Can the Government Stabilize the Economy (3 sections) Research Proposal

Can the Government Stabilize the Economy (3 sections) - Research Proposal Example . Such scarcity, whether natural or man-made, makes it necessary for everyone to stretch whatever limited resources he has. Resources can be financial or physical. Practically every one has to make hard choices, to make trade-offs as between one good or service and another. A decision to have one or more of one thing means that one will have less of something else. The relevant cost of any decision is its opportunity cost- the value of the next best alternative one has to give up. Economists stress that one must always calculate the opportunity cost of any specific choice. It would be an ideal situation if a policy maker had all the resources with which to grow the national economy. Scarcity is not the basic premise of growing an economy but rather the availability and the optimal utilization of resources. A country such as the United States has considerable amount and diversity of resources such that it can become self-sufficient; however, less naturally endowed countries would have to grapple with dire scarcity to some degree and will have to procure resources other countries. In a particular case where a country has to consider only what resources it has within its national borders, it will have to make choices about how to use them to maximize or optimize production. In a simplified production possibility frontier (PPF) model where a country has limited resources and a given technology and has only two outputs from a fixed supply of inputs, the decision maker has to make decision about the various combinations of the two outputs, such as wheat and soybeans, or foodstuff and computers. The production of food alone and none of computers will likely not use the resources available in an optimal way. The ideal combination might lie between the two extremes where a certain proportion of resources are employed for the production of food and computers jointly. The concept of the production possibilities frontier comes to our mind – it shows the