ZIS IB Year 2 - Maley

This article discusses how Australia's unemployment rate fell unexpectedly. Unemployment decreased to 5.1% from 5.2% in July in a time in which a Bloomberg survey of 23 economists predicted it to increase to 5.3%. The reason given for this is that the labor participation rate slumped to lowest level in more than five years, a sign workers looking for jobs have exited the labor force. Unemployment had been expected to rise - although the economy grew by about 4% on the back of a strong resource industry, a stronger currency and slower global growth led to job reductions at companies including Ford and Qantas. Employment in the states of Victoria and South Australia dropped 14,800 and 9,000 respectively, but increased by 6,900 in Western Australia and 5,800 in Queensland which are centers of the resource industry.

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%. 

The author is defending the single number UE rate as a measure of an economy's well being. His core point, some countries don't encourage working to the same degree as the US. In other words, some countries policies instead encourage people to stay home (and care chldren, for example). Thus, the labor force participation rate for such a country (Germany, in this case) is lower. So, in this sense, to know if the economy is doing well, the UE, as measured against the labor force, is a better single measure.

This article explains how the Swiss economy continued to grow despite the predictions that it would shrink or go into a recession. Economists thought this, because the franc became a strong currency, making Switzerland's imports cheaper but making it very expensive for other countries to buy goods from Switzerland, meaning fewer exports for Switzerland. Since we know that GDP can be calculated by adding the incomes produced by C (Consumers) + I (Investments) + G (Government) + X (Exports - Imports), we will see that Switzerland's GDP would decrease because less exports or more exports would make 'X' a negative value lowering the nations GDP. However, Switzerland's GDP went different as expected. Even though exports were now more costly for other countries, Switzerland exports grew by 2.8 % in the last quarter of the year, in precious metals, jewels or arts. Adding on to that, the gross fixed investments also grew by 2.5 % in investments in construction and equipment as the strong currency proved a "safe-haven" for investor. The rise in exports and investments lead to an unexpected and unpredicted expansion of the Swiss economy instead of a recession.

The article is concerned with the current economic situation in Ireland, namely a recession. This is a period of decline in an economy, where in the business cycle it is known as a 'trough'. This is illustrated well in the article through the decline of demand in the housing market, as a decrease demand is a typical characteristic of a recession. The overall demand or aggregate demand of a country decreases during a recession, as seen in the Irish housing market, as people have lost confidence in the economy, uncertainty has gone up and unemployment has increased. Consequently people save their money as the situation is unstable and they are unsure of their furture imployment and income. Saving is a leakage in the cycle and therefore corresponds to the decrease in aggreagate demand. In the article's context, The Irish are untrusting and therefore unwilling to invest in new housing. This is all a result of bad planning. In the 1990s, Ireland's economy was booming: banks were doing well, the housing market rising significantly and in large demand. Therefore the government decided to build Adamstown. Yet as the housing bubble broke and with it the faith and confidencein the Irish economy, people put their spendings " on hold" as the article illustrates, and areas of modern infra structure such as Adamsville became Ghosttowns.

It's a rare sight, seeing US banks taking precautions instead of relying on the federal government for a bail out. This though is the precise case at the moment. Seeing as it still isn't clear whether or not Greece is staying in the Eurozone, US banks such as Meryll Lynch and JPMorgan are taking necessary precautions to insure that should Greece retreat from the Eurozone, the banks wouldn't be hit as hard. In a recent survery, sent out by a private advisory firm, 80 percent of the answers predicted that Greeve is going to leave the Eurozone, and a fifth of the given 80% believe that more countries may follow Greece's potential lead. 

Unemployment is Greece has reached its highest point, 23.1% from only 8% before the economic crisis two years ago. 672,000 out of 800,000 registered unemployed people are not receiving any unemployment benefits and therefore have no income at all. This means there is a huge number of people who are not able purchase goods and services so the overall consumption is decreasing. Unemployment is costing Greece about five billion per year. Minimum wages have also been cut by 23% which are increasing the costs for the government.  This had led to an $81 billion decrease in consumption and the shutting down of thousands of businesses which means the aggregate demand curve has shifted to the left, decreasing consumption in the country. The economy in Greece has shrunk by 7%, meaning it is in recession. 

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. 

This article talks about South Korea's exports falling for the six month in a row. Exports in South Korea in August fell by 6.2%. Because of this the AD curve would shift to the left. A fall in exports does not mean there has been a fall in income in South Korea, but rather a fall in the national level of income in other countries, which means people are not importing as much as they previously were. When people have a lower income, or when people perceive the economy to be shrinking, they save more money, which means they are not consuming as much. This fall in consumption has an effect inside the country in the form of consumption, but also outside of the country in the form of a decrease in imports. 

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. 

Brazil's President Dilm Rousseff a 66 billion dollar stimulus plan to revive the country road and transport systems in order to bolster the economy. The government predicts a growth of 3% in 2012, down from the 4.5% growth in 2011. In order to maintain the GDP growth at what it was the previous year the government plans to invest 66 billion dollars into the country transport system in order to promote jobs and growth within the country. As this is not a transfer payment (tax revenue redistributed to pensioners, veteran, and the unemployed) the government is contributing to the economies gross domestic product. This stimulus plan would go to wages of the people working on the transport system and the purchase of capital goods necessary to make the improvements. In order to maintain the GDP per capita in Brazil it is necessary for the economy to grow at the same rate as the population.