Macro economic’s questions

Task Micro and macroeconomics Question GDP is a measure of all the market value of all goods and services produced within a country at a specific time and has the following merits and demerits in measuring the welfare to a country,
Merit- GDP takes into account the entire population as it is an average measure to determine per capita. The GDP is always consistent, frequent and widely measured that allow for observation of trends hence it’s more accurate in making conclusions about welfare standards.
Demerit – GDP does not consider leisure in its analysis but nations or people that tend to spend more time working has a high income but does not imply well-being. The GDP only considers general outlook of an organization but not the total assets which is economically wrong, GDP also does not take care of the informal sector like household chores which usually does not imply the wellbeing (Roberts, 2005).
Question 2
Canada has experienced a decreasing interest rates and a relative increase in the GDP over the last decades. This has led to increase in the consumption expenditure and a rise in the investments as shown by the statistics by growth in the economy (Roberts, 2005). The adjustments have contributed positively to the economy as it resulted in the expansion of various sectors hence high GDP.
Question 3
Introducing insurance will reduce the employees’ salaries that will eventually lower their income. This will reduce the level of consumption and investments in the economy under the business cycle leading to a recession. As a result, there is decrease in the production of goods and services in the economy reducing the GDP (Roberts, 2005). This will affects the economy in the long run as majority of the population may be rendered jobless leading to a rise in the unemployment’s rates due to the decreased output levels of the industries.
Question 4
Low interest rates have been maintained over the past but have only resulted in low economic growths. This has been attributed by the decrease in the domestic demands by individual countries as a result of the low activities by the private sectors as low rates discourages investments (Roberts, 2005). Various countries also experience high depts. hence despite the expansionary measures most of their resources are allocated to settling deficits as a result of the world economic recession leading to low growths.
Question 5
Free trade is opposed since it results into the collapse of the local industries and less producing nations becoming dumpsites resulting in increase in the unemployment rate. However free trade leads to competition that results into quality and relatively cheaper commodities for the population, corporation of the countries, removes trade barriers that leads to more disposable income for the consumers while exports and imports are also cheap that translates to low prices. But for countries that tend to develop and increase their GDP, they should oppose free trade so as to maximize on their local production to earn more income from their products (Roberts, 2005).
Question 6
Pessimistic future by the consumers and the business cycles will results in the businesses to produce more in the current. This will increase the GDP in the short run which consequently raises the prices due to increase in the demand by the consumers as they would consume more in the present as they predict the future to be pessimistic.

As the price of oil increases rapidly, businesses have an icrease in the production cost that will result in reduced amount of outputs hence GDP decreases from Q2 to Q1. But the consumers are also pessimistic in the long-run, demand increases that will result in increase in the price levels as shown by shift from P2 to P1.


Advances in robotics makes businesses to manufacture more outputs in the short run as consumers will also increase their consumption expenditure due to pessimism in the future. Hence GDP will increase as demand rises. This will increase the general equilibrium price to P1 and quantity to Q2.
The state should set various policies to restore the equilibrium levels. For instance in the pessimistic situations where the consumers and businesses fear borrowing, the interest rates should be lowered while subsidies encouraged by the government. This will make consumers to borrow more that increases the money circulation in the economy while business produces at relatively cheaper prices hence maintaining the consumptions and expenditure levels.

Work cited
Roberts, Lance W. Recent Social Trends in Canada: 1960-2000. Montreal: McGill Queens Univ. Press, 2005. Print.