learn economics and how to write excellent essays. Thank you for reading, and cheers. 

Explain the possible conflicts in the achievement of macroeconomic aims when using demand-management policies. [10]


This paper explains possible conflicts in the achievement of macroeconomic aims. When governments utilise demand management policies, there may be conflicts or trade offs amongst those goals. The most common conflict is the conflict between achieving full employment and price stability. There are also other conflicts such as those between achieving internal and external stability. This paper explains various possible conflicts in the achievement of macroeconomic aims when governments use demand management policies, such as fiscal and monetary policies.

First, demand management policies such as expansionary fiscal and monetary policies are often used to achieve full employment. For example, when there is an increase in government spending as governments spend on building infrastructure to boost economic activity, there is an increase in AD and hence an increase in real national income. As more resources are employed, the economy operates closer to full employment. However, there is a trade off as the economy will also face demand pull inflation as demand rises and bids up costs of factors of production. Demand pull inflation is defined as a persistent, sustained, and inordinate increase in the general price level due to increases in AD near or at the full employment level. Many fast developing countries like China with fast-rising AD and increasingly less spare capacity will likely face this conflict. On the other hand, contractionary fiscal and monetary policies can be used to reduce demand pull inflation, but this in turn conflicts with economic growth and employment, thus posing yet another trade off.

Second, as expansionary demand management policies are used to achieve economic growth, the balance of payments may worsen. For example, if interest rates are lowered to reduce costs of borrowing, households will borrow more to spend on consumer durables and firms may also invest more as expected net profitability increases. This leads to an increase in AD and real national income. However, the demand for imports and hence import expenditure increases too. This is because many consumer durables may be imported and firms may also import raw materials and machineries for their investments. Assuming that export revenue does not rise as quickly, the balance of trade worsens. Ceteris paribus, the current account and hence balance of payments worsens. Thus countries like Singapore with high MPM will be more likely to suffer from this conflict. This is because the increase in import expenditure is larger when national income increases. Vice versa, contractionary demand management policies to correct or address a balance of trade deficit can conflict with economic growth and employment.

If a country wants to achieve economic growth, it may choose to use expansionary monetary policy to increase AD. When interest rates are lowered, the cost of borrowing is lowered. This causes households to borrow more to purchase consumer durables such as televisions and refrigerators. This causes C to increase. Firms will also find that expected profitability of investment increases as costs of borrowing falls, given that economic conditions remain the same and returns on investments do not change. Thus I increases. Since C and I are components of AD, AD will increase, resulting in an increase in real national output and hence actual economic growth. However, in an open economy, the lower interest rates would likely result in capital outflow. If there is massive capital outflow as funds move to countries which offer higher interest rates, the capital and financial account will worsen. This leads to a worsening balance of payments. Hence, the desire to achieve actual growth via expansionary monetary policy can conflict with the desire to achieve a healthy balance of payments.

Furthermore, there is also a conflict between achieving a healthy balance of payments and price stability. If a country is facing a deficit in its current account and balance of payments, it may make use of demand management policies to improve the current account. For example, an expenditure switching policy of currency depreciation would help decrease the price of exports in terms of foreign currency and increase the price of imports in terms of domestic currency. As export competitiveness increases, the demand for exports and hence export revenue increases. At the same time as imports become more expensive, consumers switch to purchasing domestic goods instead. Assuming that Marshall Lerner condition holds, when IPEDx + PEDmI >1, balance of trade improves. Since X-M increases, AD increases and general price levels increase too.  However, if the economy is import-reliant, the depreciation of the currency could lead to imported inflation as the prices of imported raw materials increase. This causes the SRAS to fall and the general price level to increase. Thus a healthy balance of payments is achieved at the expense of price stability. An example of this would be Singapore, where imported inflation is likely to happen if the currency depreciates. This explains why Singapore is reluctant to depreciate its currency even when BOT is worsening.

In conclusion, there is a need to consider the use of supply side policies in some cases to minimise these trade-offs, conflicts in macroeconomic goals. Alternatively, a suitable mix of government policies may be considered to mitigate possible unintended consequences which may arise.

JC Economics Essays: Special thanks to W for her contribution of this well-written economics essay. However, this economics essay was not done under timed examination conditions. 

This paper explains the possible conflicts amongst macroeconomic goals of governments, and is basically about explaining the various trade offs and conflicts: inflation versus economic growth, internal versus external stability, and other such conflicts. 

There are many good points to learn from this paper. First, it directly addresses the question. It also has many definitions and examples, which suggests that the candidate has learnt her economics material well. The essay is also very well written, and is clear cut, accurate, and to the point; however, perhaps some diagrams could have been drawn. What economics diagrams would you have drawn in this case, and why? Economics essays often benefit from a relevant, well labelled, and accurate diagram that illustrates and analyses a point. Thanks for reading and cheers!

Explain the factors affecting Aggregate Demand (AD), given the context of Singapore. [10]


This economics paper explains the factors affecting Aggregate Demand (AD) and Aggregate Supply (AS), given the context of Singapore. 

First and foremost, in economic theory, AD and AS represent the aggregate demand (AD) and supply (AS) respectively of all the goods and services in an economy. The level of real national output and the general price level are determined by the intersection of AD and AS on an AD-AS diagram.

THINK: how would you draw an AD-AS diagram to reflect the intersection of AD and AS?

In theory, AD refers to an economy’s total demand for domestically produced goods and services for a given general price level. AD = C + I + G + (X – M), where C represents consumption, I represents investment, G represents government expenditure, X represents exports, M represents imports, and (X – M) represents net exports. Real national output (or real national income) and the general price level is determined by the intersection of the AD and AS curves. The AD curve is downward sloping because the lower the general price level, the greater the quantity demanded for domestic outputs. As AD = C + I + G + (X – M), what affects the AD curve are the factors that influence each individual component, which are C, I, G and (X – M). An increase in any of these components of AD would shift the AD curve to the right, while a decrease would shift the AD curve to the left.

Consumption

First, consumption (C) refers to household’s expenditures on goods and services. Consumption is affected most by income and wealth. For instance, when the Singapore economy is booming, rising wages of workers, rentals of buildings and assets, company profits, and interest will raise households’ incomes, which will then in turn increase consumption. On the other hand, higher personal income taxes and increased social security contributions, for instance in Singapore’s case particularly such as increases in the amount in the Ordinary Account of the Central Provident Fund (CPF) that Singaporean workers have to set aside for their retirement, will lower disposable income, thus dampening consumption. Wealth consists of savings and assets. A booming Singapore stock or property market pushes the value of financial and property assets up, thus making household feel that they are wealthier, which would then cause them to consume more, thus in turn increasing the consumption level. Conversely, if the Singapore stock or property market faces a downturn, Singaporean households will feel that they are less wealthy, and thus they will consume less, thus in turn causing consumption to decrease. As wealth also consists of savings, it is thus also affected by taxes such as property taxes and capital gains taxes; however, in the case of Singapore there are no capital gains taxes. The higher these taxes are, the lower the consumption level will be. Since AD = C + I + G + (X – M), a rise in consumption will increase AD thus shifting the AD curve to the right, a drop in consumption will decrease AD, thus shifting the AD curve to the left.

Investment

Second, investment (I) refers to firms’ spending on capital goods. Investment is affected most by business expectations. For example, if a Singapore firm expects the demand for its goods to rise, it is likely that the firm would invest more currently in machinery and plant to boost its future capacity. This would thus increase the investment level in Singapore, and since AD = C + I + G + (X – M), a rise in investment would increase AD, and shift the AD curve to the right, whilst on the other hand a drop in investment would decrease AD, thus shifting it to the left.

Government expenditure or government spending

Third, government expenditure (G) refers to the government’s spending on publicly provided goods and services. Government expenditure consists of government spending on public goods and services and also on government investment in infrastructure; the amount that the Singapore government spends depends on the state of the economy, as well as the aims and objectives of the government in power. In this case, let us focus on government expenditure in general, for instance spending on teachers’ salaries and on the Singapore Armed Forces, rather than government investment. Since AD = C + I + G + (X – M), a rise in government expenditure would cause a rise in AD, thus shifting the AD curve to the right, whilst conversely, a drop in government expenditure will cause a drop in AD, thus the AD curve will shift to the left.

Net exports

Fourth, exports (X) refer to foreign purchases of domestically produced goods and services while imports (M) refer to domestic purchases of foreign produced goods and services. (X-M) forms the net exports of a country, which in Singapore’s case is very important given that Singapore is a small and open economy. Factors which affect exports and imports are the usual factors which affect demand and supply, such as tastes and preferences, disposable incomes of foreigners who purchase these goods, and prices of related goods to these exports, such as substitutes and complements. Exports may rise due to foreigners developing a preference for Singapore’s exports, possibly due to better marketing or better quality of goods produced. On the other hand, if other countries promote their products more, or have better or new products compared to Singapore, then Singapore will be expected to face rising demand for imports. Since AD = C + I + G + (X – M), a rise in exports would increase AD thus shift the AD curve to the right, if there is a drop in exports, the AD curve will shift to the left as AD decreases. A rise in imports would also cause a drop in AD, thus shifting the AD curve to the left, while a drop in imports would cause an increase in AD, thus shift the AD curve to the right.
  
In conclusion, the factors that affect Singapore’s AD are the factors which affect consumption, investment, government expenditure, and net exports. 

JC Economics Essays - This is a modified economics essay written by student JQ, which was originally written under timed conditions for an economics test. Do remember that it is very important to time yourself whilst practising for the economics essay examination, because you have to craft a well-written economics paper within a given time limit. When practising for any economics test, you could plan a structure or outline for 5 minutes, and then spend the rest of the time crafting your response. Do note that this economics paper has been cleaned up for spelling, grammar, and also for essay structure, and some of his arguments have been repositioned for easier flow. Do you find that this economics paper is easy to read and clear cut? How has the clear and direct structure made it easier for you to read this paper? In addition to these two basic questions on essay structure, when reading this economics essay, the other questions that you could ask yourself are: (1) how would you approach this essay? (2) What economics knowledge or information do you need to answer this essay question properly? (3) Also, should a diagram be drawn? Why or why not? (4) Did the writer of the essay answer the question adequately, not just in theory but also in bringing in the Singapore context? Do remember to read with a questioning mind when thinking through this essay. Thanks for reading and cheers. 

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