Question

After reading Principles of Macroeconomics, please discuss the incentives and allocation of labor resources and financial instruments. Try to relate the concepts to your personal life. In considering the allocation of labor and saving resources, please address the questions below: What is your incentive to work? Would you continue to go to work if you were not being paid? Why did the employer hire you? Would you save more or spend more if the interest on your bank account increased?

Answer 1

Incentives get higher when people tend to allocate or exchange resources optimally. Similarly when resources are rightly invested in efficienct portfolios bycmix of financial instruments then returns too are stabilised and hence incentive is higher to invest.

Peoples incentives to work is job stability and regukar flow of income as well as job satisfaction and career growth as major ones. However people would not continue to work if they aren't paid commensurately except few volunteering jobs. Employers hire candidates based on experience and utilities they bring to table and long term returns to organisation . If interest on bank account is increased people tend to deposit more in pursuit of higher fixed deposit rates and higher returns and hence savings also increases.