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.
Recession- The recession is an opposite of boom stage. The unemployment increase, most of firms are losing confidence and stops invest or expand. They may change their planning and started to survive. The customers are likely to save money then spend and the percentages of loans are high and may increase. Individuals are losing jobs and the government have to spend more money of benefits.
Recession is two consecutive quarters of negative economy growth. During recession, there is low level of demand because people don’t have much money to spend. So they look for cheaper products that they can afford. At this time businesses confidence gets low as people aren’t demanding for their products so they would have to cut out their productions as they don’t need to make as much products. At this time they would need to provide cheaper price to attract their consumers and to increase the demand.
Therefore, company A needs to stop making this product. Although we can argue that if company A could reduce the cost dramatically, it can become profitable. However, as the demand of its headphones is shrinking and there are so many suppliers (due to low barrier of entry), there will be great price pressure on the product, as explained by William F. Samuelson and Stephen G. Marks (2010). The price reduction may over shallow the possible cost reduction the firm could achieve. Susan Schreter’s second step is to target new customers from within groups.
The housing market also plummeted leading to negative equity, which the majority of the working class could not afford resulting in the repossession of their houses combined with the drastic increase in unemployment Britain was in a mess. However Major did have some success, he abolished poll tax, which was very popular among the public, he increased spending on the NHS and introduced transport subsides to keep travel fares low.
To begin with, raising the tax will bring in more money to the government from since demand is inelastic for cigarettes and people will keep on buying them. The extra amount of income could be used to help the well being of the country and to provide more public goods. Also, cigarettes are a demerit good, a good which is considered unhealthy or damaging in some and can be physically harmful to the consumer and other surrounding, so when price increases, demand will fall. Even if it is a small fall in demand, it is most likely to be for the young smokers to demand since they have less income than adults. If more young smokers quit, the healthier the next generations will be since smoking is a main reason behind a lot of health issues including lung
The weekly sales figures in 2007-08 is 3.3% in 2006-07 was9.1 By looking at the sale figures I can say that economic climate is affecting my business. Percentage are lower than 2006-07, the reason why im saying this is because people cant afford to buy expensive clothes, because its getting expensive to live, prices going up for e.g. delivery vans that gets clothes into
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.
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. This then results in a decrease in AD causing business revenues to fall and confidence to decrease delaying business investment and cutting costs, i.e. increasing unemployment, all of which could slow economic growth and force a recession as evidenced in the 1930s depression. Additionally deflation increases the real value of debt leading to
If you pump in millions of new workers seeking jobs, it decreases the amount of work available. Plus, the laws of economic supply and demand will push the wages down far from what they would be. Another con is that immigrants, especially the poorer ones, consume a high amount of government resources like health care, education, welfare, etc. without paying a corresponding high rate of taxes. Almost all immigrants will start out earning very low wages, and unless they get additional education or training, they will likely