As stated in extract 1, it tells us that the goods we import are not made in the UK and so makes it impossible to replace the imports, therefore meaning that we still have to import goods, despite the high prices due to the low exchange rate of sterling. This is partnered with the fact that some suppliers (shown in extract 1) have agreed long term supply contract with cheaper overseas suppliers before the depreciation of the sterling and so they are now paying high prices. This may mean that these suppliers may have to increase the prices of these goods, therefore leading to cost push inflation due to trying to maintain a decent profit margin in the hope the demand for the good does not drop dramatically. However, it is stated that there still may be a large price differential with countries such as China and India, even after sterling's depreciation. On the other hand however, as stated in extract 1, line 8, volume of good imported has also increased by 16% and inflation has continued well above target.
International Trade ECO 372 University of Phoenix There are many contributing factors to the stabilization and prosperity of our global market. We, the United States, are living in a time of severe trade deficit, meaning that we are importing many more goods than we are exporting. While it is nice to be able to buy foreign products at a lower price, there is risk in doing so. When we purchase foreign goods over domestic at lower prices it forces our domestic companies to sell their goods at lower prices to remain competitive. These lower prices may lend to making enough profit to sustain the current workforce.
But a country such as Turkey, seeing as no trade agreements have been made between them and the US, would not be so ideal because of larger tariffs and borders between the trading industries. As an economist, one must agree that there must be a delicate balance between outsourced industries and industries on the home front. It would be best to lean towards more American products so employment rates would be much higher, but with high employment comes great inflation. The costs of many products would skyrocket if we did not have industries that had very low employee wages in other countries. And if there is too much outsourcing, there would be no jobs.
Fewer companies are willing to enter the market because of the SOX requirements that make going public too costly. Plus, the maintenance required to stay public is too expensive for smaller companies, forcing companies to look elsewhere to raise capital. Rising costs persuade large numbers of companies to exit the public markets to sidestep SEC regulation, creates two problems. First, the overall economy could suffer because corporations limit investment projects due to the higher-cost sources of capital to fund potentially new operations. Second, financially stressed companies that go dark are the very companies’ shareholders need to monitor usually and where transparency is most important.
Economic costs of inflation- Inflations economic costs would include damage to competitiveness as high inflation could cause spiralling price multiplier effect; as prices go up workers would demand higher wages so increasing business costs and another round of price rises to maintain business profits- making exports for expensive, thus reducing the demand for them causing a decrease and AD domestically. Additionally this may lead to unemployment as more costs to the firm i.e. menu costs. Change in inflation could also cause uncertainty to consumers/businesses to spend and invest as they don’t know what the future holds, this can decrease confidence in the market and potentially, in the longer term, cause and reduction in AD. Economic costs of deflation- deflation has proved to have several economic costs, the main cost is that it encourages differed expenditure where people’s expectations change and they delay spending in the hope of getting a better deal.
Final Exam Answers just a click away BUS 475 Capstone Final Examination Part 1 (100% Accurate) 3. From the point of view of consumer surplus and producer surplus, what problem was created when Thailand subsidized the cost of energy to consumers to help alleviate the burden of higher energy costs? a) It encouraged the consumption of too much fuel at the expense of other goods. b) It has no effect; consumers gained consumer surplus, but taxpayers lost the same amount because they had to finance the subsidy. c) It hurt the poor and benefitted the rich.
After evaluating the financial ratios I would tend to agree with that assessment based on the current conditions of the economy. The economy is still showing signs of slow growth and as things continue to improve I would expect shoppers to move away from Wal-Mart and begin to gravitate more toward the seemingly higher quality of products and added prestige offered by shopping at Target. Walmart has also experienced a growing level of consumer backlash related to its employee relations, low rates of pay, a high profile charge of bribery in Mexico, along with slow growth in its Chinese markets that could further damage its potential. Stock Valuation and Growth Based on our calculations, the stocks of Kroger, Target, and Walmart are overvalued. The stock prices we computed were $6.29, $16.84, and $19.10 in comparison to their closing stock prices of $27.89, $61.15, and $69.95, respectively.
However in the long-run, this price raise is not enough to make people quit smoking so since cigarettes are a demerit good, it will have a negative effect on the environment and it will increase the number of health issues from second hand smoke, not to mention the high unemployment rate and less taxes for the government. Work Cited: BusinessDictionary.com. 2013. What is inelastic demand? definition and meaning.
The increase in real GDP would put downward pressure on the price level and reduce inflation. Supply-siders also believed that the budget deficit would not increase substantially as a result of the tax cut. Even if it did increase, it would be offset by increased saving due to the lower taxes. Many economic critics today and in the 1980’s questioned the effectiveness of Reagan s policies, also known as Reaganomics. Economists still argue whether Reagan’s actions were helpful or harmful to the United States economy.
One of the problems is that it reduces the funds available for businesses to invest. People are attracted to high interest rates and the security of investing in the government which attracts them use their savings and profits to buy bonds. However, money spend on the government is one fewer dollar for investments. Crowding-out effect is caused because of loss of funds for private investment due to government borrowing. It hurts and slows down economic growth.