Macro economics short answers Essay Example | Topics and Well Written Essays - 250 words

Macro economics short answers - Essay Example (15 points) Some institutions and institutional arrangements boost economic growth. Institutional arrangements outline the formal and informal rules of the game that direct how people interact. These arrangements form incentives and outline expected and tolerable forms of behavior in social interaction. The institutions that boost economic growth include: Productivity is referred to as the ratio between the output quantity and the quantity of inputs. It determines how well production inputs, like labor and capital, are being employed in an economy to create a specified level of output. Factors that lead to increases in productivity include capital accumulation, more access to natural resources, technological innovation, transformation in labor processes like division and specialization, improvements in business practices and transformation in patterns of trade. Great depression was as result of crash of the stock market. Once the stock market plunged, fearful that banks would fail, people started to withdraw their money. Almost overnight, they put thousands of banks under threat. The more money people withdrew, the more banks failed, and the more banks failed, the more money people withdrew. By 1933, nearly 11,000 of the nation’s 25,000 banks had fallen. In order to boost economic activities the Fed was to put in place policy measures geared toward increasing money supply in the economy but it did not do that in time leading to economic