Should the government take an active role in the management of national economies?
Should the government take an active role in the management of national economies? In the 15th and 16th centuries with the growth of trade, industry and banking, capitalism became more prominent. The Industrial Revolution brought changes to the economies of many countries. Factory owners did not want governments to control trade. They wanted to run their companies by themselves. Adam Smith suggested a laissez-faire approach should be followed, leaving consumers and producers to make their own decisions and thus gain maximum benefit from all of the market system. During this period countries produced more and more products and goods and many capitalists became rich. However, normal workers did not earn very much and had to work long hours. World War I lead to the destruction of the four factors of production: land, labour, capital and enterprise. Socialism after the war was promising and people thought of it to be a more just society. The principle being that fairness and equality determine government policy. The German Karl Marx suggested that the government should take over and control the economy. It should own all the land, the factories and companies. In a socialist economy the government tries to spread money evenly among the workers. Many countries followed these socialist ideas, which later on led to Communism. Ludwig Van Mises thought markets like people needed to
Explain why governments may need to be wary about economic setting policy aimed solely at growth of GDP
Explain why governments may need to be wary about economic setting policy aimed solely at growth of GDP (10 marks) GDP (gross domestic product) is a commonly used measure of the value of aggregate output of an economy; it is the market value of all final goods and services produced within a country during a given time period (usually a year). If we add together the four components of spending we obtain a measure of GDP: C + I + G + (X-M) = GDP. Even though real GDP is growing in a hypothetical economy, so it has a positive growth rate, is does not necessarily mean that the economy will also have a positive per capita GDP growth. This is the case if the population is growing faster than the real GDP, then the amount of GDP per person on average decreases, and the growth rate of real GDP per capita is negative. Therefore, the government should take into account the % change in population. In addition, GDP cannot accurately measure standards of living. GDP cannot reflect achievements in levels of education, health and life expectancy. A society’s level of health and education contribute significantly to standards of living. Countries may achieve higher or lower levels of health and education with a given amount of GDP per capita, but these may remain unaccounted for in measures of GDP. Moreover, GDP does not take into account the quality of goods and services. In a LEDC,
With the aid of at least one diagram and examples, explain the difference between a movement along the supply curve and a shift of the supply curve
With the aid of at least one diagram and examples, explain the difference between a movement along the supply curve and a shift of the supply curve (10 marks) A supply curve is a curve showing the relationship between the quantities of a good that firms (or a firm) are willing and able to produce and sell during a particular time period and their respective prices, ceteris paribus (all other things being equal). An increase price will usually lead to an increase in the quantity supplied, and thus there is a positive relationship between price and supply. A movement along a supply curve only occurs when the price changes, ceteris paribus. In other words, the price changes but the other non-price determinants remain constant. A movement along the supply curve, caused by a change in price, is called a ‘change in quantity supplied’. The diagram above shows that as price increases from P1 to P2 quantity supplied increases from Q1 to Q2. There has been a movement along the supply curve from A to B. A price rise will cause an expansion up the supply curve, from A to B. A fall in price from P1 to P3 will cause a fall in the quantity supplied from Q1 to Q3 (contraction from A to C). This is called a change in quantity supplied. For example, in September 2014, oil prices fell to $99.93 since June when oil prices hit $115 (P1 to P3), due to weak China demand for oil. While
What are the stages in economic development? Discuss this in reference to at least two countries.
What are the stages in economic development? Discuss this in reference to at least two countries. “Economic development usually refers to the adoption of new technologies, transition from agriculture-based to industry-based economy, and general improvement in living standards.” At one time it was believed as proposed by Malthus in his supposition known as Malthusian catastrophe that within a few centuries the mushrooming population of the world would consume all the food resources, and would reduce humanity to the brink of starvation. But the Malthusian catastrophe failed. All countries, excepting, a few have shown a significant development and transformation in the fields of producing means of sustenance, utilizing resources, creating employment and increasing the per capita income. To show how economic development has coped with the crisis of great depression and recession from time to time, I would like to follow “Ruston’s and Jeffrey Sachs’” models particular with reference to the development of economies in Britain and India-a place where I am studying and where I initially belong to, respectively. In his 2008 book Common Wealth, economist “Jeffrey Sachs” postulates that an “impoverished country moves up from one stage to the next just like a person climbing up the rungs of a ladder, gradually achieving more and more prosperity.” The journey begins
Economics Assignment
Economics Standard Level Assignment Case Study, National income, Macroeconomics 5/19/2008 IB Economics SL Patrick Vollmer Outline of Content of this Package: . Case Study 2. Overhead- Introduction to Macroeconomics 3. Measuring National Income 4. Summary IB Economics Companion - p.147-157 5. The Good, The Bad & The Economist- p.304-325 6. National Economic Performance Sheets with questions 7. National Income Statistics 8. National Income Overhead ) The Case Study - "rise of the Gulf" The article "Rise of the gulf" which is an extract of the magazine "the economist" is based on the condemnation and recommendation for the oil rich nations that are allocated at the Arabian Gulf. It portrays the path on which the Gulf nations rely too profoundly on their oil supplies and are founding their economy on the growth of the global oil market. The difficulty that occurs by this resource allocation is that changes in the value of a commodity (specifically oil) then directly affects the economy of the nation. Though oil is constant at present, oil cannot last forever and the great economical surplus that these oil rich nations have could disappear if oil where to decrease or finish. For most of the oil relying nations, the great prosperity has proven more of a irritation than a blessing as the large sums of capital have not been repretiated into the economy but rather kept
economics commentary
ARTICLE Rice, pulses may cost 20% more this festive season 0 Oct, 2007, 0000 hrs IST, AGENCIES NEW DELHI: This festival season may drain your pocket a little extra as the prices of pulses and rice are likely to shoot up by 10-20%, an industry report has said. The retail price of pulses may jump 15-20% to Rs 45-55 per kg in the next few days from Rs 35-45 per kg now, said a report by industy body Assocham. Releasing the report 'Pulses and rice prices during festival season', Assocham president Venugopal N Dhoot said that the country faced a shortage of one million tonne of pulses in the past few weeks and this is likely to widen further. "The price of rice might go up 10-15% in view of exports of non-basmati rice to African and other nations. A ban should be imposed on exports to meet the festival demand," the report said. "The price rise due to supply fall will only add to the woes of consumers who have already squeezed their budget due to rising onion and vegetable prices," he said, adding the shortage had risen due to erratic production of pulses globally and nearly 3/4 million tonne of gap between the demand and supply. "The demand for pulses has rose over 20 million tonne with domestic production not exceeding 13 million tonne. Even the imports are not meeting the domestic demand adequately," he added. The report pointed out that the imports of pulses are
Economics Commentary
Price Floor to Be Set for Air Tickets The article concerns the price war in the airline business in China. Air companies sell tickets at lower than cost price to drive out competitors. The Civil Aviation Administration of China (CAAC) wants to prevent this and will set a price floor for seats on 699 flights. In this commentary I will explain the situation and discuss the consequences of this issue. Air companies try to attract the necessary numbers of passengers to stop their routes from being canceled by the CAAC. Offering discounts is one of the ways to attract people to buy air tickets. In this case, discounts of 70 to 80 percents had been offered to consumers over the last few months, while a regulation made by the NDRC and CAAC in 2004 states that airlines should not sell tickets at less than 45 percent of the nominal price. Although this regulation, China Eastern continued the price war by still giving these huge discounts which were meant to provoke counterattacks from other airlines. Firms usually want to determine prices to maximize profits and one option is predatory pricing. Predatory pricing means that firms cut prices below costs to drive out competitors. As soon as firms have driven out competitors, obtained a bigger market share, they raise the prices again. Costs D LRAC1 P1 LRAC2 P2 Q1 Q2 Q Fig1 Predatory pricing Predatory
Economics Commentary
COMMENTARY COVERSHEET Economics commentary number: HL Number 3 Title of Extract: Sharp rise in unemployment as financial crisis hits job markets. Source of extract: Guardian.co.uk Date of extract: 15/10/08 Word count: 677 words Date the commentary was written: 06/10/08 Sections of the syllabus to which the commentary relates: Section Candidate name: Atin Garg Candidate number: Commentary Extract Sharp rise in unemployment as financial crisis hits jobs market British unemployment today posted its biggest rise since the country's last recession 17 years ago as the financial crisis filtered through to the jobs market. Official figures showed unemployment measured by International Labour Organisation (ILO) standards rose by 164,000 in the three months to August from the previous quarter to stand at 1.79 million. The rise took the jobless rate up half a percentage point to 5.7%, also the biggest jump since July 1991. "These numbers are truly horrendous and much worse than I had feared," said David Blanchflower, a labour market expert and member of the Bank of England's monetary policy committee. He told guardian.co.uk his earlier prediction that unemployment
Economics commentary
Economics Commentary - U.S quota reduction on textiles China is an industrialized country and it exports lots of goods to other country. International trade involves the exchange of goods and services across international boundaries. The country depends on its sales abroad to develop its country. The textile industry is a massive industry in china, depends a lot on its exports to make its profits. But the United States (U.S) also has a text tile industry and so to protect their industry they use quotas to protect its industry. The quota is worth "$6 billion annual quota" and U.S is reducing its quota on the import of Chinese textiles by $9 million because U.S thinks that China is using a third country to get its goods to U.S. China's government is not pleased with this and it is try to protect its industry. U.S is using protectionism, which is the restriction of international trade. It prevents consumers and producers reaching the equilibrium price and quantity that would happen in a free market. One way to enforce protectionism is Quotas take the form of a physical limitation on the quantity of a commodity which is allowed to enter the country in a given year. What U.S is doing to Chinese textiles is that it is dropping its quota by $ p million dollars from the "$6 billion annual quota". The "world supply" falls; and this gives the Chinese firms to supply more to the U.S
Economics commentary
Economics Commentary - Global recession The global economy seems to go into a global recession. A recession is when there is two consecutive quarters of decline in real GDP. There are many factors which effect the global recession, like interest rates, monitory policy, investment, unemployment and economic growth. Interest rate is one of the factors that are affected and effecting the global recession. This is because "that the Fed is forced to raise interest rates". With this rising interest rates, there are many things which get affected, like the business sector and a fair amount of consumption expenditure by the household sector (mostly durable goods; these are tangible goods that tend to last for more than a year) because most of their spending is borrowed from banks. The cost of borrowing these funds from the bank depends on interest rate because if the interest rate is high then the cost of the overall expenditure is high, as they need to pay back more. Therefore if interest rates are high, then consumption and investment expenditure decreases; as a result "interest rates will choke the global economy." Investment expenditure is expenditure made by the business sector. This therefore decreases aggregate demand. Aggregate demand is the total expenditure on final goods and services produced in the domestic economy, at a range of price levels, during a given time