Problem Assignment Example | Topics and Well Written Essays - 750 words

Problem - Assignment Example sponses including government’s actions on fiscal policy and the central bank’s actions on monetary policy to ensure stabilization of production over business cycle. Keynes, a supply-sider, encouraged governments to consider spending more money during economic depression (Arestis, 2011). This would create more employment opportunities; hence money would be spent to further employ more people. In the 1970s it was however ineffective because a kick start to the normal levels was all that was required. Human capital is simply an accumulation of experience, skills, and knowledge of labor force, though labor productivity may be significant. The productivity and incomes of workers tend to grow as their human capital advances. Unemployed individuals comprise those who have quit or lost their jobs, or have for the first time entered or re-entered the labor market. The employed comprise those under employment level that exhibits no cyclical unemployment. Often, discouraged workers belittle employment. Additionally, in cases where a worker is employed but is overqualified for the job, underemployment is still overlooked. Further, workers in underground economy normally do not consider themselves as employed. To measure unemployed rate, the participation rate of labor force is used (Arestis, 2011). GDP simply explains the economy’s size measured through use of output. Despite capturing productivity it considers population growth. Also, GDP measures per-capita, a factor that does not explain much on distribution or sustainability of the economy. An elevation in the net wealth lessens the possibility of saving thereby elevating consumption at each income. Greater price levels reduce money holdings value which decreases the net wealth and consumption at each income (Arestis, 2011). Savings become more rewarding while borrowing becomes more costly when the interest rates have been increased. This elevates savings and reduces consumption at each income. Consumption