Group items tagged

At the moment globally there has been a spike in food prices. One of the causes has been the severe droughts in the United states which have driven up the food prices. In response to this inflation the government of Brazil decided to reduce taxes on basic household goods to support an economic recovery. This action also leads to stabler prices, which is one of the macro-economic goals of a country. The tax break on household goods allows for a increase in consumption as consumers will feel wealthier and have an increase in purchasing power. As a result this will increase Brazil's GDP to a certain extent as Consumption is one of the factors that influence the gross national product. 

This article discusses the need for the U.K. government to "show some political backbone" by becoming more enterprise friendly in order to stimulate the badly required growth of their economy. U.K. business leaders have become increasingly concerned as the CBI has predicted that the U.K. economy will shrink by 0.3% this year. This fall in GDP is a sign that the country is entering a double-dip recession. The reason behind this is declining exports, the on-going euro crisis, a stagnant economy since the coalition, reduced borrowing on credit cards, an increase in unemployment and a lack of household spending. A reduced borrowing on credit cards and lack of household spending directly affects GDP as GDP can be calculated using the expenditure method, where household consumption is one of the factors taken into consideration. If consumption falls, so does GDP. In order to prevent the GDP from falling further and to promote economic growth, schemes such as tax breaks for small firms taking on extra workers ,schemes that boost the mortgage and household market and schemes that support household expenditure have been implemented. This could lead to a rise in employment as well as expenditures, causing GDP to grow. 

As can be seen, there has been a drop in unemployment in the UK, falling to 2.58 million people and is shown visually on the graph. There has been a drastic change in the unemployment of 16 to 24 year olds, which will have positive outcomes in the long-run. With less young people being unemployed, they are gaining on vital years of learning that they would have previously missed out on if they had not been employed. In order to gain experience and be better workers in the future, they would need to be employed as soon as possible, and with this happening it will affect the workforce later on as they have developed useful skills to benefit their work.  Once older workers have retired, there will now be people to fill the roles of these workers. With the Olympic Games providing the boost to the economy that is greatly needed, employment is starting to rise again; however, there is the worry that this will only have an impact in the short-run, with there being temporary jobs for the unemployed that will soon no longer be needed. If this happens there could be a rise followed by a sudden drop in employment, so there is a question of whether it will benefit the unemployed at all.

Indonesia has been experiencing rapid economic growth which has increased the size of the middle class as well as their disposable incomes. The article describes how an increase in required down-payments on cars and houses may decrease the growth in Indonesia's economy. Last year the automotive finance growth of banks was 55%, the highest in the world. They have noticed that this is an unsustainable rate of growth. Due to these fears the Indonesian central bank has placed new regulations which will make buyers pay higher down-payments when making a purchase on credit. These down-payments have been increased from originally 10-20% to 30% and more. With that households see themselves with less money available for consumption. The new regulations may also result in a dip in property sales as aggregate demand decreases. However on the other side it may also only defer sales, since people will safe longer until they buy property. 

The global rise in food prices, caused by a drought in the US, has increased Brazil's inflation, along with the government trying to put a stop to the currency gains. Due to bad weather conditions, the tomato industry has been affected, and has lead to an increase in the price of tomatoes. With global prices on the rise, there is less want to import goods, but with inflation in Brazil, high food prices all around is hurting its economy. Currency gains are also having a negative affect which is hurting industrial competitiveness. Consumers are finding it difficult to cope with rising food prices and in the short run will mean that a lot of their earnings are being spent on necessities and not spending on luxuries. Low unemployment is pushing up wages, and with interest rates being cut, people will most likely try and save their money.

China has accused Italy, Greece and the EU for supposedly illegally subsidizing domestic solar manufactururs (suspected that due to a decline in Italian imports of Chinese Solar panels.)  The US international Trade Commision then made a locked tariff of 24-36% on imported solar panels from China.  A year ago the Coalition of american Solar Manufacturers filed antidumping cases against China, saying they were flooding the US market with inexpensive and heavily subsidized solar panels that the US couldnt compete with.  The US fears that China is dumping because it means their domestic producers are not able to compete in the market for solar panels. Therefore this high tariff of 24-36% has been imposed to promote consumption of domestic solar panels. 

This article discusses the changes which European Union officials are planning for the future in order to ensure economic growth. One of the changes mentioned are the Spanish borrowing costs which will be pushed up to their highest levels for four months. In the short-run this will mean less spending from consumers, but in the long run will ensure a significant decrease in debt. Furthermore, they have called on national governments to "implement a series of job-creating policies". These include cutting labor-related taxes, as well as shifting the burden to property, energy and emission levels. These particular changes will cause a rightward shift in aggregate demand as there is an increase in government spending. Moreover, countries will be forced to lift remaining restrictions on worker movement within the EU, which will allow for more employment. This will also cause a rightward shift in aggregate demand because there will be more employed workers and therefore amount of consumption will increase as more people will be able to spend more money.  Overall, this article shows improvements for the future which will increase aggregate demand of the EU. 

Indonesia is threatening to slow down its economic expansion because of its  lack of spending, especially on infrastructure. At this stage, Indonesia is only  spending around 2% of its gross domestic product on capital expenditure and  infrastructure which is far below the amount needed to support Indonesia's  current economic growth.

This is a classic example of cost-push inflation. The supply costs are increasing (in this case the workers wages) which means that SRAS shifts to the left, as less is being is being supplied. Firms hire less workers or produce less because of the high costs. As a result, price levels rise, unemployment levels rise and the real gross domestic product falls. This is also obvious because, if workers go on strike as mentioned in the article, then they are producing less goods, meaning that GDP obviously decreases. This could turn into an inflationary spiral. This spiral is because, when wages are increased for purposes such as to pay or rent or everyday goods, the firms also demand higher prices, which causes those who buy from them to charge more too. This is what causes the cycle to begin. Otherwise it could get to a point where currency becomes worthless.

Based on the article it can be deduced that budget deficit plan in Germany is quite successful. Overall Germany has been able to accumulate a surplus of 8.3 billion Euros through tax revenues and social security funding in only 6 months. The surplus was quite unexpected because in 2011 their was a deficit in Germany. However, this surplus also suggests that the revised tax plan and fiscal policy in Germany are quite successful and that the nation is working towards fully reaching the 4 major economic goals, in particularly that of economic growth. However, the article also suggests that this surplus could decrease by the end of 2012, in which case the fiscal policy may not be as successful after all. To fully examine this budget deficit in Germany data from the whole year of 2012 is needed. However, as of now the article suggests that the policy implemented is quite a successful one.  

The article discusses that the US may face a fiscal cliff in order to reduce the large deficit that has accumulated in the past. A fiscal policy stands for a series of major tax increases and government spending cuts if Congress does not act. The article discusses that through lower government spending and higher taxes it is expected that $600 billion can be extracted from the economy to decrease the debt. However economists think that every dollar of deficit reduction will subtract the same or a greater amount from economic growth. In theoretical terms this would make sense. If government spending decrease this reduces aggregate demand in the economy and by that will cause a decrease in real GDP. Households will cut back on purchases and especially households that are dependent on government support through unemployment benefits will suffer from the policy. Although this will decrease the deficit of the US it may be that it distracts the fragile recovering economy. 

The article explains how the German retail sales decreased by 0.9 percent in July, as a result of the increasing fuel prices.  The inflated prices of fuel have caused the consumption on other goods and services of households in Germany to decrease. Consumption is one of the four factors that affects the aggregate demand or the total demand for final goods and services in an economy at a given time and price level, in an economy. Therefore, if consumption of households decreases the aggregate demand in an economy also decreases. Hence, the aggregate demand in Germany's economy has decreased significantly and therefore their retail sales have also decreased, by 0.9 percent as the article claims. This is because if consumption is lower than the units of output sold are also lower. 

This article describes how the Brazilian government tries to increase investment and consumption through tax cuts. In particular on trucks, machinery, and automobiles the government reduces or gives an extension on the taxes. Another measure to stimulate investment in the country is via reducing its interest rate to an all-time low of 7.5 %. 

This article mentions exports in correlation to a country's GDP - more specifically, Russia's GDP. As one of the world's largest energy suppliers, a lot of Russia's GDP is made up of the amount of exports of their energy goods. As the article says, when oil prices went down in 2009, Russia's GDP decreased dramatically, by about 8%, and when oil prices increased again it rose by 4.2%. Such a high amount of exports suggest high independance. Russia does not rely on other countries to sustain its energy consumption. Also, Russia makes a lot of money from these exports - all of which are injections into the economy. Russian citizens buy the oil because it will likely be cheaper in Russia, as there is so much of it - and the cost of exporting has not yet been included, either. As well as this, foreigners will buy it because they have little other choice. This gives Russia a lot of market power. 

According to this article, Germany's unemployment had increased for a fifth month in august. The unemployment rate is currently at 6.8%. This increase in unemployment was a consequence of the European debt crisis, which had severely decreased demand for exports, causing companies to hold back on investments.  These two factors have therefore decreased both aggregate demand (net exports decrease) and aggregate supply (decrease in investments). Therefore fewer jobs are required as less output is being demanded. This is shown by the numerous job cuts which have occurred throughout Germany. "Siemens AG (SIE) said on Aug. 27 it will cut 500 jobs at its German factories making industrial gear boxes and clutches by 2016, citing slack demand".   However, the article states that the unemployment rate is still the lowest it has been for the past two decades, and meanwhile wages are rising. This increase in wages is boosting consumer spending, therefore causing an increase in aggregate demand, which should eventually allow for aggregate supply to increase, and therefore increasing the need for workers.  Moreover, although unemployment has risen in Germany, it still does not yet compare to the 8.2% unemployment of the US, the 10.8% in Italy, and the euro-area average of 11.2%. 

India's investors and some politicians want the Reserve Bank of India (RBI) to lower its interest rates so that more firms could invest in capital goods in the country. This would increase investment, which in turn would shift aggregate demand to the right and lead to GDP growth. RBI however argues that lowering the interest rates could cause inflation to go up, which in turn would have a great effect on India's lower class citizens. The RBI also argues that interest rates are not very high at the moment, and blame the lack of investment in 'bad governance and lack of reforms'. If the RBI lowered the interest rates and investment did not increase much as they argue, while inflation goes up, many poor people would suffer in the process as they wouldn't be able to buy as many essential goods such as food. This would cause a movement along the aggregate demand curve as price level goes up. On the other hand, from an investor's perspective this would be the best way to generate economic growth, which would benefit the country as a whole if it led to more investment on capital goods.

Investors in India are asking the Reserve Bank of India (RBI) for lower interest rates, so that more can be invested in order to accelerate the country's growth rate (which has been decelerating). However, the RBI is concerned that this could lead to an increase in inflation (which is already high) as AD would increase, causing the country to produce beyond its full level of employment, meaning that price levels would raise more than RGDP proportionally (demand pull inflation). The RBI believes that people are more concerned with inflation as it causes the price of food to go up, affecting poor families. However, there is a possibility that growth is of more importance to Indians when looking at the country's economic performance. Other factors such as an increase in oil prices and a poor-monsoon could drive food prices even higher. As result the Indian RBI must be very cautious whether it will be worth lowering interest rates.

This article discusses the severe rising level of unemployment in Greece. Unemployment rates rose to approximately 24.4% this summer and 55% of young people aged 14 to 24 are unemployed. The reasons behind this high unemployment are that a high percentage of the Greek workforce is employed by the government (about 25%) and these employees receive large unreported subsidies and bonuses. Also, Greece suffers from a large amount of tax evasion, causing it to struggle to pay the high number of government workers. Consequently, Greece had to cut 100,000 government jobs, causing unemployment to rise. Unemployment was high in the first place because of the deep recession which started in 2007. The high unemployment in Greece has further knock on effects on its economy, particularly if the majority of those unemployed are of the younger generation. A young workforce with no jobs means that once the older generation retires, the younger generation will want to take over their jobs but they will not have the experience to do so. Also, they will lose incentive to work hard as they are used to not having jobs. 

1/4th of the labor force in Greece was being employed by the Greek government. However the government borrowed a lot of money and that means that the government workforce will end up decreasing dramatically sooner or later, and that happened.  Their economy has shrunk around 20% since 2008. The article also told us that 'Moody's Analytics predicts that the Greek economy won't start growin gagain until 2015, at the earliest". That is bad for Greece because it will take very long and be very hard for it to become a stable and strong economy again. 

Unemployment is the condition of someone of working age (16-64) who is willing and able to work, actively seeking employment, but unable to find a job. The unemployment rate is the percentage of the total force in a nation that is unemployed. This article lists unemployment rates in various states of India, compares unemployment rates in rural and urban areas and also provides unemployment of women compared to men. The differences are extreme. India had a nation-wide unemployment rate of 3.8% (for June 2012) while the rate is as high as 17.9% in Goa. The lowest unemployment rate is in Gujarat at 1%. There are also large differences between male and female unemployment in India. While male unemployment stands at 2.9% female is at 6.9%. If we focus on a specific state in India, the female unemployment rate was highest in Goa at 46.2%. The unemployment rate is also very different between rural and urban areas. The article only provides figures for females. 28% of females were unemployed in rural areas compared to 17.9% in urban areas on a national level. The highest female unemployment rate in urban areas is in Sikkim at 51.1%. - Julieta Fischer

The increase of the inflation rate is due to a price rise in housing costs and air fares. As rents increased, the over all consumer price index rose "followed by alcohol and tobacco, food, restaurants, and leisure". Cost-push inflation is currently going on in the UK as wages are not rising as quickly as prices for goods and services. UK has frozen both council tax and fuel tax and reduced income tax. Bank of England but its groth forecast to zero. The Bank is cutting intrest rates to get consumers buying again. Lowering tax and intrest rates will help consumers have more money in their pockets and, therefore, more to spend

This article talks about how South Korea's inflation is at its lowest in 12 years at 1.2 per cent. This has both positive and negative effects. It is positive because price level is only slightly increasing, which is good for consumers withing South Korea. However it also has many negative effects. Because inflation is so low employment and real GDP will only be slightly increasing, these are elements that are good for the economy when they increase. One of the main reasons why the inflation is so low is because exports, a key section of the country's economy, have decreased. If exports continue to decrease then this could result in a decrease of GDP in the country which is not good for people living in the country and the country's economy. However, the article says that it is unlikely that South Korea will experience deflation and that this is likely the trough for inflation, meaning inflation is due to increase.