...Instructor's Name Course Code Date 3.0 Inflation and Unemployment Inflation and Unemployment are both intertwined. Inflation is a continuous increase in the rate at which the market prices for goods, as well as, services of the market rise and hence, the buying or purchasing power of goods and services falls. When inflation rises most businesses start putting in place tighter monetary policies that end up sacrificing job creation and wage growth that slows down economy growth. Unemployment refers to an economic situation in which people search for jobs or work but are unable to get the jobs thought they are able to work and accept the market wage rates given by firms. This means that when there are exists no vacancies, then there are no jobs. Unemployment can be used as an effective indicator of future inflation. When there is inflation in the economy value of money, falls meaning that the average goods' price would increase to a high level. For instance, if the economy goes to recession the unemployment levels rise. Inflation and unemployment also known as stagflation was first reported in 1958 by A. W. Phillips he discovered that when unemployment falls, or there are vacancies available, workers were empowered to push for higher wages and, as a result company's passed these higher wage costs to consumers, which in turn results in higher prices of goods and services. These led to inflationary buildup in the economy. Both inflation and unemployment are related because an increase...
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...Guy Beagley INTERNATIONAL MARKETS P5 DESCRIBE THE INFLUENCE OF TWO CONTRASTING ECONOMIC ENVIRONMENTS ON BUSINESS ACTIVITIES WITHIN A SELECTED ORGANISATION m2 COMPARE THE CHALLENGES TO SELECTED BUISNESS ACTIVITIES WITHIN AA SELECTED ORGANISATION, IN TWO ECONOMIC ENVIRONMENTS Economic Environments dESCRIBE THE INFLUENCE OF TWO CONTRASTING ECONOMIC environments ON BUSINESS ACTIVITIES WITHIN A SELECTED ORGANISATION Introduction In this report I will be discussing the business environment, specifically that of China and the United Kingdom and the influences of two economic environments that contrast each other over different business activities. I will also be discussing the challenges that the selected business activities within Tesco (Tesco being the organization that I have decided to talk about) within the economic environments of China and the United Kingdom. Gross domestic product Gross Domestic Product is the measure of a country’s business industry using the data that is taken from GDP the government can establish what the estimated wealth of the country is and also the average lifestyle is that the country is living in such as rich or poor. GDP is the monetary value of all finished goods and services that the companies that are active have developed, manufactured and finished and create if it is in terms of the services that a company might supply. GDP is usually taken per year the data that is finally taken as a result of the government working it out is then...
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...product (GDP) * Real GDP * Nominal GDP * Unemployment rate * Inflation rate * Interest rate The second part will consist of three different economic activities in which I will describe how each affects the government, households, and businesses. The three activities include; purchasing of groceries, massive layoff of employees, and decrease in taxes. The first term is Gross domestic product (GDP). The GDP has been used as an indicator as to how well an economy is growing and the overall well-being of the economy at hand. The GDP can be used as evidence for classifying economies into different groups based on growth. The GDP reflects the total amount of both goods and services that were bought and sold and therefor can measure a country standard of living. When the GDP rises, the assumption is that the economy is growing, because the GDP is the total value of all products that are bought and sold. The second term is real gross domestic product (GDP). The real GDP is expressed in base-year prices meaning that this measure is inflation-adjusted and will reflect all of the goods and services that were bought and sold in a given year. The real gross domestic product can take into account the changes in price levels in order to produce a more accurate number. Nominal gross domestic product (GDP) is the gross domestic product figure before accounting for and adjusting for inflation. Nominal GDP figures can be somewhat misleading in the sense that the figure will...
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...or into the labor market. Structural: unemployment caused by a mismatch between the skills of job seekers and the requirements of available jobs Cyclical: unemployment attributable to a lack of job vacancies no economic growth = no jobs 5. Calculating a bank’s excess reserves Reserve ration=bank reserves/total deposits Required reserves=required reserve ratio X total deposits Excess Reserves=total reserves – required reserves 6. Differences in computing GNP and GDP GNP includes all outputs of a nation even if they are made outside the country. GDP only totals what is produce in the borders of a nation even if the company is foreign 7. Why does inflation affect production decision Price uncertainties during times of inflation can affect how a firm expands and invest. If prices are changing rapidly a firm can decide to hold off on investing in production till the prices stabilize again. 8. Who is responsible for buying and selling government securities The Federal Reserve System (the open market committee) 9. what does basic...
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...of currency will have many impacts upon the economy such as upon Balance of Payments, a change in real GDP, employment and inflation. rGDP AD2 AD1 AS Assuming demand is relatively elastic, an appreciation of the currency results in a lower AD, shown by AD1 decreasing to AD2, as lower export demand and greater spending on imports causing a fall in domestic AD. This reduces economic growth, shown by a decrease of Y1 to Y2. Furthermore we would see lower inflation, shown by P1 decreasing to P2 as import prices are cheaper, as well as lower AD leading to lower demand pull inflation and manufacturers having greater incentives to cut costs to remain competitive. This is assuming demand is relatively elastic - if the demand was more inelastic, the result will be vastly different - there will be less of a decrease in economic growth and inflation. Assuming demand is elastic, an appreciation of the currency price would worsen the current account position. As exports are more expensive and imports are cheaper, we see a decrease and an increase in both respectively. This will cause a bigger deficit on the current account, having negative implications upon the economy such as becoming uncompetitive and leading to a further decrease in export led economic growth. However, the impact on the current account isn't certain - an appreciation will tend to reduce inflation, making UK goods more competitive and leading to stronger exports in the long term and benefiting the current account. Furthermore...
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...ideal, and issues concerning both level for higher government, and every individual level. A gross domestic product is a major word or term people need to understand is known as what is use as a gross domestic product that is also referred as the Gross Domestic Product. This product should have the rate for the value for many services, and choosing goods, which is produced within our economy during this particular price quoted in stated this year (Colander, 2010). When people produce goods usually earn the amount of income from businesses purchasing products because of the growth and the economy. This should mean certain type funds or amount of raise increases throughout each year. In this economy the actuality gross product is inflation, which adjusts some type measurement to give an estimated kind of value on any or good, and better, services that starts at the base year amount. The real product is usually considered as a constant amount. However, after the real gross product used a price index to create, which measurements should show exactly a higher amount of funds, which these level have raising pricing during each year and should take the time to...
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...| Inflation and Government Economic Policies | M3:A2 | 5/1/2013 | | ECO 201 M3:A2 5/1/13 1. What is inflation? Inflation is an increase in prices for goods and services (What is Inflation?). What are the causes of inflation? Inflation has a variety of possible causes, but they are between the Keynesian and monetarist theories, ranging between demand-pull, cost-push, built-in inflation, and the quantity model. With demand-pull, inflation is caused by aggregate demand being more than supply. With cost-push, inflation is caused when manufacturers and businesses raise prices due to shortages in order to balance increases in production costs. With built-in inflation, inflation occurs due to prior increases in prices caused by demand-push or cost-pull. And with quantity, inflation is caused by having too much money in the economy (What Causes Inflation?). Is inflation desirable and what can be done to control inflation in a market economy? Inflation is desirable when it is low, because low inflation represents price stability which is perfect for productive planning and investment. There are many ways to control inflation in a market economy which varies between a Keynesian and monetarist approach. Using a Keynesian approach, the government would get involved by breaking up monopolies, regulating commodity prices, and controlling wage levels, while using a monetarist approach, the government would make changes in policy in order to control the amount of money...
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...divided the emerging markets into advanced emerging and secondary emerging countries. Moreover, advanced emerging countries are defined as “upper middle income GNI countries with advanced market infrastructures and high income GNI countries with lesser developed market infrastructures” (FTSE Glossary). According to the FTSE Global Equity Index Series, The Czech Republic is on the second position in the FTSE Advanced Emerging Countries Ranking, while Mexico is found on the fifth position. 3 Report on the purchasing power for the exchange rate between the US dollar and the Mexican peso and the Czech koruna After computing the Changes in Exchange Rates (Czech Koruna vs US Dollar and Mexican Peso vs US Dollar) and the Differential inflation rate (please see the computations performed in the excel file – also attached to...
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...plays a key role in the production of goods and services and in the provision of energy, meaning that even small fluctuations in its price can lead to supply side shocks for nations as well as lower demand for imports as a component of aggregate demand. A supply side shock is a shock that will shift the Aggregate supply curve and in the case of oil will be a negative shock because it will increase costs for an economy, as they are dependent on it. Oil is, for a large number of products and services, fundamental to their production, be it in the manufacturing of the good itself or the energy needed to perform tasks in transportation, heating storage etc This therefore follows that oil is a major cost of production for goods and on a macro level effects Aggregate supply shifting it to the left. In indicated by the shift from AS1 to AS2 in the graph. The magnitude of the shift will be dependent on any stabilisers the economy has in place to dampen the effect of the shock such as fast acting fiscal responses, like reducing the tax on oil but it is undoubtedly true that these will not cushion the shock completely. A shift in, AS will have two important effects: an increase in inflation due to the new raised price level and an increase in unemployment. It could have been argued that in the short run, the economy would hold true to the Philips curve and so this rise in the level of inflation would decrease unemployment but this is not the case. As Oil is a cost of production, it...
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...Company specializes in the production of small fancy picture frames, which are exported from the U.S. to the United Kingdom. Mesa invoices the exports in pounds and converts the pounds to dollars when they are received. The British demand for these frames is positively related to economic conditions in the United Kingdom. Assume that British inflation and interest rates are similar to the rates in the U.S. Mesa believes that the U.S. balance-of-trade deficit from trade between the U.S. and the United Kingdom will adjust to changing prices between the two countries, while capital flows will adjust to interest rate differentials. Mesa believes that the value of the pound is very sensitive to changing international capital flows, and is moderately sensitive to international trade flows. Mesa is considering the following information: The U.K. inflation rate is expected to decline, while U.S. inflation rate is expected to rise. British interest rates are expected to decline, while U.S. interest rates are expected to increase. 1.Explain how the international trade flows should initially adjust in response to the changes in inflation (holding exchange rates constant). Explain how the international capital flows should adjust in response to the changes in interest rates (holding exchange rates constant). Holding exchange rates at a constant rate would allow for Mesa Company to export there products to the United Kingdom and gain a significant profit. The exchange rate...
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...Controlling the level of inflation and achieving close to full employment are both major macroeconomic policy objectives which governments try to achieve. Stagflation is a period when there is a persistent rise in prices and slow economic growth. Slow economic growth implies that there is a rise in unemployment as the economy is not working at its full potential. As part of their objectives, governments aim to lower unemployment and try to keep prices stable but when there is stagflation, conflicts tend to occur as policies intending to lower inflation can cause output to fall further. This essay will evaluate the causes of such an occurrence happening and what governments can do to resolve such problems, referring to current economic events. Governments are generally happy when there is a low level of inflation. A ‘creeping inflation’ can be connected with high profits and general business optimism. (Powell 2009:272) argues that this “maybe a necessary side-effect of expansionary policies to reduce unemployment.” Although when inflation rates are unanticipated and go out of control, the costs of inflation become more apparent. Rapid changes in prices lead to money-functions being non-existent and bartering starts to replace transactions. Normal economic behaviour is distorted too as household bring forward purchases if they expect inflation to increase further. As mentioned earlier unemployment is considered to be bad for an economy. This is shown in Graph 1 at point D where...
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...on the previous year’s financial report. That’s why break-even is reliable to estimate current year’s results. In a short run, break-even analysis can be accurate. There are some limitations of break-even as well. For example, it cannot give accurate results if the data used for it is predicted. Data such as change in direct cost or indirect cost can have an impact on break-even analysis. This means that the results are going to be very different from the actual result. So, in the long run break even will not be reliable. Furthermore, if the company is selling more than one product, it will become really hard for the company to carry out break-even analysis. This is because; all the different products are going to have different prices meaning that the company will have to create different financial accounts for each product they sell. The break-even analysis has to be different for each one as well. Also, a change in the selling price is going to have huge effect on break-even analysis. If the selling price changes, the whole financial data will change as well. If the total revenue changes the total profit will change as well. This means that if the company relies on break-even analysis, at the end of the year they will see a huge difference in their profit of the business. Break-even analysis shows a straight line for estimated income or cost. If the cost or revenue changes for only one or two months and comes back to normal again, the break-even analysis...
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...This paper argues that inflation-targeting central banks should announce explicit loss function with numerical relative weights on output-gap stabilization and use and announce optimal time-varying instrument-rate paths and corresponding inflation and output-gap forecasts. Simple voting procedures for forming the Monetary Policy Committee’s aggregate loss function and time-varying instrument-rate paths are suggested. Announcing an explicit loss function improves the transparency of inflation targeting and eliminates some misunderstandings of the meaning of “flexible” inflation targeting. Using time-varying instrument-rate paths avoids a number of inconsistencies and other problems inherently associated with constant-interest-rate forecasts. In this analyses mainly we describe general national inflation rate, food inflation rate, non food inflation rate some reason, problems and solution of inflation rate. Introduction Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service. The value of a dollar does not stay constant when there is inflation. The value of a dollar is observed in terms of purchasing power, which are the real, tangible goods that money can buy. When inflation goes up, there is a decline in the purchasing power of money. For example, if the inflation rate is 2% annually, then...
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...taxation. These fiscal policies can be divided into expansionary policies and tight policies * Expansionary policies: Refer to when businesses spend more than they take in from taxes and this is good for businesses because more government spending leads to more jobs for consumers or increased infrastructural investment e.g building roads. This is good for businesses because more individuals can afford their goods and services. Businesses would have greater sales while paying lesser taxes to government resulting in better net profits * contractionary policies: Refer to when government spends less and collect more taxes, meaning that businesses and individuals pay more taxes to government, contracts are scaled down and more workers are made redundant this is bad for businesses because demand may fall as a result of less disposable income meaning that consumers will not spend as much on goods and services. Monetary policies: Monetary policy is the process by which the monetary authority of a...
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...Inflation is one of the leading theories explaining the structure of the cosmos, first proposed in 1979 by Alan Guth as a major refinement of the Big Bang theory. In this post, I will explore the basics of inflation as well as how it resolves some problems with the Big Bang theory. The basics Cosmological inflation proposes that between 10−36 and 10−33/32 seconds after the Big Bang singularity, there was an inflationary epoch wherein the universe underwent an immense, exponential expansion of gargantuan scale. In a trillionth of a trillionth of a second, the universe expanded more rapidly than the speed of light itself- this does not violate Einstein’s dictum that light-speed is the universal speed limit, however, because it is empty space...
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