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s1 {font-kerning: none}span.s2 {font: 12.0px ‘Arial Unicode MS’; font-kerning: none}Ten principles of economics and the data of macroeconomicsNameInstitutionHow economists are both scientists and policymakers and what principles society uses to allocate its scarce resources.Ideally, economists are not only known scientist but also the policy makers. They use the theories and policies as a method of addressing the economic issues. Generally, economists are referred as scientist since they can develop models and the hypotheses which can be tested by relevant data.

In addition, the models outcome can be used in prediction. They are used as off marks for predicting the data results.  The data enables the economists to explain what people actually do in their day to day activities. This is referred as the positive economics. Example is the change in the rate of gasoline consumption in case there is a change in gas tax. Consequently, economics are scientists because they can develop and test the economic theories and assumptions through scientific ways while using the theories appropriately. As a policy maker, economist always helps in developing and modeling of the policies and regulations which assist in enhancing the economy in a given state. Due to scarcity of resources in most societies today, there are different ways through which the society can use to allocate the scarce resources.

Most people use the tradeoffs including other alternatives. The rationale and incentives of the forgoing alternative can be used to allocate the resources wisely. Depending on several factors such as the abilities, desire and the effort put but the members of the society. Circular flow of money and goals in an economyMost of current economies are a two sector economy. There are two major players in such economy including the households and the firms in the economy. In such a situation, the firm produces the major goods and services while the households are the primary consumers. The households in addition provide basic factors of production including the labor, capital and land.

These factors of production are used by the firm to produce goods and services. The firm in return provides the goods and services which are paid by the household. However, in a three sector economy, the government intervenes and in addition, there is release of taxes while the government is offering incentives to facilitate production. This in effect regulates the rate of investment and savings in such economy. There is no much difference between the two sector economy and the three sector economy. How the economy coordinates society’s independent economic actors.

In an economy, the main actors are the households, firms and the government. The households play the role of acquiring goods and services from the firms. In addition, they provide the factors of production such as labor and land to resource markets. According to theory presented by economists on the same, each household is regarded as a single decision maker. There is an assumption that individual households often attempts to maximize the utility they own. They therefore use their limited and scarce resources like the labor and capital to maximize their utility.Likewise, firms are the major economic agents in an economy. They are set up by the investors and all the entrepreneurs who aims at utilizing the resources to produce goods and services demanded in the market.

In addition, most economics apply the price system to coordinate the entire society and the independent economic actors. Basically, the price system is considered as the coordination of all the major economic actors within the society. This helps the major agents to have a specific price system that can meet the requirements of other factors. The production of goods also affects the economic coordination in that, for a firm to produce goods and services efficiently, there should be specific fundamental rules and guidelines which only aim at maximizing profits while minimizing the cost.

This is the major theory supported by most economists in an economy. It should not go without saying that the distribution of goods and services is very important as a role of most actors in the economy. The economy should ensure that the products are readily accessible to all households in the economy.

In this way, there will be constant flow of goods and services while the households are giving back the returns in terms of payment and provision of factors of production. How a country’s gross domestic product (GDP) is defined and calculatedThe gross domestic product of a country can be defined as the total of value of all prices of final goods and services a country produces to the market per annum. It can also be defined as the market value of the finished products produced within the country though a particular time margin. It is gotten by including all goods and services produced irrespective of whether produced inside the country or outside the border. It measures the total income gotten from the goods and services produced within the country over a given period of time.  It can be calculated by the given formula:Y=C + I + G + NXTo explain these components, (C), consumption consists of all of the spending on the goods and services by individual households in the economy.

The investment (I) is the spending on the newly purchased structures and equipments. G is the government purchase and it includes the spending on goods and the services by the federal government or the state. The net export, (NX) is the value equal to price of goods and services produced domestically within the country and sold to outside market abroad (exports) less the total value of goods and services supplied domestically (imports)A good gross domestic product should follow, Y= C +I + G  + NXHow the consumer price index (CPI) is constructed and why it is an imperfect measurement of the cost of living.

Consumer price index can be defined as the measure of the change in average price paid by the households for market basket identified over s given period of time.  It is majorly used as an economic indicator, deflator of economic profession and in adjusting the dollar values. The value of average is obtained from detailed expenditure information. It is an imperfect measurement of the cost of living since different households have different purchasing power with different tastes and preferences. This makes it difficult to stimulate the average of price paid.