Jonathan De Los Reyes Macro Econ Professor Bhandari 3/18/13 RWM Essays Week 1: 1.9, 2.1, 2.2, 2.

3, 2.5, 2.7 1.9 The human development includes measures of three things: 1) health, measured by average life expectancy, 2) education, measured by average years of schooling and expected years of schooling and 3) income, measured by GDP per capita. The HDI has become the most influential alternative to GDP per capita as a single-number development measure. The GDP per capita, counts for one third of the HDI score itself. 2.1 1. Classical economists argue that the economy possesses powerful self-correcting forces that guarantee full employment. Their vision of a stable market economy rests on three building blocks: rational expectations, market clearing and imperfect information. It does not seem convincing because using rational expectations involves expecting something youre not sure is going to happen. Youre basically just guessing.

2. The Keynesian economists say that while the economy might eventually reach the full employment outcome Lucas model predicts, the wait is likely to be intolerably. Keynes says that government intervention designed for the workable policy time frame of 3 to 5 years is what we need because in the long run well be dead. The wait for Lucas model is too long. He also states that Lucas idea of the amount of power people really have over their economic lives is exaggerated. The idea of a perfect work place at a corporation is a myth because bosses will keep the extra profit if the economy or company is doing well rather than give it to their workers. 2.2 The Marx problem is that there is a lot of people on the reserve army for unemployment and that lowers the bargaining power of workers in all other countries. The net result is that the number of people looking for jobs in the developing countries grows faster than the employers seeking new workers. 2.3 Inequality, power, and ideology lead to the recent economic crisis in which racism and favoritism became an issue in employment. Unions were broken apart to keep the workers power strong against the employers. Other things that contribute to economic crisis are: the rich becoming richer, the government not regulating income distribution, and the growing rate of instability. 2.5 GDP is the sum of products and activities. Growth occurs when GDP is larger than the previous year. If there is little to no growth in GDP our economy is known to be sluggish. When the GDP is sluggish, our economy will seem like it is growing through a small recession. Rowe believes that economic growth and rising GDP is not always what people want because it could possibly create a bigger gap between

the rich and the poor. Money is distributed to the products and services that are 100% needed by the population.

2.7 In Marxist theory, dynamic capitalist economy is felled by instability by the pure nature of capitalism. The two things that could eventually happen in capitalism are overproduction and the falling rate of profit. We see this a lot in todays Macro economy. It really shows how much we live in a capitalist society.

Week 2: 4.6, 8.1 4.6 A derivative is a very complex aspect that not many economists can explain. A derivative is a financial agreement that comes from its value from something else like an asset. Derivatives are mainly used for Mortgage-based securities during an economic crisis. The homeowners ability to meet their mortgage payment correlates directly with the ability of the MBS issuers to repay their debt. In this crisis, a mortgage broker extended a mortgage to a borrower who then turned the bank fund to a loan. The bank would turn the loan to a group of mortgages. Week 4: 3.1-3.8 1. Arguments Against: The inequality in the incomes causes large changes in the common mans lifestyle. The greater the income inequality puts a lot more power in the rich peoples hands. The more equal the distributions are with a combination of stronger unions can lead to more favorable economic conditions.

Arguments For: The individual in a capitalist economy will get what they deserve in a capitalist economy. If the share of income were to be going up, then wage earners would be more productive. Their increase in productivity would mean that they deserve more of the nations total income.

2. None of the economic growth recoveries have benefited every single person in the last decade. There are many inequalities and great differences in wealth and income that make it nearly impossible for a recovery to accommodate everybody.

3. The rich people like the stockholders and the people in large businesses are the ones who got the most from the wealth accumulation. From 1970 to 2000 the top ten percent raised their share of the nations total income by fifteen percent. This means that the gain from those thirty years was equivalent to the total income by the bottom forty percent of the people who lived in houses.

4. Krugman believed that upward mobility in economic stances has become more and more tougher to achieve. The income of the rich people rose by 148 percent. Krugman says that a small group of wealthy but untalented children inherently control vast segments of the US economy and the poor but talented children simply cannot compete. It is unlikely for a person to find a good career because most people are born into the 90 % and stay there.

5. The inequality in the US is not due to the big gap between the less educated and the highly educated but more of the increase in incomes from property and top corporate executives. Reuss states that the reason for the high inequality in the US is because of the ability of property owners to keep their share of wealth and use it to make even more. While this is going on, the working class continues to work in jobs that are going nowhere.

6. The Great Recession was the start of a big deterioration in racial wealth inequality. The average income of a black household was one twentieth of an average white household. The Homestead Act in 1862 had a large transfer of government owned land to only white households. This stabilized the inequality in racial households. The wealth of black people went more toward their house. The white people would have other money sources to support themselves when the bankers would foreclose homes because the white people didnt pay as much for their houses.

7. In 2010, 34% of single mothers were in poverty. The welfare that was provided to single mothers since 1935 has been decreasing over time. The prerequisites for the benefits from welfare for single mothers were that she must be working and have an economic status of 130% below the poverty line. At the time, the exchange for the benefits from the government was good. When the single mother poverty rates dropped, most of them fell short of the government requirements. One thing that

could be done is to raise minimum wage. Anti poverty programs could choose to increase income eligibility limits so that a worker can receive the benefits while still working a minimum wage job. Another thing that would be beneficial would be a universal child health care system. After school programs would securely watch over the children while the mother could be at work. This way they wouldnt have to worry about their children.

9. The difference in incomes give the incentive to create more productive economic ideas by businesses and individuals. Tilly thinks that inequality doesnt allow for economic growth. The different ethnic barriers stop the economic growth because of racism. The inequality of the haves goes right with the have-nots because they just implement back policies instead of making social resources that educate the poor so that they can be more productive.

Week 5: 1.2, 1.9, 4.3 1.2 If production increases at a fast rate, inflation and unemployment would have the GDP going back down.

1.9 Human development index, HDI, focuses more on the common persons ability to access normal goods. It is more concerned with how well they can live a healthy and content life. The goal for human development is to prioritize healthy living and how they live a normal life.

4.3 The financial markets must be regulated because of the self-interested free market economists on wall street. History has shown that capitalist markets cannot be trusted therefore needing to be regulated.