Economics Homework: Market Analysis, Poverty, and Economic Growth

This economics homework assignment addresses several key concepts in microeconomics and macroeconomics. It begins by defining poverty in the US, exploring measures to determine poverty, and differentiating between absolute and relative measures. The assignment then analyzes Professor Heckman's article on early childhood interventions, drawing a production possibilities curve to illustrate the impact of these interventions, and explaining their effectiveness in reducing poverty. Furthermore, the assignment delves into GDP calculations, including nominal and real GDP, the GDP deflator, and growth rates. It also explores the money supply, the role of the Federal Reserve, and the impact of government spending. Finally, it examines different schools of economic thought, including fiscal policies and their impact on economic indicators like unemployment and inflation, and the role of government intervention in managing the economy. The assignment provides comprehensive answers to questions related to elasticity, market equilibrium, and the effects of various economic policies.

Week 4 Homework
(1) (6 points) Consider the definition for poverty in the US.
a. How would you define poverty?
In USA, the poverty means people who lack material possession or adequate income for
the requirements.
b. What would you use to determine whether a particular household were considered
“poor”?
In USA, the Poverty is measured by comparing the income of a person or his family to a
set poverty threshold or minimum amount of income needed to include fundamental
requirements. The individual whose income comes under the threshold is known
as poor.
c. Is your measure an absolute or a relative measure of poverty?
This measure is absolute measure of poverty. The reason is that the absolute poverty is
considered as condition in which income of household is below the essential level to
fulfill basic needs.
(2) (14 points) Consider Prof. Heckman’s article in the Wall Street Journal (found here:
https://www.wsj.com/articles/SB113686119611542381 and as a PDF) that outlines
interventions designed to prevent or reduce poverty.
a. (4 points) In 1-2 sentences, summarize what Prof. Heckman is saying in the article.
Professor Heckman stated in article ‘Catch 'em Young’ that a best method to
decrease deficit is to make investment in the quality early childhood development for the
deprived kids. It creates best education, health, financial as well as social results that
increase revenues as well as decrease requirement for the expensive social spending.
b. (5 points) Draw a production possibilities curve for capital and consumption goods. Draw
the impact of early childhood interventions on the PPF. Be sure to clearly label the x- and
y- axis, the original PPF, and the new PPF.

In below mentioned diagram, the healthcare is stated on vertical axis. Alternatively, the
education is stated on horizontal axis. If the society were to allocate all of its resources to
healthcare, this can make at the A point. However, this will not have means to generate
education. In a case, when this was to allocate all of the resources to the education, it can
make at point F.

c. (4 points) Consider the optimizing behavior of people from Chapter 6. Why is early
childhood intervention so effective at reducing poverty? The article addresses this in the
chapter that starts with “Studies of the dynamics of human skill formation…”
The article suggest that there is great importance of the early childhood intervention in reducing
poverty. The reason is that some years of poverty can have adverse impact of the growth of
children. The early childhood intervention programs make aware the children aware about the
issue as well as impacts of the poverty.