Economics Assignment: Happy Planet Index and Economic Issues

This economics assignment explores several key concepts and economic issues. It begins by analyzing the Happy Planet Index as an alternative measure of economic and social wellbeing, contrasting it with GDP and discussing its application in assessing the impact of events like the Gulf of Mexico oil spill. The assignment then examines Keynesian economic responses to address economic problems in Australia, focusing on fiscal and monetary policies to stimulate aggregate demand. Finally, it critically evaluates the impact of free trade on infant economies, arguing that free trade may not always protect these economies and can lead to unfair competition and challenges. The assignment provides thesis statements and supporting arguments for each question, along with a comprehensive reference list.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Student ID

1ECONOMICS ASSIGNMENT
Table of Contents
Answer to workshop question 1.................................................................................................2
Thesis statement.....................................................................................................................2
Arguments on the thesis statement.........................................................................................2
Answer to workshop question 2.................................................................................................3
Thesis statement.....................................................................................................................3
Arguments on the thesis statement.........................................................................................3
Answer to workshop question 3.................................................................................................4
Thesis statement.....................................................................................................................4
Arguments on the thesis statement.........................................................................................4
Reference list..............................................................................................................................6

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Answer to workshop question 1
Thesis statement
“Happy Planet Index for measuring impact of occurred in the Gulf of Mexico on
social and economic well-being.”
Arguments on the thesis statement
Because of inability of Gross Domestic Product to capture overall economic and
social well-being various measures are developed to capture qualitative aspects related to
well-being of life. One such index is Happy Planet Index that captures both human well-
being and associated impact of environment. This actually relates efficiency of the economy
to people’s well-being in the society. The simple index is computed by first multiplying life
expectancy and life satisfaction and then divides the product with ecological footprint
(neweconomics.org 2019). The impact of any event affecting the ecological balance needs to
be captured using Happy Planet Index.
One such event is the oil spill in the deep water of Gulf of Mexico. The horizon of oil
spill in the deep water of Gulf of Mexico is known to be an industrial disaster. The incidence
of oil spill occurred on April 20, 2010. In the history of marine water oil spill, this is one of
the significant events covering a large area. The volume of oil spills was estimated to be 31
percent compared to 8 percent in the last oil spill in the Gulf of Mexico (Romero et al. 2017).
Oil and methane gas exploded and spread in water because of explosion of a drilling riser.
The oil spills had serious effect on wildlife in the water. Fishes and turtles died due to
the spread of oil. The coastal grassland also affected from the spill of oil following the
explosion. Biologists were highly concerned regarding the severity of the impact of oil spill.
The oil that get stuck on birds’ feathers hampered their ability of thermoregulation. The
healthy wildlife in the region is related to well-being of people living there. People depend on

3ECONOMICS ASSIGNMENT
the wildlife in terms of food and commercial fishing (youtube.com 2019). Tourism is one
important industry of the region offering earnings to many people and hence supporting the
economy. As the incidence of oil spill in the Gulf of Mexico involves ecological footprint
along with human well-being, Happy Planet Index the suitable index for measuring economic
and social well-being.
Answer to workshop question 2
Thesis statement
“Economic problems in Australia can be addressed successfully using Keynesian
responses to the problems.”
Arguments on the thesis statement
The economic theory of Keynes is based on the concept of total expenditure in an
economy and associated impact aggregate output and price level. The theory first introduced
during 1930 in order to explain the Great Depression. In contrast to classical economic
theory, Keynes’ advocate government intervention to influence aggregate demand and
counter economic recession (Goodwin et al. 2015). The Keynesian theory therefore is based
on the demand side of the economy.
The Australian economy is current suffering an economic downturn amid with
different factors. The economic downturn has exposed small business to the debt burden.
More than thousands of businesses likely to be knocked by debt collectors. The retail sector
in Australia is experiencing an economic slump with demand declined for items such as
perfume, jewellery and entertainment. The lower demand in the retail sector is attributed
from low wage and hence a lower income of average household (Taylor 2019). Along with
this, there is also threat to job security resulting in possibility of unemployment.

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In order to address economic problems in Australia Keynesian response is to take
demand side policies. Following the Keynesian theory, government should take expansionary
fiscal or monetary policy to overcome economic downturn. The demand side expansionary
policies attempt to increases aggregate demand resulting in an increases in output and
inflation. On the fiscal side, policy needs to be taken that raises government expenditure or
reduces the tax rate. Government can increase productive expenditure to increases aggregate
demand. A lower tax rate increase disposable income of household. As income increases,
households tend to spend more which is supportive to aggregate demand. For monetary
policy expansion, RBA needs to lower the cash rate (Schumpeter 2017). This by lowering
borrowing cost increase investment. Increase in aggregate demand increases both aggregate
output and price level. As price level increases, unemployment decreases. Keynes’ policy
response by boosting aggregate demand thus is able to solve economic problems that
Australia is facing at present.
Answer to workshop question 3
Thesis statement
“Free trade fails to protect the infant economies”
Arguments on the thesis statement
Free trade indicates the situation where international trade occurs without any
restrictions such as import tariff, quantitative restriction or quota or policies like control of
foreign exchange. The popular theories related international trade are those given by Adam
Smith and David Ricardo. Both advocated free trade but following different approaches
(Feenstra 2015). Adam Smith pioneered free trade depending on absolute advantage while
international trade theory of Ricardo is based on comparative advantage.

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Once countries engage in free trade countries specialize in producing goods in which
they have a comparative advantage. Comparative advantage is defined in terms of
opportunity cost involved in producing goods. A country has a comparative advantage in
producing a good if it can produce the good at a relatively lower opportunity cost. As
resources are allocated only to produce specialized goods resources are utilized in an efficient
manner producing a higher output than otherwise be. For poor countries free trade come with
the benefit of efficient use of resources, access to a broader market, a larger basket of goods
and services and improved standard of living.
Despite all the benefits come along with free trade poor countries often have to bear a
cost of allowing open competition with the advanced nations. In real world, free trade seems
to be unfair for the poor nations. Free trade exposes industries in the poor nation to compete
with advanced industries in rich countries. As the industries in poor or developing nations yet
not developed properly they are unable to compete with advanced countries (Foellmi,
Hepenstrick and Josef 2017). Under free trade all the protection that industries in poor
countries enjoyed previously are eliminated. The uneven competition resulting unequal
business environment costs the poor countries.
As a poor country opens up to international trade the skilled labor tends to move to
advanced nations for higher wage. As only unskilled labors are left for domestic economy
quality of goods are again sacrificed. If the costs from free trade exceeds the resulted
benefits, then free trade should abandon policy of free trade.

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Reference list
Feenstra, R.C., 2015. Advanced international trade: theory and evidence. Princeton
university press.
Foellmi, R., Hepenstrick, C. and Josef, Z., 2017. International arbitrage and the extensive
margin of trade between rich and poor countries. The Review of Economic Studies, 85(1),
pp.475-510.
Goodwin, N., Harris, J.M., Nelson, J.A., Roach, B. and Torras, M., 2015. Macroeconomics in
context. Routledge.
neweconomics.org 2019. The Happy Planet Index. [online] New Economics Foundation.
Available at: https://neweconomics.org/2006/07/happy-planet-index [Accessed 18 Jul. 2019].
Romero, I.C., Toro-Farmer, G., Diercks, A.R., Schwing, P., Muller-Karger, F., Murawski, S.
and Hollander, D.J., 2017. Large-scale deposition of weathered oil in the Gulf of Mexico
following a deep-water oil spill. Environmental pollution, 228, pp.179-189.
Schumpeter, J.A., 2017. Theory of economic development. Routledge.
Taylor, D. 2019. Retail conditions 'as bad as the GFC' driving small businesses to the wall.
[online] ABC News. Available at: https://www.abc.net.au/news/2019-06-19/australian-small-
businesses-struggling-amid-economic-downturn/11224246 [Accessed 18 Jul. 2019].
youtube.com 2019. Gulf Oil Spill Effects On Wildlife. [online] YouTube. Available at:
http://www.youtube.com/watch?v=8Uax5FRWnvs [Accessed 18 Jul. 2019].