LESSON 1

DISCUSS QUESTIONS.

1. What does political economy mean?

Political economy deals with the production and distribution of the resources.
This is the field where the economic principles apply to the political decision-making. Political
Economy is all about how the politics affects the economy and vice-versa. It tackles the different
political forces that can affect our economy. The word “political” refers to the fact that the said
production and distribution is no longer household level that it requires proper decision making
not just by a small group of people. It also uses the tools of economics to study politics. Political
economy is a social science that studies production, trade, and their relationship with the law
and the government.
2. How significant is political economy as a field of study?
Studying the Political economy is fundamental as it helps us to analyze different
political factors that can affect our economy. But it is more than that it also allows us to break
down different issues or problems and how we can deal with them using their components or by
utilizing economic tools to avoid unnecessary decision-making. It is important as Economics is
one of the critical foundations of our lives. By studying economics, it will also teach us to be
more critical in the way we see the world. Political economy is fundamentally about how we
organize our lives and provide for our basic and more complex needs. It also answers the
questions we probably don’t hear every time but is important in our lives.
3. How does Politics affect the Economy?
Government policy has a large influence in our economy by making policies that
can dictate a business entity. From an economic point of view, growth comes from population
gains, reinvestment of capital, and technological improvement. In the broadest sense, the
economic activity of a country reflects what people, businesses, and governments want to buy
and what they want to sell. Because we are in capitalist economy where we rely too much in
“free market” where the consumers make the decisions and the producers molds the economy.
4. What is the impact of political instability?
Political Instability will cause our economy to collapse to their lowest point.
Instability is caused by the conflicts between the different parties of government since they have
different views of the problems and how they will solve it. That is why it is important to have a
reliable government. Political Instability will shorten the policy makers perspectives and it will
cause them to make sub- optimal short-term macroeconomic policies. It may also lead to a more
frequent switch of policies, creating volatility and thus, negatively affecting macroeconomic
performance.
5. How political instability affects the economy?
Political Instability can have greater impact on businesses and markets. Thus,
affecting the flow of our economy also. It will be hard for them to invest in new capital or enter
new markets. It may also cause more damage like moving to new places to avoid risks as most
business owners are afraid to take risks even though it is part of their business. Political
 instability creates uncertainty that tends to turn away people from being willing to invest in a
country. Political uncertainty may also make it difficult for the people in a country to get decent
jobs, which could hurt spending and saving.
6. How does political stability affect economic growth?
Political Stability is needed for an economy to develop and achieve the desired
outcomes. Different groups have different theory on how the economy should be developed;
hence, making political economy a complex field to make decisions. One should have a reliable
policymaker and enough resources to achieve this.
7. How democracy performance of a particular country is affecting the competitiveness of
industries highly regulated by the state?
A democracy performance of a country has a large effect when it comes to
competing to other countries. It helps them to have a broader way of making complex decisions
that can largely or drastically change a policy that will help their business to run freely. Economic
conditions often inform the policy changes that governments elect to enact. This can help the
government to decide freely to some aspects that will give an active role in responding to and
influencing the economic circumstances of a country is for the purpose of preserving and
furthering the economic interests of important stakeholders or the general citizenry.