Economics Commentary - Dollar Hits a New Low, Oil Hits a New High
Economics Commentary - Dollar Hits a New Low, Oil Hits a New High Recently, the global economy has been struck a lot, mainly due to the subprime debt crisis. So far as the foreign exchange market is concerned, many factors have made contributions to the depreciation1 of the U.S. Dollar. The main reason for the sharp depreciation of USD is the unfavorable economy with a sick-into-death credit market that makes domestic and foreign investors disappointed. As it is referred to the article, many economic data released by the US government is quite dark leading people to lose confidence, and have worse expectations towards the US financial market. As a result, people, especially the foreigners, will consider making their investment plan into abeyance and withdrawing the current portfolios2 in the US. Also, those investors will seek to make new investments in the other healthy market such as East Asia and Europe. This will lead to the decrease in the demand of USD and the increase in the supply of USD, since they do not need any more dollars and want to sell the USD in order to purchase other currencies such as Euro. This series of actions contribute to decreasing the exchange rate of USD against other currencies. In this diagram, the demand curve shifts to the left and the supply curve shifts to the right, giving a sharp decrease in the price of USD from p1 to p2. (The quantity
The circular flow of income and particular the injections and leakages have a substantial influence on the economic activity of the time. Economic activity is defined as the production and distribution of goods and service in an economy,
Explain how changes in the levels on injections and leakages can change the level of economic activity The circular flow of income and partrticular the injections and leakages have a substantial influence on the economic activity of the time. Economic activity is defined as the production and distribution of goods and service in an economy, processes like Government expenditure (G), investment (I), exports (X), imports (M), savings (S), and taxation (T) all play an important role in the level of activity within an economy. Savings is a significant process in the circular flow of income. This process is classified as a leakage as it involves people removing funds which would otherwise be spent. When the leakage is taking place it reduces the amount of money that could be spent on purchasing goods or services. This will result in a drop in demand which will be responded to by a drop in production. This drop in demand and production is otherwise known as a decrease in economic activity. Despite savings resulting in a drop in economic activity it is also the money that funds investment agencies. This means that the savings can be used as finance which may result in economic stimulas. The inverse effect of spending occurs when there is a great amount of investment within an economy. Investment is classified as an injection as it is an input of funds which may be used in the
Law of Diminishing returns
Law of diminishing returns The law of diminishing returns occur in short run businesses, when at least one factor is fixed (e.g. Capital). This law state that when a variable factor of production is increased, as workers for example, it reaches a point where the output starts to increase at a slower rate, when the marginal cost declines. I will use 3 terms to explain the law of diminishing returns, total output, average output and marginal output. The total output is the total product generated by the factors of production. The average output is the total output divided the number of units of the variable factor of production, which in this case are workers. Finally the marginal product is the change in total output when an extra unit of the factor of production is employed (worker). A numerical example might be as follows: Capital Workers Total Output Average Output Marginal Output 0 20 20 0 2 70 35 50 0 3 10 36,6 40 0 4 45 36,25 35 0 5 75 35 30 0 6 200 33,33 25 0 7 210 30 0 0 8 200 25 -10 In this example, we can see how initially the marginal output is rising. It peaks when the 5th worker is employed, where the marginal output is 30. Then marginal output start to fall and total output is still increasing, but at a slower rate. At this point is when diminishing returns take place, when workers start to get into each other's
Economics internal assesment-government policies
Governments have two broad policies of affecting aggregate demand-the total spending on goods and services at a given price level), of an economy, and one of them is through monetary policies. In an effort to increase aggregate demand, the Polish government has implemented monetary policies - a set of official policies governing the supply of money and the level of interest rates in the economy. Through the polish central bank, the government has cut the interest rate to 3.75%, the lowest interest rate level since 1990. The new low interest rate - the cost of borrowed money) is expected to have positive effects on the polish economy. Firstly, it is going to discourage the incentive of saving money in the banks, as people will earn low interest in return. A fall in interest rate will also increase consumer confidence which will probably lead to increased purchase of goods. A fall in interest rate has also relieved those people who currently have mortgage payments as they are the mostly affected by interest rate changes; thus, a fall in interest rate will lead to increased consumption as those consumers will save more money on mortgages to spend on other goods and services. The new low interest rate is expected to lead to increased investment- the additional of capital stock to the economy by firms), as it's cheaper to borrow money. Increased investment could also be
Tax Bungle
Ryan Marschang AP Macroeconomics Final Exam Essay Question 2 Tax Bungle George W. Bush, former President of the United States, during his time in office achieved very little. In fact, not only did he fail to achieve but he actually negatively impacted many aspects of society including the economy. Bush was inaugurated into office alongside a large surplus bequeathed from Bill Clinton. Furthermore, at the time of his entry into the White House, the United States was faced with three central challenges. The economy was slowly declining into a recession, inequality was on the rise and American institutions such as Medicare and Social Security were in need of funding and innovation. Bush's first action in office was to implement a tax cut that supposedly would stimulate the economy back into economic growth. However, the Bush tax cut, according to Joseph E. Stiglitz in his article "Bush's Tax Plan - The Dangers", was an utter disaster, in all respects. The proposed Bush tax cut had several key components. Firstly it was composed of an overall income tax cut. However, it was not just a simple tax cut, the income tax rate was reduced more for those in the highest tax bracket and less for those in the smallest tax bracket, as such it wasn't equal for all members of society; it severely favored the rich over the poor. Furthermore, the plan included large dividend tax cuts. A
Supply and Demand - Applying the Theory
Supply & Demand: Applying the Theory "In a growing world, milk is the new oil" The purpose of this report is to analyze and interpret the article "In a growing world, milk is the new oil", to determine the effect of different economic factors on supply and demand, and how that can affect the equilibrium price. "There's a world shortage of milk", states Philip Goode, and this is due to the rising incomes "from China and India to Latin America to the Middle East." As people become wealthier, they are willing to buy a higher quantity of milk. "The average person in China now consumes more than 25 liters...up from 9 liters in 2000." This results in a shift of the demand curve to the right (Figure 1), which causes disequilibrium and leads to a shortage (Q2 - Qe), since people now demand more quantity Q2 than the market can supply at the time, Qe. This shortage pushes up the price of milk, for at the originally supplied quantity Qe, people are actually willing to pay price Pe2 on the new demand curve. Although this new demand will attract potential producers into the market as they see a greater potential for making profit, during the process of adjustment, the new supply may not come fast. Currently, the milk industry is operating at optimum capacity to meet demands. There is a lack of spare capacity due to a shortage of cows and limited time to adjust to the rise in demand.
Protectionism and Free Trade
Protectionism and Free Trade 6) Prevent dumping Dumping is exporting a product at a price which is either below the price it charges in its home market or is below its costs of production (Wikipedia). Dumping is usually not easy to spot and therefore it is hard to prevent. However many countries, in order to intimidate foreign industries in selling products below the domestic price level, set very high fines consisting in paying the difference on each unit sold between the fair price and the price which the good was sold (working like a tariff). A company would never go against its business (usually). In dumping cases the companies sell below cost because they have a comparative advantage in producing the good, for example: government could subsidize the good or the good could be produced at lower production costs. In fact this is the reason why they are advantaged and can control the market price, making the other companies adjust to the new price and increase competition. Dumping is however condemned, not prohibited. As long as a domestic industry is not materially injured or not threatened with material injury (ia.ita.doc.gov), a foreign company is not guilty of dumping. Dumping is a threat for a country's economy. However this is only one negative aspect of free trade and is a very uncommon one due to the very strict restrictions. Even if a government feels
LDC Essay Economics Aid
ESSAY HIGHER ECONOMICS LEVEL: Explain the key issues in relation to the developing nations concerning the consequences of economic growth To begin, it is extremely expedient and beneficial if meticulous definitions and what processes of the topic at hand are given. In this second LDC essay, the main focus is on the Consequences of Economic Growth. While a country may grow wealthier therefore, during the growth of its real productivity, it does not essentially mean that it will expand. Economic Growth on the other hand, occurs where there is an increase in the productive potential of the economy and is best calculated by the boost in a country's real level of output over a period of time, for example the increase in the actual Gross Domestic Product. Economic growth is caused by improvements in the quantity and quality of the factors of production that a country has available: Land, Labour, Capital and Enterprise. On the contrary economic decline may take place if the quantity and quality of any of the factors of production falls as each one of the factors rely heavily on each other. Growth is obviously a good thing. This is the set view of economic growth, as it tends to be treated as the main "stepping stone" of economic policy for both developed and developing countries. However, it may not always be supreme. Possible costs and consequences of growth can include the
Winners and Losers of Inflation and Deflation
Who are the winners and losers of inflation and deflation? Inflation is defined as a persistent increase in the average price level in the economy. 1 This increase in the average price level causes a decline in the real value of money in the economy thus reducing consumer's purchasing power. Economists have put forward three different types of inflation: excess monetary growth, cost-push inflation and demand-pull inflation. The core theory regarding inflation relates to the supply of money. Monetarists believe that increases in money supply leads to higher aggregate demand, thus shifting the aggregate demand curve from AD 1 to AD2 causing the price level to rise from P1 to P2. Demand- pull inflation is also the result of an increase in aggregate demand and can occur when the economy is near or reached full employment. An increase in aggregate demand to a level due to a change in any of the determents raises the average price level as the economy reaches full employment. In contrast cost-push inflation is the result of increased costs in the factors of production such as wages and raw materials. The results of these changes are that firms cannot produce the same quantity as before and therefore the short-run aggregate supply curve shifts to the left from SRAS1 to SRAS2, thus causing the price level to rise from P to P1. One of the government's macroeconomic goals is
Human Research Management - Southwest Airlines
2010 Professor Dr. Aziz ŠUNJE Student: Majda PEKMEZ SARAJEVO BUSINESS SCHOOL SOUTHWEST AIRLINES Human Resource Management - Individual Case study Q u e s t i o n s: . Distinctive culture - what does it mean? Describe SWA organizational culture. How is SWA organizational culture connected with SWA business strategy? 2. What makes Southwest employees so highly motivated and flexible despite the fact that they are 84% unionized? 3. Strategic HRM: Put SWA HRM concept in the frame of HRM Harvard model. Recognize management philosophy as one of situational factors. Shortly describe each of four aspects (HRM Policy Choices) SWA HRM. 4. Sourcing: Describe SWA way of sourcing people. What is your opinion about SWA way of sourcing people? ---------------------------------------------- . "I've tried to create a culture of caring for people in the totality of their lives, not just at work. There's no magic formula. It's like building a giant mosaic - it takes thousands of little pieces... The intangibles are more important than the tangibles. Someone can go out and buy airplanes from Boeing and ticket counters, but they can't buy our culture, our spirit de corps." Herb Kelleher, CEO Southwest,