A rise in oil prices would also directly affect business performance as oil is a cost of production to firms, especially to those which produce oil related products, hence reducing profits and limiting the amount of money that firms can reinvest. All of this would result in a fall in real output from Y1 to Y2, representing a fall in economic growth. One could say that a fivefold increase in
Inflation damages businesses because it causes uncertainly. A rise in the rate of inflation might reflect a rise in the cost they have to pay; for example: * Employees will want more wages * Costs of materials may go up * Cost of fuel and energy may also rise. These rising cost will eat into the business profit. This keeps businesses to then have a choice to either keep prices constant or to see profits fall or raise to raise prices and perhaps lose out on competitors. The
Economists believe that government spending should rise temporarily so the drop in private spending can repair itself. The government is taking an opposite approach to the advice of economists by issuing immediate spending cuts. This fiscal policy is inappropriate for the current economic situation. With large spending cuts, the government could push the economy back into another unwanted recession. With political campaigns for the United States Presidency heating up, Americans should not be
The factors which contribute to a recession and sometimes a depression are: increase in cost of production, higher costs of energy, and the national debt among many others. This means people and companies alike will tend to cut spending, which by chain reaction will cause the unemployment rates to increase and the GDP to
As situations happen around the world the internal economy is being affected, the price of oil increases and more money in the market should be created, but this will affect the inflation, as more money is in the market, the GDP keep growing and the unemployment is decreasing. To balance the economic growth, lower the inflation, and make a reasonable rate of unemployment it is important to take in consideration that typically if money is released into the system the real Gross Domestic Product will increase, creating opportunities of work and decreasing the unemployment rate. After indentifying the tools used for the Federal Reserve and analyzing the influence this has with the money supply the Feds can add or take money into the system to control the levels of inflation, increase the Gross Domestic Product and reduce the
First, if the government increases its purchases but keeps taxes constant, it increases demand directly. Second, if the government cuts taxes or increases transfer payments, households’ disposable income rises, and they will spend more on consumption. This rise in consumption will in turn raise aggregate demand” (Weil, 2008, para. 4). Consumer income has a huge effect on aggregate supply and demand just as the aggregate supply and demand can affect consumer income.
If inflation is increasing, which means the value of money is going down, it may make more sense to invest the money in investments that are likely to increase in value. 5. Imagine that you are considering moving to a new country and looking for a job there, but you first want to make sure the country has a strong economy. Describe at least three economic factors that you would want to research as evidence of the economy's strength or weakness, and explain how each factor would affect your decision to move there. (4-6 sentences.
Prices rice when government prints too much money. Society is facing a short-run tradeoff between inflation and unemployment. The recession that is reshaping the lives of American’s is a direct result of
Retirements cannot lengthen indefinitely without massive gains to productivity, or increases in the supply of younger workers; the math doesn't work. Eventually, living standards start to fall. The combination of the deadweight loss from taxation and the shift of workers from production to dependence makes it harder to pay for the retirement benefits--effectively, Social Security undercuts its own political sustainability. This is the real problem we face, and it's barely hinted at in the Trustees report. 2.
However economic growth has various costs. Firstly if economic growth is unsustainable and is higher than the long run trend rate inflation is likely to occur. inf Furthermore, this temporary boom in output is unlikely to continue, and may be followed by an economic downturn or recession. Thus, it can be very damaging to increase the rate of economic growth above the sustainable rate. This boom and bust cycle happened in the UK in the late 1980s and early 1990s.