Answer to Question #172371 in Microeconomics for Salman Pasha

Question

In the world, every economy faces the same fundamental economic challenges. In regards to this statement explain briefly what are these basic economics challenges/issues?

Answer 1

Redistribution of income inorder to reduce poverty levels without causing loss of economic incentives

Provision of public goods-which are not provided in the free market 

Environment preservation- especially from the wastes that are emitted by the industries 

Dealing with monopolies- as monopolies exploit the consumers when they set prices too high.

Provision of employment- as unemployment is a waste of resources. Employment also increases standards of living.

Recessions- in business as they cause worker layoffs thus increasing unemployment rates.

Inflation- inflation causes confusion and uncertainty to consumers. 

Balance of payment deficits- this leads to devaluation of currency which consequently leads to increase in prices of imports and thus reducing living standards and causes inflation. 

Exchange rate volatility- an overvalued exchange rate causes fall in the economic growth.

Introduction of new technologies-and their impact on the economy.The main economic problem is that this might lead to unemployment although it also improves the production process.