If I were in a position to run our economy and raise our economic growth, which means an increase in the real gross domestic product (GDP) over time. I would have two sets of methods to carry out. The immediate increase in real GDP for the short run, and increase in production possibility for the long run.

For the short-run growth, it is a movement from the point inside the production possibility curve (PPC) to the point on the PPC. I would apply the expansionary fiscal policy, which is a rise in the government’s expenditure. One of its expenditure may be on firms. So when the government subsidizes firms, their production will increase and it will create more job opportunities for people. When job availability increases, unemployment will drop leading to efficient use of existing resources. Hence, when production increases from the point inside the PPC to the point on the PPC, this would lead to a short-run economic growth.

For the long-run growth, it is an outward shift of the whole PPC. Three main aspects will create such a shift, the number of resources, the quality of resources, and the technology. First of all, the increase in the number of resources can be through the use of immigrant policies, offering a larger inflow of expertise that leads to an increase of labor. Exploring natural resources can be another way to increase land resources. Moreover, importing machines from other countries can be a way to increase capital. Most importantly, an increase in education on business can create more enterprises leading to more labor resources. Besides, increase quality of resources can be through higher levels of education and training to cultivate more experts in labor, and an increase of health care within the country is important to maintain labor’s production quality. Lastly, technology can soar through research and development, a subsidy on university researches, and buying more foreign technology.

In the Middle Ages, goldsmiths took in customers’ deposits (gold coins) and issued receipts that functioned much like checks do today. People used the receipts as a medium of exchange. Goldsmiths also issued loans by writing additional receipts against which they were holding no gold to borrowers. Were goldsmiths engaging in fractional reserve banking? Why do you think that customers turned their gold over to goldsmiths? Who benefited from the goldsmiths’ action? Why did such a system generally work? When would it have been likely to fail?

Fractional reserve banking is what all banks are mandatory to keep some deposits as a minimum required reserve in the bank to avoid bank-run. No, goldsmiths were not engaged in the fractional reserve banking system as no central bank or central authority required them to keep a minimum percentage of the gold deposit as a reserve. Four parties benefit from goldsmith’s action. Customers generally turn gold over to goldsmiths as it is convenient for several reasons and it generally worked.

Customers find the goldsmiths to be very convenient to do a large number of gold transactions. It is very difficult for one to bring gold coins for transactions of large amounts. It would be convenient for both the buyer and the seller if gold coins were stored in the goldsmith and receipts were used instead for transactions, both can easily access the large amount through the goldsmith with just a single receipt. Moreover, for safety reasons, it is more secure if the goldsmith keeps a large number of gold coins instead of keeping them in hand. People may steal gold if they knew an individual who has a lot of gold coins with them. Besides, some may also earn interest return if they keep gold coins in goldsmiths.

Four parties benefit from goldsmith’s actions, they are the depositors, the goldsmiths, borrowers, and the economy. Depositors benefit from having a secure place to save their gold coins in for convenient transactions, interest returns. Goldsmiths benefits in making profit from lending to borrowers like firms or households with interests. Borrowers benefit from having an opportunity to loan without having to give some gold for the goldsmith to keep. They can use this loan to operate a start-up or business. The economy benefits as business activities increases with the easiness of transaction made by goldsmiths, aggregate demand surges making the GDP escalate. This benefits the unemployed workforce, as firm’s demand for workers increases, and the unemployment rate decreases.

All parties involved receive various benefits, this increases the incentive for all to work together and get goldsmith running with everyone’s effort of depositing in it and borrowing from it. The goldsmith just acts like today’s commercial banks. However, goldsmith may fail because they do not have a minimum required reserve. When depositors suddenly want to withdraw all their money out and goldsmith has lent all to borrowers then they might go bankrupt. Also, when borrowers do not return their loans which leads to the goldsmith having bad debt. If there is a lot of bad debt then goldsmith will end up bankrupt.

Does the fact that something is abundant mean it is not scarce in the economic sense? Why or why not?

Scarcity in economics is defined as resources being finite and limited, which are not enough to satisfy the unlimited human wants. It is uncertain that when something is abundant means it is not scarce in the economic sense. When abundant resources are more than the amount that people want, then it is not scarce. However, if abundant resources are less than the amount that people want, it is scarce.

In order to determine whether the resources are scarce or not fully depends on the comparison between the amount of its availability and the amount that people want, as scarcity is a relative concept. For example, in this COVID-19 pandemic, although masks are abundant, the need for masks is much higher than its availability. Therefore, masks are scarce. Moreover, the market price increase of masks also indicates the mass amount that people need for masks. Hence, no matter how abundant a resource is, when its availability is less than the amount that people want and need, the resource is scarce.

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On the other hand, when an abundant resource’s availability is higher than the amount that people want, then the resource is not scarce. For example, sunlight in California is a natural resource and people’s demand for it is lower than the voluminous availability of sunlight. Hence, sunlight is sufficient to fulfill human wants and that it is not scarce.

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To conclude, when something is abundant we are uncertain about it is scarce or not. It totally depends on the comparison with the number of human wants as scarcity is a relative concept.