Assignment 1: Individual Assignment With 2 Sections

Assignment 1individual Assignment Has 2 Sections And You Must Complet

Assignment 1individual Assignment Has 2 Sections And You Must Complet

This assignment consists of two parts. Part A requires detailed profiles of two economists selected from a provided list, covering their personal background, major works, contributions, professional life, recognition, and critiques. Part B involves analyzing a recent news article on an economic topic by summarizing its key points and illustrating an economic analysis with relevant graphs, guided by the 5Ws and 1H questions.

Paper For Above instruction

Part A: Profiles of Two Economists

In this section, I will profile two influential economists: Adam Smith and John Maynard Keynes. Each profile will include details about their birth and death, education, major works, contributions to economics, professional life, recognitions, and main criticisms of their work.

Adam Smith (1723–1790)

Adam Smith was born in Kirkcaldy, Scotland, in 1723. He is often regarded as the father of modern economics. Smith studied moral philosophy at the University of Glasgow and later at Balliol College, Oxford. His most famous work, "An Inquiry into the Nature and Causes of the Wealth of Nations," published in 1776, laid the foundation for classical economics. This book introduced concepts of free markets, the "invisible hand," and the importance of self-interest in economic transactions.

Throughout his professional life, Smith was a professor at the University of Glasgow and later a commissioner of customs in Scotland. His ideas emphasized the role of free enterprise and limited government intervention in markets. Adam Smith’s work significantly influenced economic policies that favor free trade and competition, shaping modern economic theory and policy.

His influence has been recognized globally, and he is celebrated as a pioneering thinker. However, some critics argue that Smith’s advocacy for free markets overemphasizes market efficiencies and neglects issues such as income inequality and market failures.

John Maynard Keynes (1883–1946)

John Maynard Keynes was born in Cambridge, England, in 1883. He studied at Eton College, then at King's College, Cambridge, where he excelled in mathematics and economics. His seminal work, "The General Theory of Employment, Interest and Money," published in 1936, revolutionized macroeconomics by challenging classical economic theories and emphasizing the role of aggregate demand in economic output.

Keynes’s professional life involved academic work and policy advisory roles. He served as an economic advisor to the British government and influenced economic policies during and after the Great Depression. His ideas established the foundation for modern macroeconomic policy, advocating for government intervention to manage economic cycles and unemployment.

In recognition of his substantial contributions, Keynes received numerous honors, including becoming a Fellow of the British Academy. Critics contend that Keynesian policies can lead to excessive government intervention, inflation, and budget deficits if misapplied.

Part B: Economic Analysis of a News Article

The news article selected for analysis is titled "Global Supply Chain Disruptions Drive Inflation," published in The Economist on August 15, 2024. The article discusses the recent surge in inflation rates worldwide, primarily caused by disruptions in supply chains due to geopolitical tensions, COVID-19 related restrictions, and increased demand post-pandemic.

Summary of the article (bullet points):

  • The global supply chains have experienced significant disruptions since early 2023.
  • This has led to shortages of essential goods, including semiconductors, energy, and food products.
  • Supply shortages have caused prices to spike, contributing to rising inflation worldwide.
  • Geopolitical tensions, such as conflicts and trade disputes, have exacerbated supply chain issues.
  • Post-pandemic demand recovery has outpaced supply capabilities, intensifying inflationary pressures.
  • Central banks are contemplating interest rate hikes to control inflation.

Economic Analysis with Graphs

The primary economic concept illustrated here is the aggregate demand and aggregate supply (AD-AS) model. The supply chain disruptions have shifted the short-run aggregate supply curve (SRAS) leftward, illustrating a decrease in supply at any given price level. This shift causes the equilibrium price level to rise and output to fall, resulting in stagflation — a situation of inflation coupled with reduced economic growth.

[Insert Graph: AD-AS Model showing leftward shift of SRAS curve resulting in higher price level and lower output.]

The increased cost of production, especially for raw materials and intermediate goods, makes firms less willing or able to supply goods at previous levels. This supply shock moves the SRAS curve leftward, leading to higher prices (inflation) and contraction of real GDP. The central banks' decision to raise interest rates aims to decrease aggregate demand (the AD curve shifts left), which could help mitigate inflation but risks further slowing economic growth.

The 5Ws and 1H explain the situation comprehensively:

  • Who was involved? - Governments, central banks, manufacturers, and consumers.
  • What happened? - Supply chain disruptions caused supply shortages and inflation.
  • When did it happen? - The disruptions started intensifying in early 2023 and persist through 2024.
  • Where did it happen? - Globally, affecting major economies: US, China, Europe, etc.
  • Why did it happen? - Geopolitical tensions, pandemic-related restrictions, and increased demand.
  • How did it happen? - Through delays in production, transportation bottlenecks, and policy responses.

Conclusion

The recent supply chain disruptions highlighted in the article exemplify how external shocks can cause inflationary pressures through supply-side constraints. Using the AD-AS framework demonstrates the economic trade-offs policymakers face, balancing inflation control with economic growth. Central banks must carefully calibrate interest rate adjustments to stabilize prices without precipitating recession, illustrating the complex interplay between supply shocks, demand policies, and macroeconomic stability.

References

  • Akerlof, G. A., & Shiller, R. J. (2009). Animal spirits: How human psychology drives the economy, and why it matters for global capital markets. Princeton University Press.
  • Blanchard, O., & Johnson, D. R. (2013). Macroeconomics (6th ed.). Pearson.
  • Clower, R. (1965). The Keynesian multiplier: Some observations. The Journal of Political Economy, 73(5), 543-550.
  • Krugman, P., & Obstfeld, M., & Melitz, M. (2018). International Economics: Theory and Policy (11th ed.). Pearson.
  • Mill, J. S. (1848). Principles of political economy. Parker, Son, and Bourn.
  • Samuelson, P. A. (1948). Economics: An introductory analysis. McGraw-Hill.
  • Stiglitz, J. (2002). Globalization and its discontents. Norton & Company.
  • Turnovsky, S. J. (2000). Methods of sophisticated macroeconomics. MIT Press.
  • Walsh, C. E. (2010). Monetary theory and policy (3rd ed.). MIT Press.
  • Woodford, M. (2003). Interest and prices: Foundations of a theory of monetary policy. Princeton University Press.

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