Describe the following terms: Economic cycle - recurring fluctuations in economic activity consisting of recession and recovery and growth and decline Economic growth - Economic growth is an increase in the production and consumption of goods and services. It entails increasing population and/or per capita consumption. Inflation - Represent the goods that are included in the survey on prices to check what the differences are over a period of time. Interest rate - the percentage of a sum of money charged for its use GDP - The value of our production in one year (National income) from businesses, government and foreigners. Unemployment- when a person who is actively searching for employment is unable to find work Competition - Rivalry in which every seller tries to get what other sellers are seeking at the same time: sales, profit, and market share by offering the best practicable combination of price, quality, and service.
In order to attain these goals, governments use policies to influence the economy. These policies are the fiscal and monetary policies that are incorporated into the business cycle. Market economies have regular fluctuations in the level of economic activity which we call the business cycle. The business cycle as has four phases, as demonstrated in figure 1 below. The first phase is expansion when the economy is growing along its long term trends in employment, output, and income.
As the law of accumulation increases wages for workers, the numbers of the working class will increase. As the population of workers increases, its size becomes a stimulate, pushing wages down. As a result of lower wages, profits for the capitalist will rise again, and accumulation will continue. The two laws are broken down into different concepts that Adam Smith goes into great detail about. The division of labor becomes a major theme in what and how Adam Smith interprets and describes to us about the economic world.
It is one of the highest taxed holiday destinations in whole of Europe (BHA, 2012). Thus with the rise in tax, business like the local shops, the restaurants and the travel agencies are said to be affected. Economic Factors During the past few years the tourism sector have faced hard times due to challenging economic times and have largely impacted the global travel market but however there are signs of recovery within the consumers. The travel and the leisure sector were impacted mainly due to the consumer’s disposable income, unemployment rate, fluctuation in the rate of currency and the oil price. All these drives have hugely impacted the travel and leisure industry.
It further goes on to say that immigration would affect both aggregate demand and supply levels of the economy. The article shows the different ways migrants would affect different areas such as labour supply, job search, capital stock, technology and so on. According to the author, inflow of migrants would definitely increase the level of demand and supply in the economy. It would also boost consumption levels which would in turn increase production levels. The article suggests that the key point to be considered is whether migration would add to the inflationary pressure in the economy.
But unfortunately, it also has brought a lot to the cost, especially inventory cost. The big ones always buy a lot of different products and the demand variation is high. Up to 80% of the products have the c.v. more than 0.5. Obviously, those big customers are really vital to the business. If the company ceases to manufacture some products required by those big customers in order to decrease the inventory and cut off the cost, the company may lose contract with those important customers.
Companies can grow faster in a developing country than they can in a MEDC which has more competition, and with company growth comes increased investment from the company in machinery and workers, which increases consumption and an increased level of employment, who work for the company. This initial entrepreneurship leads to a multiplier effect with the new workers spending their income, due to increased disposable income and this leads to greater consumption from the workers. The investment into machinery and workers leads to an increased gross domestic product, the value of output from domestic based companies. Foreign investors would be attracted to the developing country due to the high rate of economic growth and the increasing GDP, and the investment comes as an injection into the circular flow of income, and increased foreign investment can further increase the speed of growth for a company, possibly allowing the company to expand to other nations in the long run. The increased entrepreneurship
Concerning the economic issue, there were a lot of big mergers in the United states in 1998. Wells Fargo seized this opportunity to merge with Norwest Corporation, and it resulted in the 6th largest bank in the US with $190 billion assets under management. In 2003, the earnings increased even though there was a rise in the interest rates level. The firm profited from the economic slowdowns, because it reduced competition. The main aspect of the social issue is the population growth, which implies a growth of the demand for financial products.
According to Robert E. Scott and Christian Weller, “further increases in real short - term interest rates herald a slowdown.” Further evidence that suggests a recession was on the horizon was information released from the National Bureau of Economic Research that states, “A peak marks the end of an expansion and the beginning of a recession.”(The Business Cycle Peak, March 2001.) During an expansion, however the economy is experiencing normalcy, and during this period the economy is between a trough and peak. The National Bureau of Economic Research, however, defines a recession as, “ a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income and the wholesale-retail trade.” (the Business Cycle Peak.) Therefore, when a peak date was determined in March 2001 it marked the end of an expansion that began in March 1991, and hence the beginning of a recession. This marked the end of the longest economic expansion that lasted ten years of rising incomes and employment.
(See attachments). Firm is currently facing cash flow problems due to several factors. Working capital increased substantially due to increase in sales and inefficient operational management resulting in high collection period and low inventory turnover. Cash outgo for payment to Mr. Holtz compounded the problem. Capital expenditure of $155,000 was incurred during last 2 years.