Onomic Signals and Cost-Benefit analysis in Macroeconomics (2)
This is another request (should be completely different from the previous one)
Answer both questions:
1)Economic data and the signals they contain are central to business conditions analysis. Economists focus on a?directa? signals and a?indirecta? or causal signals. Explain first, with examples, the difference between a direct and an indirect signal. To illustrate the point further consider the very important macro indicator called Retail Sales, which captures household expenditures on physical goods as well as food services. Write a 1.5 page essay speculate on the various direct and indirect macroeconomic signals that may be contained in a three-month analysis of retail sales data.
2)In the initial lectures on the economic way of thinking we considered the description of cost-benefit analysis in macroeconomics offered by Henry Hazlitt. Three years ago policy makers in the Kingdom of Bahrain were faced with rising inflation caused by the fall in the international value of the US dollar. You know from your economics class that inflation over time can be caused by putting too much money into the economy, but you also know that the sudden rise in prices of necessities can hurt consumers, especially low-income citizens. The government agreed to give each low-income Bahraini household (but not non-Bahraini residents, which represents 54% of the Kingdomas population) BD50 monthly to make it easier to buy what they needed. First, please explain Hazlittas lesson, and then analyze this policy decision using that lesson. You can also draw upon any other relevant ideas contained in the economic way of thinking to analyze this policy. (1.5 to 2.0 pages)