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You are going to play a game similar to the the circular flow game played previously.
Half of you will be households possessing factors of production and half of you will be firms with money, looking to buy factors of production.
The firms will then make products from a set of Land, Labour & Capital to make 1 Good or Service
They will then sell this Good or Service back to the households who will pay for it using the money earned earlier.
And a relaxation of immigration laws
However, due to cash flow issues, the firms will only get half of their money to start with and the other half after the first round.
There will be an injection AND/OR a withdrawal at some point...
A minimum wage has been imposed of $3 per factor input
The nation’s economic woes boil down to this.
Compared with a healthy economy, about 7 million working-age people and 5 percent of the nation’s industrial capacity are sitting idle, not producing what they could.
The economy is growing again, but at a rate — less than 2 percent in recent months — that’s too slow to keep up with a population that keeps increasing and workers who keep getting more efficient.
This is the output gap, the divide between the amount the United States can produce and what it is actually producing.
The gap, currently $900 billion, explains why we feel so miserable more than a year into what is technically classified as an economic recovery.
Sustainable economic growth means a rate of growth which can be maintained without creating other significant economic problems, especially for future generations
There is a TRADE-OFF between growth now and growth in future generations.
Why?
Resource depletion
Environmental problems in the future
Global Warming
In terms of sustainability, it may be argued that growth based on short-term public debt, rather than long term productivity, is unsustainable.
Periods of growth are often triggered by increases in aggregate demand, such as a rise in consumer spending, but sustained growth must involve an increase in output.
If output does not increase, any extra demand will push up the price level.
capacity
For long-term growth to be achieved, the
of the economy must be increased.
How could you show this on a graph(s)?
1. Illustrate the effects of the increase in taxes and rise in immigration shown in the game using a graph
2. What would be the effects on the price level, output and unemployment?