Discussion Post
Discussion Topic #1 Response
Gross Domestic Product computes and calculates the total value of goods and services in the market. It is the process wherein based on the discussion, total goods production are being measured in a specific period within the legal market. It is true that the goods and services being produced distributed and sold in the black market is not included in the Gross Domestic Product measurement because the output of these goods and services does not have the proper documentation that makes it included in the GDP measurement. Additionally, incomes that are produced from these products and services in the black market is not formally part of the official supplied and demanded products that circulate in the legal market so as the ones that are consumed in each household. GDP is just measured per country that is why goods produced overseas are not included in the measurement.
Based on the discussion, GDP doesn’t measure the well-being of a country’s economy. Many factors support this statement. An example would be a person producing his own goods for his own consumption, so somehow, this person does not contribute to the economy’s income as he did not spend out from his own pocket. So, imagine hundreds and thousands of people doing the same scenario will surely make GDP less than it should be and serve as inaccurate measurement of economic well-being. Goods and services being produced for their own consumption do not have a market value unless these products or services will be mass produced and turn into a formal business that will contribute and will have a market value, which will be included in GDP measurement. That is the reason behind GDP not being a perfect economic well-being as those personally produced goods does not have a pre-determined market value.
Discussion Topic #2 Response
Frictional unemployment, as mentioned in the discussion, is a normal thing that happens in terms of losing and getting another job. It was discussed that there are many reasons why frictional unemployment happens such as worker’s health reason or can be leaving a current job in exchange for a better one. In addition, frictional unemployment also exists because of the reality that both employees and jobs are heterogeneous in which a job mismatch also occurs in some events. Seeking a better job is one of the common reasons for leaving the current one so as to earn more profit by means of winning a higher-paid job. In relation to frictional unemployment, job mismatch that influences an employee to leave his current job adds to frictional unemployment’s level. So, we may agree to the claim saying that eliminating the unemployment insurance system may not impact the level of frictional unemployment.
As the discussion says, there will be a major effect on the real GDP’s level if the unemployment insurance will be eliminated because removing it will keep its level on high. It is a reality that it can be a recession indicator as people will have less capability to purchase domestic products, which adds to unemployment indicators. Additionally, this insurance is not part of GDP as this is allocated money provided by the government for the benefit of affected society and it is not a payment for goods and services.
Well-being in the economy may not increase as having more unemployed workers who do not have the purchasing capability may have an impact towards the economy’s GDP that can be a measurement of a country’s economic well-being. Therefore, eliminating the unemployment insurance may not increase the economy’s well-being; what’s more impacting would be the workers’ length of time being unemployed, which has an effect on the economy.
Discussion Topic #3
In economics, income distribution is defined as the country’s total Gross Domestic Product in which is being distributed amongst the population, while inflation is defined as constant increase in the level of products and services. Inflation is measured as yearly percentage increase. As the inflation rises, the amount of money and its capacity to buy products become smaller in terms of percentage. Inflation lower income earners compare to higher income earners. The reason behind is primarily, incomes of low income earners tends not to rise as fast as the prices does, so, low income earners’ buying power also decreases. Additionally, low income earners generally do not have the ability and skills to make demands for wage increase. It also should be noted that rising inflation usually leads to increase of interest rates. This process directly affects the low income earners’ expenditures to live and compounds some other effects of rising inflation. So, inflation weakens the purchasing power of employees who are of low income in relation to higher income earners because their incomes increase as fast as the inflation.
Between anticipated and unanticipated inflation, the second one can be considered a greater problem. This is because between these two inflations, the unanticipated one would not protect people and businesses against the negative effects of incorrect prediction of inflation. People may not be able to switch savings to deposit bank accounts, which offer higher interest rate or to another financial assets like equities or housing were capital grows overtime could exceed inflation of price. Unlike anticipate inflation, it will not give companies the ability to adjust their prices and lenders will not be able to adjust their interest rates.
