President’s Dilemma Reflection

In the last month in our IB HL Economics we have been working on our President’s Dilemma project, a project where we are given a mock dilemma of stagflation in the U.S. economy and are tasked with solving unemployment and inflation by enacting policies in the economy. In a group with 2 other members we collaborated in order to come up with a set of policies we believed would help assist in ending both unemployment and inflation in the economy. We divided our policies into two sections with both short run goals and long run goals.

Short-Run Goals

In the short run we aimed to reallocate spending from overseas in order to try and create a safety net for the unemployed in the economy. We did this because we believed that by immediately solving unemployment we could boost the production of firms and overall output in the economy. We then provided incentives to the unemployed and to hiring firms to encourage working jobs. For the unemployed we offered to subsidize the expenses involved in moving to areas with work to try and encourage workers to actively seek jobs. Then, to encourage employment by the firms we chose to give half of the unemployed benefits of newly hired workers to the firm for the first year of employment. By doing this we hoped to ease the employment costs of firms given the recent inflation in the economy. By doing this we hoped to quickly boost back the supply and employment in the economy. Additionally, we chose to lower interest rates to try and increase economic activity and increase spending in the economy so that we could create stability in the economy to support our long-run goals.

Long-Run Goals:

In the long run we looked at using reallocated funds no longer going to the unemployed in order to boost spending on education and job training to try and ensure that a new generation of workers is trained and educated to work in a variety of positions. By having the ability to work in a number of jobs, workers in the economy would be able to switch jobs easily if large-scale layoffs were to affect workers in the future. In addition, by spending more on future education we’re hoping to provide a smarter workforce, though with obvious lagging benefits, that will be able to cope with economic dilemmas.

Reflection:

In the end I believe we performed very well in front of the board of advisors. We presented our policies and were able to defend our decisions during the question and answer session that followed. I believe this was because we fully supported the ideas we we’re promoting and were able to understand how they affected the economy. What this came down to specifically was an evaluation of stakeholders in the economy. When we designed our policies our goals aimed at providing support for every concerned population (the government, the unemployed, the retired and the corporations). We did this knowing that by playing strongly to any single population’s demands we would be impairing the other three. Because of this we spent a lot of our time designing our policies in a unique way to ensure everyone was benefitted in the short-run to their immediate satisfaction, and that we were still able to provide economic stability and control in the long-run. We did this knowing that the stakeholders of our economic policies in the dilemma were everybody, and that our goals as advisors was to ensure that those affected were not upset or impaired in anyway.

In the future I believe I would do everything in the same was as we did for this project: we created our goals, addressed those in a priority of severity of need, and ultimately concluded with a set of policies that was effective in providing stability and support to all sectors of the economy.

Economic Indicators

In economics, certain indicators can predict economic shifts and changes in AS and AD. These indicators, known as economic indicators, can be grouped into two categories:

Leading indicators are indicators in the economy that can be used to predict economic activity before it occurs. These indicators are important to economists as it allows them to use information from the economy to predict and manipulate aspects of the economy in order to prevent market failure. Certain leading indicators include stock changes, changes in debt and money supply in an economy.

Lagging indicators are indicators in the economy that follow economic activity. While these indicators cannot be used to predict economic activity, it can be used to reflect upon the effect on economic changes. This is important as it allows economists to see the effects of economic changes in order to predict how to prevent these effects in the future. Lagging indicators can include changes in interest rates, changes in consumer price index (CPI) and unemployment.