As the demand for one product decreases it can cause a chain reaction lowering the demand for products needed to produce the first product. This cycle will continue until the demand for manufactures goods increased and its citizen’s put more capital back into the economy. This theory is true for any reason that people stop buying goods, if the demand goes down so does the supply and the money spent on the supply. In effort to stabilize an economy that is stuck in the decreasing demand and supply cycle the government should increase spending and find ways to increase individual spending across the country. As the capital is put back into the economy the demand for supplies will go up.
As the ageing population continues to grow, the dependency ratio will continue to rise and there the ratio of workers to dependents in unbalanced. There are less people to support those that are dependent both financially, through taxes perhaps, and socially. To combat this, Governments could increase taxes so that there was more funding to support the elderly, as in pay for their residential and medical care, but this would cause disputes among taxpayers. An alternative to this would be to revoke pension and service rights or by introducing a cost, which would exclude elderly people that belonged to the proletariat. Marxist would suggest that introducing a higher tax or introducing costs for welfare support would be society’s way of extending the oppression of the proletariat, keeping them poor and preventing revolution to form a communist
When companies can produce more due to demand they are able to hire more workers, which can lower the unemployment rate. Lowering the unemployment rate will provide more income tax revenue to the government and fewer citizens taking unemployment benefits. Conversely, when exports decrease consumers pay less money for products causing domestic profits to decline and companies are unable to maintain or increase their workforce causing the unemployment rate to
However, pensioners will be hit hard because the extra income they earn from saving will have dramatically reduced, making them worse off. On the other hand, savers may leave the pound for better interest rates in other countries (hot money), causing a fall in the demand for the pound. As a result the value of the pound will fall, making exports cheaper and there will be an injection of net exports. In conclusion, the impact of loose monetary policy will be beneficial to the economy because extra consumption and investment will cause AD to increase which will increase economic growth. However, it takes a long time for changes in interest rates to feed through to consumption and investment and by then the economy may have gotten worse.
When the demand for U.S. dollars increases, the value of the dollar will increase or appreciate (Stone 2008, pp. 685). As a result, U.S. products become more expensive for foriegners causing a reduction in exports and increasing imports. This not only effects the U.S. economy, but also affects the economies in other countries. Monetary policies influence and are influenced by international developments, including exchange rates, and based on these market conditions the U.S. government can make strategic changes to these policies to maintain the country’s economic stability (full employment, stable growth and price stability).
The existing economic effects presented by the rise in demand for Medicare occurred because of the rise in the number of aged individuals. For elderly to be accommodated by the effects of Medicare as per current crisis, particular individuals or sectors of the economy will need to be sacrificed and left to suffer the negative effects related to the increase in demand for
Individuals are losing jobs and the government have to spend more money of benefits. They collected back less from taxes and VAT. Businesses are cutting back on productions but for some customers is good if they have money because the prices are falling as well as inflation. At the boom stage the GDP (Gross Domestic Product) are the values of
The reason I would make this choice is to stimulate lending to businesses, reduce unemployment and increase household income so that the economy could then recover naturally. Scenario 2 In 150 to 200 words, explain your reasoning for the way you are planning on using the Discount Rate. Be sure to address the following: 1. How the Discount Rate can affect the economy 2. How your action will affect economic growth 3.
If this persist long enough it can cause people to revolt against their government and can lead into wars. Other effects of hyperinflation are the relocation of wealth from the public to the government. Once people lose faith in the value of money they will begin to trade goods and services instead of directly purchasing good and services with the country’s currency. During this time interest rates will lower, which will reduce the value of money even more. To stop hyperinflation a government needs to restore confidence in the countries budget system and balance their budget.
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