Category: Economics

Question 12Which of the following is an example of a microeconomic issue?
a country’s trade deficit
a country’s inflation rate
a country’s unemployment rate
a decision by Boeing to open another plant

➤ Why do individual rewards increase competition among employees?
Individual rewards increase competition because people compare personal results and strive to outperform peers for bonuses or promotions. Pay-for-performance and ranking systems create relative incentives. This boosts effort and productivity for measurable tasks, but it can also cause information hoarding and reduce cooperation.

➤ How can an inferior good have an upward-sloping demand curve?
An inferior good can slope upward only as a Giffen good. This requires a very strong negative income effect that outweighs the substitution effect after a price drop. It usually occurs with essential staples for very low-income consumers, where higher prices reduce real income enough to raise consumption of the staple.

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➤ When are inventory changes counted as investment in national accounts?
Inventory changes are recorded as gross private domestic investment in the period when production occurs. If production exceeds sales, unsold goods raise inventory investment. If sales exceed current production, inventories fall and investment is reduced. National accounts use these stock changes to align production and expenditure timing.

➤ How is democratic localism implemented in practice?
Communities implement democratic localism through legal devolution, local elections, neighborhood councils, and direct democracy tools. Examples include participatory budgeting, recall procedures, cooperative enterprises, and citizen assemblies. Effective practice requires statutory authority, fiscal autonomy, capacity-building, and inclusive outreach to involve underrepresented groups.

The conventional decision-making approach (CDM):emphasizes transparency and documentation.specifies an accounting domain.distinguishes correlation from causation.promotes a favored policy.