Economies: Economic Analysis 3

In 3–4 pages, explain how built-in stabilizers work and how different tax systems relate to built-in stability. Analyze the multiplier effect that exists in a market economic system. Explain the impact of an increase in net exports on real GDP.

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

     Competency 1: Analyze the economic environment and the role of the federal government in establishing fiscal and monetary policies.

o    Analyze the effect of automatic stabilizers on a country's economy.

o    Explain the effect of an increase in net exports on real GDP.

o    Explain why it is difficult for a country to boost its net exports by increasing its tariffs during a global recession.

                        Competency 2: Analyze the impact of macroeconomic principles, theories, policies, and tools in real world business situations.

o    Analyze the concept of the multiplier effect.

                        Competency 4: Communicate in a manner that is professional and consistent with expectations for members of the business professions.

o    Correctly format citations and references using current APA style.

o    Write content clearly and logically with correct use of grammar, punctuation, and mechanics.

o     

We now examine the basic relationships between different economic aggregates. More specifically, income and consumption, investment and interest rates, and how output is affected by increases or decreases in spending. It is also important to understand the determination of Gross National Product (GDP), given its production capacity. In addition, it is also important to understand why GDP increases in one period and declines in another.

To address these questions, analysts use the aggregate expenditure and the aggregate demand and supply models to better analyze the role of fiscal policy as a tool to stimulate full employment, economic growth, and to control inflation.

As you prepare to complete this assessment, you may want to think about other related issues to deepen your understanding or broaden your viewpoint. You are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of your professional community. Note that these questions are for your own development and exploration and do not need to be completed or submitted as part of your assessment.

                        Do you think that, at this time, the United States should try to decrease or increase federal spending?

o    What reasons do you have for your position?

o    How will the increase or decrease impact GDP and national income?

Suggested Resources

The resources provided here are optional and support the assessment. They provide helpful information about the topics in this unit. You may use other resources of your choice to prepare for this assessment; however, you will need to ensure that they are appropriate, credible, and valid. The MBA-FP6008 – Global Economic Environment Library Guide can help direct your research. The Supplemental Resources and Research Resources, both linked from the left navigation menu in your courseroom, provide additional resources to help support you.

Macroeconomics Theory and Models

The below resource contains information about macroeconomics theory and models.

                        McConnell, C., Flynn, S., & Brue, S. (2015). Macroeconomics (20th ed.). New York, NY: McGraw-Hill Education. Available from the bookstore.

o    Chapter 10, "Basic Macroeconomic Relationships," pages 218–236.

o    Chapter 11, "The Aggregate Expenditures Model," pages 239–259.

o    Chapter 12, "Aggregate Demand and Aggregate Supply," pages 263–282 and 285–287.

Government Fiscal Policies

The below resource contains information about government fiscal policies.

                        McConnell, C., Flynn, S., & Brue, S. (2015). Macroeconomics (20th ed.). New York, NY: McGraw-Hill Education.Available from the bookstore

o    Chapter 13, "Fiscal Policy, Deficits, and Debt," pages 288–308.

Causes of Recessions

The below resource contains information about causes of recessions.

                        Economics Help. (2015). Causes of recessions. Retrieved from http://www.economicshelp.org/macroeconomics/economic-growth/cause-recess...

Gross Domestic Product (GDP) Measures

The below resource contains information about GDP measures.

                        Amadeo, K. (2016). Real GDP per capita: How to calculate, data since 1946. Retrieved from https://www.thebalance.com/real-gdp-per-capita-how-to-calculate-data-sin...

The Multiplier Effect

The below resources contain information about the multiplier effect.

Buchwald, A. (1975). Squaring the economic circle. Retrieved from http://yousigma.com/jokes/squaringtheeconomiccircle.html

Boundless. (n.d.). The multiplier effect. Retrieved from https://www.boundless.com/economics/textbooks/boundless-economics-textbo...

In this assessment, you will gain greater understanding of tax systems in relation to economic stability, the multiplier effect, and how net exports affect GDP.

Requirements

There are three parts to this assessment. Be sure you have completed all three parts before submitting.

Part 1

                        Analyze the effect of built-in (or automatic) stabilizers on a country's economy.

o    Explain how built-in stabilizers work.

o    Explain the differences between proportional, progressive, and regressive tax systems as they relate to an economy's built-in stability.

Part 2

                        Analyze the concept of the multiplier effect.

o    How does this concept relate to both economic recessions and vigorous economic expansion?

Part 3

                        Explain the impact of an increase in net exports on real GDP, assuming the economy is operating below its potential output.

                        Explain why it is difficult for a country to boost its net exports by increasing its tariffs during a global recession.

Organize your assessment logically with appropriate headings and subheadings. Support your work with at least 3 scholarly or professional resources and follow APA guidelines for your citations and references. Be sure you include a title page and reference page.

Additional Requirements

                        Include a title page and reference page.

                        Number of pages: 3–4, not including title page and reference page.

                        Number of resources: At least 3 scholarly or professional resources.

                        APA format for citations and references.

                        Font and spacing: Times New Roman, 12 point font; double-spaced.