Roll No.

55
Dr.NayMyo Aung

Q-1. Every country tries to develop its economy's output of goods and services as much as
possible. It is also important how the economy spend these output of goods and services.
Suppose you are a responsible person of your economy. Based on your learning, please discuss
how you consider the spending with regard to the economy's output of goods and services, with
your own words.

Ans-1

Consumer spending is the total money spent on final goods and services by individuals and
households for personal use and enjoyment in an economy.
Output is a quantity of goods or services produced in a specific time period (for instance, a year).
For a business producing one good, output could simply be the number of units of that good
produced in each time period, such as a month or a year.
GDP can be represented by the circular flow diagram as a flow of income going in one direction
and expenditures on goods, services, and resources going in the opposite direction. In this
diagram, households buy goods and services from businesses and businesses buy resources from
households.
According to economic theory, consumption of goods and services is assumed to provide utility
(satisfaction) to the consumer or end-user, although businesses also consume goods and services
in the course of producing other goods and services (see: Distribution: Channels and
intermediaries).
The services that the government spends money on Social Security, Health, Income Security,
National Defense, Medicare, Education, Training, Employment, and Social Services, Net
Interest, Veterans Benefits and Services.
The increased government spending may create a multiplier effect. If the government spending
causes the unemployed to gain jobs then they will have more income to spend leading to a
further increase in aggregate demand.
The Four Types of Spending are Abundant Spending, Neutral Spending, Scarcity Spending, and
Avoidance Spending. Each type of spending leads to drastically different results.
Any increase in production leads to economic growth as measured by GDP. This metric merely
represents the total production of all goods and services in an economy. Improved economic
growth raises the standard of living by lowering costs and raising wages.
The main requirements for the production of goods and services are land, labor, physical capital,
and human capital. Labour: This is the main requirement, people who will do the work.
Service economy based on providing services rather than manufacturing or producing goods.
There are 3 types of services as follow -
 Business Services. The services used by business organizations to conduct activities are
known as business services. ...
 Social Services. The services provided by an individual or a group of individuals
voluntarily for the accomplishment of some social goals are known as social services. ...
 Personal Services.
Consumer spending is an important economic indicator because it usually coincides with the
overall consumer confidence in a nation's economy. High consumer confidence indicators
usually relate to higher levels of consumer spending in the economic market.

In conclusion, output plays a big part in measuring Gross Domestic Product (GDP). GDP is a
standard measure of economic output used today. Output is used to measure the growth of an
economy and is used as a critical measurement in macroeconomics.

Q-2. How do you think the concept that money supply has a large effect on the economy?  Please
discuss your idea about this concept. As a responsible person, how could you control the money
supply? Show your work with your own words.
Ans-2.

The money supply refers to the amount of cash or currency circulating in an economy. is all the
currency and other liquid instruments in a country's economy on the date measured. The money
supply roughly includes both cash and deposits that can be used almost as easily as cash.

Economists analyze the money supply and develop policies revolving around it
through controlling interest rates and increasing or decreasing the amount of money flowing in
the economy. Public and private sector analysis is performed because of the money supply's
possible impacts on price levels, inflation, and the business cycle. In the United States, the
Federal Reserve policy is the most important deciding factor in the money supply. The money
supply is also known as the money stock.

The seven factors which affect the changes of supply are as follows: (i) Natural Conditions (ii)
Technical Progress (iii) Change in Factor Prices (iv) Transport Improvements (v) Calamities (vi)
Monopolies (vii) Fiscal Policy.

Also there is a relationship between GDP and the Money Supply. In general, when the GDP
growth rate shows rising economic productivity, the value of money in circulation increases.
This is because each unit of currency can subsequently be exchanged for more valuable goods
and services.

The changing of the money supply affect the economy - the money supply is important because
if the money supply grows at a faster rate than the economy's ability to produce goods and
services, then inflation will result. Also, a money supply that does not grow fast enough can lead
to decreases in production, leading to increases in unemployment.

Change in the money supply has long been considered to be a key factor in driving
macroeconomic performance and business cycles. Macroeconomic schools of thought that focus
heavily on the role of money supply include Irving Fisher's Quantity Theory of
Money, Monetarism, and Austrian Business Cycle Theory .

An increase in the supply of money typically lowers interest rates, which in turn, generates
more investment and puts more money in the hands of consumers, thereby stimulating
spending. Businesses respond by ordering more raw materials and increasing production. The
increased business activity raises the demand for labor. The opposite can occur if the money
supply falls or when its growth rate declines.

The results suggest that an increase in money supply

may support the economy in the short run but may create
ination in the long run. Policymakers and central banks
may not want to overuse an expansionary monetary policy
to avoid ination scenarios
The results suggest that an increase in money supply
may support the economy in the short run but may create
ination in the long run. Policymakers and central banks
may not want to overuse an expansionary monetary policy
to avoid ination scenarios
The results suggest that an increase in money supply
may support the economy in the short run but may create
ination in the long run. Policymakers and central banks
may not want to overuse an expansionary monetary policy
to avoid ination scenarios
The results suggest that an increase in money supply
may support the economy in the short run but may create
ination in the long run. Policymakers and central banks
may not want to overuse an expansionary monetary policy
to avoid ination scenarios.
The results suggest that an increase in money supply
may support the economy in the short run but may create
ination in the long run. Policymakers and central banks
may not want to overuse an expansionary monetary policy
to avoid ination scenarios.

An Increase in money supply may support the economy in short run, but may create inflation in
the long run. Policy makers and central bank may not want to overuse an expansionary monetary
policy to avoid inflation scenarios.

An increase in the supply of money typically lowers interest rates, which in turn, generates more
investment and puts more money in the hands of consumers, thereby stimulating spending.
Businesses respond by ordering more raw materials and increasing production.

The first thing that happens with a decrease in the money supply is that interest rates rise. As
interest rates rise, businesses are less willing to invest to borrow for investment spending. And
consumers, too, are less willing to borrow to buy cars and homes and so on. Thus spending
decreases.
As a responsible person, the desire results to be obtained by considering the different scenarios
which might be increasing or decreasing money supply.