Essay about Macroeconomics Assignment Chapters 1 and 2

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Pages: 5

MacroEcon 1000 WW
Module 1 Assignment

1. Economics provides a range of choices to decision makers regarding the outcomes or impacts of alternative courses of action. Describe the two types of economic analysis (see examples on the bottom of page three). Come up with three questions of your own as examples for each type of analysis, that relates to you or your community.

Positive Analysis = focuses on facts and statistics, cause and effect, theory development and inferences made from specific data, consequences of certain actions, etc. Answers the question ‘what is’ or ‘what will be’.
- If the government raises the tax on beer, will it lead to a fall in profits of the brewers?
- How will a reduction in income tax
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3. Table 2.2 on page 42 shows the change in real value of minimum wage between 1974 and 2011. What do economists mean by "real"? What happened? Is this a problem; why or why not? What if anything should we do about it?

Real value is an adjusted nominal value, it looks at the value of what a certain amount of money can buy versus its face value. In Table 2.2 it shows that the nominal value minimum increased from 1974 to 2011, but its real value, or what that sum of money can buy, actually decreased. If this trend continues it definitely will be a problem, as household who makes minimum wage may eventually not be able to buy their basic needs. Ideally, the solution would be to increase minimum wage’s real value, we could do this by simultaneously increasing it with its nominal value, or limit inflation which would also increase the real value. 4. Sam was in the market for a house when his uncle died and left him $250,000, which is the price of the house he was considering. He could put the money into a long term CD at 4%. If he pays cash for the house, the annual insurance is $3,000 and the taxes are $4,000. What is his opportunity cost per year to buy the house?

Well if Sam purchased the house, it would cost him $7000 a year, where as if he put the money away in a CD he would earn $10,000 a year. Therefore Sam’s opportunity cost would actually be $17,000,