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hunter's macro final

hunter's macro final - Meyer Hunter A Meyer 18 May 2007...

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Meyer Hunter A. Meyer 18 May 2007 Introduction to Macroeconomics Pavlina Tcherneva Final Paper This Vast Gap : Growing Economic Inequality in America and Abroad “What few people realize is that this vast gap between the affluent few and the bulk of ordinary Americans is a relatively new fixture on our social landscape. People believe these scenes are nothing new, even that it is utopian to imagine it could be otherwise.” -Paul Krugman, “The Spiral of Inequality,” from the November/December, 1996 issue of Mother Jones It is now undeniable that economic inequality is at an all-time high, on both a domestic and global level. The gap between the affluent top few and the masses of average workers has grown drastically since the 1970’s and shows no signs of slowing. The causes of this growing disparity are rooted in the rapid expansion of the technology sector and its role on a macroeconomic level, and a slew of government policies that “helped” the process along. The better we can understand the factors that lead an economy (global or national) toward increased inequality, the more efficient we’ll become at combating it, ideally with the outcome being a better society for all. Before tackling the issue of “economic inequality” head on, it makes sense to deconstruct the term. Economic inequality is discussed in several different ways: pay inequality, income inequality, or wealth inequality. In my readings, I’ve found that most of the time, the inequality of wealth- that is of income, and all other assets- is the most 1
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Meyer complete and telling statistic, however not always available. For the purposes of a discussion on economic inequality such as this, the phrases are essentially interchangeable. The most important point to keep in mind, regardless of which term is used is this: economic inequality deals with how evenly (or unevenly) the GDP is being distributed among the citizens. When it comes to global, or international economic inequality, it is less concrete, but just think of a “GWP” or gross world product, in that case instead of a GDP. The most compelling explanation as to what causes inequality from a macro economics standpoint, was put forth by James K. Galbraith, in several different publications, including but not limited to, his working paper, “The distribution of Income,” his book, “Created Unequal: The Crisis in American Pay,” and in his remarks to the American Philosophical Society, entitled “Globalization and Pay.” Galbraith argues that industry is made up of three distinct sectors, each with a varying degree of demand elasticity, creating inherent pay differences between sectors. This has a variety of implications when applied to the business cycle, can bee seen manifested within our own economy in a variety of ways.
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