Requirement:

Hi, below are the content summaries of each topic I study in my economic paper. Please help me come up with some interesting questions for each topic and justify why they are interesting with some examples related to the topics using the different models mention in each topic. Please keep each answer within 150 words. Thanks xx.

MACROECONOMICS CONTENT SUMMARY:

Topic 1a -

The Supply Side with Homogeneous Labour. Here we study the classical model of the macroeconomy. It focuses on the production side of the economy to describe the GDP as the output of a single production function for the whole economy. It is critical to note that it does not arise by aggregating the production function of individual firms. Nevertheless, the model assumes that the employment levels of all factors of production are consistent with the choices of the profit maximising firms. Consequently, measuring a macroeconomy's productivity requires us to estimate the parameters of the economy's production function empirically. Furthermore, the empirical properties of the national income imply that the production function must satisfy constant returns to scale, product exhaustion and a stable factor share of national income. The Cobb-Douglas function satisfies these properties. So the classical model describes GDP and factor shares of income with the Cobb-Douglas production technology, which yields four measures of macroeconomic productivity: marginal, average, factor share (or elasticity = marginal/average), and total factor productivity (TFP). Each measure highlights a distinctive aspect of the macroeconomic performance measure.

TOPIC 1b

Heterogenous Labour and Income Inequality. This section modifies the classical production function and the labour market by considering heterogeneous labour: skilled versus unskilled. Access to education gives a section of the population the privilege to acquire skill-premium from the relative scarcity of educated workers in an economy. This scarcity arises from the race between education and technology. A faster technology growth increases demand for skilled labour, i.e., workers with the necessary expertise to operate high-tech machines. A slower pace of growth of educated adults in the macroeconomy contributes to excess demand in the market for skilled labour. Technology growth typically creates tools to replace physical work and, hence, decreases the demand for unskilled labour. However, the growth of skilled labour in the economy sometimes increases the demand for unskilled labour in manual work if that is complementary to occupations that require skilled labour. Income inequality explained by this skill-premium increases if technology runs faster than education. Moreover, recent research indicates that a rise in inequality could be detrimental to technology growth.

TOPIC 1c

This section establishes the notion of BALANCE in the macroeconomy by suggesting that flexible movements of relative prices ensure a balance between demand and supply in each factor market and simultaneously in the goods and financial market. We define such an outcome of the classical model as the long-run outcome (equilibrium) for the macroeconomy. In the long-run equilibrium, flexible real wage eliminates unemployment in the labour market. In addition, the flexible real interest rate adjusts to ensure the balance between saving and investment in the financial market and, thereby, a balance between the full-employment GDP and the aggregate demand for GDP in the goods market. In particular, excess demand in the goods market shows up as excess demand for loanable funds in the financial market. In response, the real interest rate increases to eliminate that excess demand.

If there is an excess supply, the process reverses until the macroeconomy restores its long-run balance.