21 Jul HOW WOULD GROWTH OF THE ECONOMY AFFECT THE CONCLUSION YOU DREW IN A?
70 points The increasing cost of healthcare in the U.S. Show more Diagramming (modeling) Problem Chapter 2: 70 points The increasing cost of healthcare in the U.S. has become an increasing concern of policy makers politicians economists and citizens as consumers demand services to increase lifespan and quality of life. Using the PPF diagram below discuss the impact that increasing the amount of healthcare produced by the economy would have on the opportunity cost (the marginal rate of transformation) or the slope of the production possibilities frontier. In particular demonstrate if the opportunity cost (also referred to as the relative cost) increases decreases or stays the same. Assume that the economy exhibits full employment of resources and no economic growth. 30 points (This is a more challenging question) What are possible economic phenomenon that would cause the economy to grow? How would growth of the economy affect the conclusion you drew in A? (Hint: After redrawing the model to you created in part A redraw the model again with the original PPF and a new PPF that shows an increase in the ability of the economy to produce more healthcare and all other goods. Let the amount of economic growth be such that the amount of all other goods can remain at A1 and the economy can produce the amount of healthcare it consumed in your model for part A. Then complete the analysis of the the change in the opportunity cost as healthcare increases to a new level on the ) Please note that the use of numbers or quantity values are not necessary to conduct your analysis. Rather identify increase or decrease in the amount of healthcare and all other goods the economy experiences. Also remember that opportunity cost of the marginal rate of transformation is identical to the slope of a line or the slope of a line tangent to the curved PPF. To discuss a change in the opportunity cost identify a change in the slope of the PPF. You will find examples in the text on in my videos that accompany this topic that will help you with your analysis. H1 = Healthcare consumption in 2013 A1 = All other goods consumed in 2013 H/A = Slope of the PPF at point (the opportunity cost healthcare relative to all other goods). Hints: a) First draw a new PPF on the diagram above to represent the economy one year later assuming economic growth. I would exaggerate the movement of the PPF to allow easy inspection of the model. b) Maintaining healthcare consumption at H1 redraw a line at a new point that will allow you to compare the slope of the PPF you have drawn with the slope of the line provided on the original PPF for 2013. This will allow you to make a comparison of the opportunity costs. Price of Inequality: Please answer the following question: In the preface and first chapter Professor Stiglitz outlines the nature of the inequality in the U.S. economy and the problems it is causing. What is the main point or theme of the first chapter? What central idea does he want the reader to adopt? Do you agree with his assertions? What evidence or experiences lead you to agree or disagree with the author? Intro. to Macroeconomics Show less
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