For example, the government could try these policies Encourage Fixed Rate Mortgages – Makes mortgages less sensitive to interest rate changes. However, in practise this is difficult to do. Also, it may take along time to change consumer’s preferences from variable mortgages. Higher Stamp Duty. Increased taxes on buying a house will discourage speculative buying – this is a major cause of house price volatility.
The fed has to set a lower reserve requirement, which allows banks to loan out more money, which generates more interest, which could lead to periods of inflation and could have worse consequences if the government does not react quickly enough. Inflation would decrease the purchasing power of an individual's money, which would lead to more saving and less spending. (Fried) Less spending would mean less money being injected into the circular flow of our economy and would lead to economic crisis. However, many critics also use this to determine how national debt does not have a huge impact on the economy. A huge national debt has no effect on the money market.
If it is more is elastic, if it is less is inelastic and if it is equal is unit elastic and quantity demanded changes by the same percentage as the price. Normal goods As income rise more is the demand. The house market in San Diego County is an example of a normal good that has turned for some into a luxury although housing is per se a need. In a recent article from Union Tribune San Diego was ranked as the second less affordable city to buy a house in the United States (Horn, 2014). Indeed, in other study the author says that the median income for households falls below what the market price requires by -25.90% (2012).
In my opinion deprivatization will slow down potential growth of the country since short-term and long-term investments will be affected by the uncertainty of property rights security. Less corporations and foreign investors will take the risk of investing and not getting their return. It also might affect the quality of goods and services since there may be less competition and investments in technology. 4) Who gains from deprivatization? Who loses?
Thus, J&L’s operating margin was exposed to the volatility of fuel prices. In order to stabilize operating margin, J&L has two options. One is to enter fixed-price contracts with its fuel suppliers, however, it does not work, because fuel suppliers tend to walk away when fuel prices rise and J&L will be left with unattractive options. The other (and the only available) option is to hedge by purchasing derivatives. Argument against hedging The most important argument against hedging this type of risk is that a corporation needs to, in exchange for hedging, (i) give up the upside of commodity prices going down (in futures, swaps and collar) or (ii) pay premiums (in options) or (iii) both.
This is because according to Elliot (1986), it stated that historical cost assumes money holds a constant purchasing power. The specific price-level changes (shifts in customer preference and advances in technology), inflation, and fluctuation in exchange rates for currencies that happen in the modern economy cause this assumption less valid. Furthermore, historical cost does not consider the changes in price. In times of rising prices, the companies tend to overstate the profits and distribution of the profits to the shareholders will cause trouble to the company. This is because the historical cost does not
DFA roughly believed in efficient market theory. They believed that the high return of small stocks and value stocks come from high risk which matched the efficient market theory. Moreover, they would not do any fundamental analysis of the firm in question. (p6) At the same time, however, they did some adjustments based on other two principles, sound academic researches and skilled traders, to get rid of those not matching the theory. For example, they did not purchase those stocks with inside trade information.
Also, the movie focuses on the ethical dilemma, whether the company should (or not) sacrifice long-term goals for short-term profits. According to the GTX’ executives, sharply cutting expenditures - by downsizing and redundancies - was necessary in order to push up the stock price and avoid upcoming aggressive acquisition by the competitors. But the question is how in real life investors perceive large layoffs? According to Gunther Capelle-Blancard and Delia Tatu – there is no distinct correlation and investors are likely to do the opposite of the board’s expectations: “Layoff decision can be associated with both positive and negative stock market reaction. The perception of investors is determined by the information incorporated in the announcement itself and in firm specific characteristic, but also by economic conjuncture” The next reason of the board’s decisions lays in the fact that the GTX was prioritizing the relationships with stockholders, neglecting the other stakeholders at the same time.
The Unforeseen Effect of Minimum Wage On the surface, minimum wage seems like a good thing. The thinking that more money in an employee's pocket is a good thing is a no-brainer right? I'd argue no. There are different angles to look at, and even more inadvertent effects that have been realized. I'd like to steal a few minutes of your time to show you the unintended and unforeseen effects of this government interference in the private economy.
The economy is not run by a single entity, which means that it is the individual or individuals that are driving our economy. The difference in motives and operation styles from company to company will mean that there are flaws within the economy. In a time of recession and high unemployment this has to be complemented in another way to counteract the recession and promote economic growth. The classical model is an accurate indication of the economy if businesses were operating as one entity, or under government control, which is not the case in our society. Supply does not match demand because the goal of the production entity is revenue and the goal of the consumer is spending.