discussion 1:
Economic growth may be attained when either aggregate demand or aggregate supply shifts to the right. Prior to beginning work on this discussion, read Chapter 15 from the course text, especially examining Section 15.2, and respond to the following components:
- What are the different effects between aggregate demand-based growth and aggregate supply-based growth?
- What may shift aggregate supply to the right? Thoroughly explain its process.
- As a policy maker, would you prefer the strategies of aggregate supply-based economic growth or aggregate demand-based growth? Why or why not?
- As a proponent of either aggregate supply-based growth strategies or aggregate demand-based growth strategies, what would you recommend for the current U.S. economy to achieve stable economic growth?
Your initial post should be a minimum of 300 words.
Discussion 2:
Imagine you oversee a developing country’s growth and have been approached by a multinational corporation interested in locating in your country. Prior to beginning work on this discussion, read Chapter 16, especially examining Section 16.5, and respond to the following components:
- Describe a multinational corporation and foreign direct investment (FDI).
- Identify some benefits and costs for the host country from allowing a multinational corporation to locate there, despite its developing economy.
- Evaluate whether developmental assistance from world developmental agencies, such as the World Bank or the United Nations, would be preferable to private investment.
- What would you decide between developmental agency assistance or private investment, such as FDI from multinational corporations? Why? Explain.
Your initial post should be a minimum of 300 words.
Reply 1:
Demand-based growth strategies try to create a long-term increase in output and employment (Amacher, 2019). This type of growth focuses on the behaviors of all consumers who purchase goods & services in the domestic economy (Strickland, 2012). The effects are argued among classical economists who claim they are only effective in the short-run, while Keynesians argue the short-run is actually very long; therefore, making demand-based growth the most effective tool (Amacher, 2019)
Supply based growth focuses on the behavior of all firms who provide goods & services in the domestic economy (Strickland, 2012). Changes in capital stock, improvement in the size or quality of the labor force, additional natural resources, improvements in productivity, or technological advances can all affect the AS curve (Amacher, 2019). Unfortunately, no matter how much you try to influence business by adjusting the factors that might change the AS curve, there’s no guarantee business will respond accordingly (Strickland, 2012). This makes supply-based growth efforts unpredictable (Strickland, 2012).
The long-run AS curve will shift right in response to an increase in resources or productivity, improvement in the size or quality of the labor force, additional natural resources, improvements in productivity, or technological advances (Amacher, 2019). The effects of reduction in taxes or regulations/laws can also shift the AS curve right (Amacher, 2019).
If there must be a choice between the two, I would go with demand-based growth efforts as they are much more predictable (Strickland, 2012). When the government changes expenditures or changes the personal tax policies there is an instant effect to the AD curve (Strickland, 2012).
Also supply based growth has a proven track record of failure. Throughout the 80’s and early 90’s, the U.S. applied a type of supply-based growth efforts. These efforts seemed to do well to reduce inflation in the early 80’s (Love Econ, 2017). However, the bigger picture speaks for itself, supply-side economics didn’t work. That era of U.S. economic history was absolutely plagued with consistent massive deficits.
As a policy maker, I would attempt to focus on using both efforts. I feel both AS and AD based growth efforts can be utilized at different points in the business cycle of the economy. I would argue the demand-based growth efforts are best utilized during periods on economic contraction while the supply-based efforts can be utilizing during periods of expansion.
Amacher, R., & Pate, J. (2019). Principles of macroeconomics (2nd ed.). Retrieved from https://content.ashford.edu/
Strickland, R. K. [TheWyvern66]. (2012, July 27). Supply-side economics. Links to an external site. [Video file]. Retrieved from https://youtu.be/detShitHWKI
You Will Love Economics. (2017, September 22). Macro minute — demand-side vs. supply-side economics. Links to an external site. [Video file]. Retrieved from https://youtu.be/5sX3KC0LRH0
reply 2:
What are the different effects between aggregate demand-based growth and aggregate supply-based growth?
Aggregate demand-based growth is a strategy to form a long-term increase in output and employment by shifting the aggregate demand to the right (Amacher, 2019). With the shift to the right it causes a loss in research and development physical capital and human capital (Amacher, 2019). This output is the economic measurement of all goods and services produced by the economy. Aggregate demand is determined by market value and only symbolizes total output at a given price level and does not represent quality or standard of living.
The Aggregate Supply supply-based growth is the total of all final goods and services which firms plan to produce, during a specific time period. (Amacher, 2019). It is the total amount of goods and services that firms are willing to sell at a given price level in an economy. There are two views on Long Run Aggregate Supply, the Monetarist view and the Keynesian view. The curve is upward sloping in the short run and vertical, or close to vertical, in the long run.
What may shift aggregate supply to the right? Thoroughly explain its process.
In the short-run, examples of events that shift the aggregate supply curve to the right include a decrease in wages, an increase in physical capital stock, or advancement of technology. The short-run curve shifts to the right the price level decreases and the GDP increases. (Amacher, 2019).
As a policy maker, would you prefer the strategies of aggregate supply-based economic growth or aggregate demand-based growth? Why or why not?
I think I would lean more towards the aggregated demand-based way because it’s in place to create long-term output and employment. It also helps to raise the minimum wage. I believe any time you have a formula that works in the best interest of the consumer, you have a win win outcome.
As a proponent of either aggregate supply-based growth strategies or aggregate demand-based growth strategies, what would you recommend for the current U.S. economy to achieve stable economic growth?
I think both strategies have their own way of creating some type of outcome that can benefit the economy. You just have to be able to change directions before it’s too late. Supply and demand have an important relationship that determines the prices of most goods and services and they are both important when it comes to economic activity.
Reply 3:
Foreign direct investment (FDI) is a key component in global economic integration (Wei Jie, 2016). It is investment made by an enterprise, or direct investor, from one nation to another enterprise in another nation (Wei Jie, 2016). The two main types of FDIs are greenfield and brownfield investments. A greenfield investment is when a parent company starts a new venture in a foreign nation by constructing new facilities from the ground up (Wei Jie, 2016). A brownfield investment is the purchase of an existing enterprise, or facility, in a foreign nation for the purpose of starting a new business (Wei Jie, 2016). Multinational Corporations (MNCs) can fall in to either category and are firms with headquarters in one country and one or more branches in other countries (Amacher, 2019).
Some of the benefits to the host country of an MNC are injections into the circular flow of income, positive effects on the balance account, improvements to infrastructure, increased domestic productivity, and increased tax revenue (EconplusDal, 2014). Some of the costs to the host country for allowing MNCs are short-term employment opportunities, potential forfeit of political power, loss of resources, and environmental damage (EconplusDal, 2014).
Developmental assistance from world developmental agencies, such as the World Bank or the United Nations is considered to be multilateral aid. Multilateral aid consists of multiple donors giving to multiple recipients (Amacher, 2019). The alternative type of foreign aid would be bilateral. Bilateral aid consists of a single donor giving to a single recipient (Amacher, 2019). In general, recipients of foreign aid prefer to receive multilateral assistance (Amacher, 2019). Donating nations would prefer to use bilateral means, as there is more control over who gets what (Amacher, 2019).
The choice between which type of foreign aid to accept, or contribute, would depend on a several factors to include, the level of poverty the nation might currently be experiencing, the amount of growth potential the nation might possess, and the political stability of the host nation. Many developing countries are very impoverished and destitute of growth potential due to their poor resources and political stability. To some countries, MNCs simply aren’t an option as they could not operate successfully within their borders. These types of nations would only be able to accept aid from governmental operations such as the U.N. and USAID. However, if the developing nation has somewhat of a stable political system and an MNC would be successful, then I would choose the FDI route. MNCs offer specific advantages for the host nation that would remain in the long-run versus aid simply handed over to the host nation.
Amacher, R., & Pate, J. (2019). Principles of macroeconomics (2nd ed.). Retrieved from https://content.ashford.edu/ (Links to an external site.)Links to an external site.
EconplusDal. (2014, December 14). Y2/IB 18) FDI (Foreign Direct Investment) and Development. Links to an external site. [Video file]. Retrieved from https://www.youtube.com/watch?v=b3xFhPphQVA
Wei Jie, K. [Koh WEI JIE]. (2016, May 25). Foreign direct investment and its roles in economic development. Links to an external site. [Video file]. Retrieved from https://youtu.be/HSDj-apqFgQ
Reply 4:
Describe a multinational corporation and foreign direct investment (FDI).
Foreign direct investment (FDI) and multinational corporation play an essential and developing job informing our world, both monetarily and politically. A multinational corporation is a firm with headquarters in one nation and at least one branch plant in different countries (Amacher and Pate, 2019). A case of a multinational corporation would be McDonalds Corporation. It has global operations in the USA, Europe, the Asia/Pacific, the Middle East, Africa, Canada and in Latin America. Foreign direct investment (FDI) is an interest in a business by an investor from another nation for which the foreign investor has command over the organization acquired.
Identify some benefits and costs for the host country from allowing a multinational corporation to locate there, despite its developing economy.
Enabling multinational corporation to situate in a nation with a developing economy has numerous advantages to both the country and the organization. As per our eBook, multinational corporation advantage has nations by acquiring capital, giving openings for work, and expanding foreign exchange (Amacher and Pate, 2012). There are likewise inconveniences to enabling a multinational corporation to situate in a host nation with a creating economy, for example, political dangers because of the multinational corporation tasks being broad crosswise over national limits of a few countries that may result in risk to the monetary and political power of the host nation; misfortune to neighborhood business because of the multicultural corporation setting up a restraining infrastructure on comparable items sold; exhaustion of the nation’s common assets by the multinational corporation; exchange of capital and benefit to the multinational corporation home nation which is ominous to the host nation’s economy (Satnalika, 2013). As I would see it, the points of interest must exceed the inconveniences, or there would be no multinational corporations a situating in host nations with creating economic systems. (Amacher and Pate 2012) strengthen my opinion while expressing “The fact that developing countries actively encourage multinationals to locate there suggests that there are substantial benefits” (sec. 16.5).
Evaluate whether developmental assistance from world developmental agencies, such as the World Bank or the United Nations, would be preferable to private investment.
I feel that seeking developmental assistance from world developmental agencies, for example, the World Bank or the United Nations would be more ideal than looking for it from private investment. Since its beginning in 1944, the World Bank is an essential wellspring of money related and specialized help to creating nations around the globe that gives low-interest credit, zero-to-low-interest credits, and allows in support of interests in regions, for example, health, education, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management (Bousquet, 2018). As per (Bousquet, 2018)“The World Bank agreed with the United Nations in 1947. Throughout their joint history, the World Bank Group and the United Nations have worked together in virtually every region and sector, from health to education, agriculture, climate change, and so on, and from the heads of the institutions to staff on the ground, forming a unique partnership around a shared goal: working together to promote a world free of poverty and a better future for all”. Through a gathering called The Multilateral Investment Guarantee Agency (MIGA), which was formed by the World Bank and the United Nations, there is the advancement of foreign direct investment in creating nations to help financial development, decrease poverty, and improve individuals’ lives (Bousquet, 2018). In spite of the fact that having a MNC move to a creating host nation has numerous advantages that promote economic growth, I feel that the best alternative for the host nation maintains a strategic distance from the inconveniences that would occur inside their general public by looking for help from developmental agencies, for example, the World Bank and the United Nations.
What would you decide between developmental agency assistance or private investment, such as FDI from multinational corporations? Why? Explain.
Developmental agencies would be increasingly liberal such that they wouldn’t assume control over the host nation aggressively. I would use the assets and expand. I figure the relations between the two would be an all the more confiding in cemented one to choose developmental assistance. Expanding and developing together in a nation that I can increase profits with a tad of leniency contrasted with the private sector.
References :
Amacher, R., & Pate, J. (2019). Principles of macroeconomics (2nd ed.). Retrieved from https://content.ashford.edu/ (Links to an external site.)Links to an external site.
Bousquet, F. (2018, September 28). The UN and the World Bank working together in crisis-affected situations. Retrieved from https://blogs.worldbank.org/voices/un-world-bank-working-together-crisis-affected-situations
