Case Study 1, 2, 3
OIL AND THE ECONOMY
WHERE IS ALL THE CURRENCY
THE HISTORY OF U.S. GOVERNMENT DEBT

Submitted by:
Julie Ann G. Ropan
Carl Cedric P. Albunian
BSBA- Bus. Econ III- A

Submmited to:
Mrs. Pimeh C. Tolentino PH.D

Introduction The large production of oil is originated at the Middle East. Crude oil is one of the inputs of production of many goods and services that much of the world comes from Saudi Arabia, Kuwait, and other Middle East Country that which included in the monopoly. Monopoly is one of the market structures that a firm is a sole seller of product without close substitute. When some event (usually political in origin) reduces the supply of the crude oil flowing from the region, the prices of oil rises around the world. Because they think that it would be much profitable to them. But since the U.S is much affected to the inflation of the oil it is not favourable for them. U.S. firms that produce gasoline, tires, and many other products experience rising cost, and they find it less profitable to supply their output of goods and services at any given price level. The result is a leftward shift in the aggregate-supply curve, which in turn leads t stagflation. The countries with large oil reserves got together as member of OPEC, the Organizational of Petroleum Exporting Countries. OPEC is a cartel—a group of sellers that attempts to thwart competition and reduce production to raise prices. And indeed, oil prices rose substantially. From 1973 to 1975, oil approximately doubled in prices. Oil importing countries around the world experienced simultaneously inflation and recession. The U.S. inflation rate as measured by the CPI exceeds 10 percent for the first time in decades. Unemployment rose from 4.9 percent in 1973 to 8.5 percent in 1975. Almost the same thing happened a few years later. In the late 1970s, the OPEC countries again restricted the supply of oil to raise the price. From 1978 to 1981, the price of oil more than doubled. Once again, the result was stagflation. Inflation, which had subsided somewhat after the first OPEC events, again rose above 10 percet per year. But because the Fed was not willing to accommodate such a large rise in inflation, a recession was soon to follow. Unemployment rose from about 6 percent in 1978 and 1979 to about 10 percent a few years later.

Executive Summary
Crude oil is the a key input into the production of many goods and services, and much of the world’s oil comes from Saudi Arabia, Kuwait, and other Middle East countries. Some event reduces the supply of the crude oil flowing from the region, the prices of oil rises around the world. U.S. firms that produce gasoline, tires, and many other products experience rising cost, and they find it less profitable to supply their output of goods and services at any given price level.

Objectives
Because of the reducing the supply of the oil, the prices of oil around the world rises that cause the U.S firms experiencing rising cost of production that less profitable to the supply output of their goods and services. So the main objective to this case is to reduce the price of the oil that can cause the stagflation and the high cost of production.

Problem
Countries with large oil reserves got together as members of OPEC. OPEC is a cartel—a group of sellers that attempts to thwart competition and reduce production of oil to raise its price. From 1973 to 1975, oil doubled in price. Unemployment rose from 4.9 %in 1973 and 8.5% in 1975. Also the fluctuation in the economy in the U.S...

Alternative Cause of action
Analyse fluctuation in the economy as a whole with the model of aggregate supply and demand. The aggregate demand curve shows the quantity of goods and services that household, firms, the government, and costumer abroad want to buy at each price level. The aggregate supply curve shows the quantity of goods and services that firms produce and sell at each price level. If the aggregate supply curve shifted to the left the price would be increase and can cause of the fluctuation of the U.S…
Political influences may also affect the people’s confidence in the future. When the time passed by the member of the OPEC broke up because the world market can be source of favourable shifts in aggregate supply curve. World market can determine the economic performance that can leads truthful prediction that can give the nation’s idea when will be the price falls and rise. The price cannot always be at high level if some industries can persist and conserved the use of crude oil. In that situation, the OPEC will destroy and leads to break out. The U.S recovers has begun. Determining the behaviour of the nation’s political aspect can give the answer the nation’s capability to avoid wrong decision.
Conservation efforts and advancement of technology will result in the reduction of economy’s dependence for oil. As a result, the economic impact of any change in oil prices is smaller.

Recommendation The best solution I recommend is the political influences that increase the people’s confident in the future. It gives them to believe that the price of oil will fall, and as the time comes the OPEC will abolish and leads them to survive. Conclusion Political influences could make the people determination and confident that leads them to survive by the greediness of the OPEC. It results to the dismantle of the members of the OPEC and the price of oil will successfully fall.

Where is the Currency?

Introduction
Most people are surprised to learn that our economy has so much currency. In 2007, there was $862 billion of currency outstanding. To put this number in perspective, we can divide it by 236 million, the number of adults (age 16 and older) in the United States. This calculation implies that the average adult holds about $3,653 of currency. But in reality, where are these currencies?

Objectives
The objective of this case study is to determine where the majority of the U.S. currencies are being held. Problem
The problem is that no one knows where the currencies are.

Alternative courses of action
The first is that much of the currency is held abroad. U.S. dollars are used overseas as the medium of exchange, unit of account, and store of value. Second, much of the currency is held by drug dealers, tax evaders, and other criminals. . For most people in the U.S. economy, currency is not a particularly good way to hold wealth. Currencies must be deposited to commercial bank, so that depositors can get interest over their money. Criminals avoid putting their wealth in banks because a bank deposit gives police a paper trail with which to trace their illegal activities. For criminals, currency may be the best store of value available.
Recommendation
Currencies must be deposited to commercial banks. Holding your wealth in a form of currency is not ideal because it can be stolen from you or it can get lost. Also you cannot get interest in your money if you don’t deposit it in the bank.

Conclusion
Depositing your money in the bank is the most ideal way to hold wealth. It cannot get lost or be stolen from you, and it generate interest.

THE HISTORY OF U.S. GOVERNMENT DEBT

Introduction
How indebted is the U.S. government? Throughout history, the primary cause of fluctuations in government debt is war. When wars occur, government spending on national defense rises substantially to pay for soldiers and military equipment. One large increase in government debt that cannot be explained by war is the increase that occurred beginning around 1980. When President Ronald Reagan took office in 1981, he was committed to smaller government and lower taxes. The result was the beginning of a period of large budget deficits that continued not only through Reagan’s time in office but also for many years thereafter. As a result, government debt rose from 26 percent of GDP in 1980 to 50 percent of GDP in 1993.
Objectives
To know what the U.S. government should do to reduce the budget deficit of the government which will substantially reduce the size of their debt.

Problem
Government budget deficits reduce national saving, investment, and long-run economic growth, and this precisely why the rise in government debt during the 1980s troubled many economists and policymakers. Government budget deficits occur when the government spending is greater than their tax revenue. Their fiscal policy- government spending and taxes- cannot be sustained forever at current levels.

Alternative courses of action
The government must prioritize the reduction of government deficit in their legislative agenda. When Bill Clinton moved into the Oval Office in 1993, deficit reduction was his first major goal. Similarly, when the republicans took control of congress in 1995, deficit reduction was high on their legislative agenda. Both of this effort substantially reduced the size of the government budget deficit, and it eventually turned into a surplus. As a result, by the late 1990s, the debt GDP ratio was declining.

Recommendation
The government must be careful in making policy that will greatly affect the revenue of the government. Government gains revenue through imposing of tax. They must prioritize the reduction of government deficit in their legislative agenda. These efforts will substantially reduce the size of government budget deficit, and it will eventually turn into surplus.

Conclusion The U.S. governments finance wars through debt for two reasons. First, it allows the government to keep tax rate smooth over time. Second, debt financing of war shifts part of the cost of wars to the future generation, who will have to pay off the government debt. Fluctuations in governments debts are due to wars, recession (reduction in economic activity) and on the ability of the government to raise tax revenue and their spending