Explanation and Analysis 1: The Opportunity Cost of Macroeconomic Events All soc

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Explanation and Analysis 1: The Opportunity Cost of Macroeconomic Events
All societies face a trade-off between efficiency (productivity) and equity (fairness). Whenever a society focuses on production, they gain efficiency, but that makes the distribution of income and resources less fair throughout the population, so they lose equity. This provides an incentive for people to work because productivity is rewarded, but the consequence is more poverty, as those who are less productive will not be allocated much income. Therefore, the opportunity cost of increased efficiency is less equity and vice versa.

For the following macroeconomic events, explicitly define the opportunity cost of each macroeconomic event in terms of the cost to society or groups of individuals within the society; i.e., define what society trades off in choosing this event. In your answer include a discussion of:

Macroeconomic Events

Event 1: The government passes a law allowing states to pay unlimited unemployment benefits to all unemployed workers for an unlimited amount of time.

Event 2: The federal government increases the restrictions on the immigration of skilled workers.

Explanation / Answer

Event 1: The government passes a law allowing states to pay unlimited unemployment benefits to all unemployed workers for an unlimited amount of time The workers or employees may feel demotivated & this their efficiency may get reduced & thus leading to decrease of overall efficacy of firms operations. The Quality & quantity of firm's products may decrease. Contrary to that it will increase the purchasing power of unemployed & provide them an equitable standard in society. Rest Government policies depends on the type of unemployment previling in society & the extent to which its there. Event 2: The federal government increases the restrictions on the immigration of skilled workers A simple supply and demand model suggests that more skilled workers means lower wages. And then since restrictions have been imposed on in current scene so it will increase the wages of local skilled people. However in case of unskilled labour case is different an influx of cheap labour can make certain businesses like farming or restaurants feasible. Absent cheap labour, these firms simply could not compete with foreign rivals. Also such restrictions decrease the market demand.

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