Answer

Hand-Up 1 (Week 4)

Question 1: Heavy rainfall in northern Victoria has damaged grape plantations used in wine production, causing the supply of grapes to fall. This has resulted in a 25% price increase for wine.

The above statement is an example of macroeconomics because it dwells on the behavior of economic performance as a whole. It has particularly focused on the aggregate economic changes caused by the effect of heavy rainfall on grape plantations for wine production. The impact has affected the Northern Victoria region through a 25% increase in price of wine, which is a domestic product. It analyzes how the aggregate indicators and the microeconomic factors affect the economic status in Victoria.

Is this a positive or a normative statement? Briefly explain why. (1 mark)

This is a positive statement because it can be tested and either approved or disapproved. Clearly, the statement is objective and value based. The highlighted hypothesis can be tested and the truth behind the ideology analyzed for validity reasons. Such a model is application in formulating economic policies and production strategies.

Question 2: Are goods developed by the military like roads, factories and new technologies for communications an example of land, labor or capital? Explain your answer.

Goods developed by military like roads, factories and new technologies are examples of labor because they are human efforts physically done with a goal of earning income through the process of production. Any compensation that the military force will be entitled to in return for their productivity is known as wages or employee productivity. In a direct cooperation with land, production is possible because land is a passive factor. All goods developed through military works are classified under production factors as the military is determined to do much more in the economic system.

Question 3: According to the article, what is the opportunity cost of North Korea investing so much money into the military?

In Northern Korea, focusing on military spending basically means other spending priorities are foregone which might result into unreliable infrastructure from schools, hospitals to roads. Choosing one alternative here will lead to the fall of the rest. This is an extreme example of how unrelenting focus on military spending affects the standard of living for its people. The tradeoff on military spending is painful for its economic grounds.