...Republicans Back State Wage Increases by Reid J. Epstein (Source: Wall Street Journal) Hien Nguyen E200: Fundamentals of Economics T, R 1.15-2.30 Professor Srinivasan October 21, 2014. Some Republicans Back State Wage Increases Introduction In the article “Some Republicans Back State Wage Increases” by Reid J. Epstein, government currently make the minimum wage is $7.25 per hour. At this rate, jobs are elastic in the market because small business and big business are still can manage their budget to hire more employees. President Barack Obama’s call to increase the federal minimum wage with the purpose is increase the income per person in the household. Republicans believe if the federal minimum wage continues raise above $7.25 or more, then jobs are not available much more than right now. Economists believe raise the minimum wage is not a good way to help people survive under the high cost of living. It will not encourage people spend more on their income because the cost of everything in the market will raise as much as minimum wage increase. Therefore, some states like Alaska and Arkansas have been raised the minimum wage from $7.25 to $10.10 above the federal minimum wage. The raised in the minimum wage of these state have not make any different in the change of income. Opposite, jobs are become less available or require higher qualification for employee. Using Economic Concepts to Understand the Negative Side Of Raising the Federal Minimum Wage ...
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...rather than the government, and prices and production are determined by supply and demand. Inflation, another key term when discussing money, is, principally, the devaluing of currency. This inflation can happen several ways: first, the currency becomes less rare, making it worth less and less; second, an increase in the price of goods or services without an increase in the value. One example of the latter process would be increasing the cost of labor without increasing...
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...Explain why China raised interest rates six times in 2007 and how those moves might achieve its goals. It is clear that China’s economy has achieved remarkable development since 2006 though the global economy was not optimistic, whereas, the high rate of development brought some unexpected effects as well. As a consequence, China government implemented a series of policies to alleviate the adverse effects, including raising interest rates. This essay will firstly examine economic situation of China in 2007, and then discuss interest rate as a policy tool and its application. In addition, it will also explain whether raising interest rates were justified by the economic conditions then. Finally, it will analyze how interest rates can affect the economy and whether raising interest rates might work in the context of China’s economy in 2007. To simplify the problem, this essay will mainly focus on raising interest rates and omit or take little account for other monetary policies. In general, China’s economy kept increasing rapidly. GDP increased by 11.4% in 2007 (World Bank Office Beijing, January, 2008), and it was far higher than the world average rate. Among it, 40% of GDP relied on export market (King, 2007). However, there were some points to be noticed. Primarily, China’s economy in 2006 had profound effects on that in 2007. Although investments were cooled by the contractionary policy in the 4th quarter of 2006, the trade surplus compensated the adverse effects, and...
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...Supply and Demand ECO365 July 23, 2013 Supply and Demand Microeconomics vs. Macroeconomics The supply and demand simulation shows different aspects of economic structures. Although mostly focused on microeconomics, the simulation does show a small role of macroeconomics. The principles of microeconomics would apply to drop in rent prices to increase the supply being demanded. Another microeconomic principle shown in the simulation is the rise in demand when the cost of rent is lowered. Macroeconomics principles came into play when the rise in demand for apartment was a direct product of the establishment of a new company in town. Same principles of microeconomics apply to an excess supply created by a price ceiling enforced by the government. Supply and Demand Shifts A shift in the demand curve was created when the new company brought an increase in population to Atlantis. A greater amount of people created a greater demand for the apartments. Equilibrium is reached in the demand shift by raising the price of rent to decrease demand. A supply shift was created when 400 apartments were converted into condominiums, which in turn caused a drop in supply. The equilibrium would be fixed by raising the cost to lower the demand because of a decrease in supply. Real World Application With the nutritional corporations expanding and health awareness on the rise prices of nutritional supplements are rising to meet the demand. Especially in local areas, there aren’t too many...
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...established by the government to insure that a product or service receives a pay that is not "too low". Raising the minimum wage can benefit the economy. For example, less of taxpayer’s money will go to low-wage workers receiving federal assistance. Additionally, raising the minimum wage brings people up closer to a better living wage, and can decrease poverty for many Americans. However, cost of raising minimum wage is great. Firstly, the number of workers willing to work increases on the supply curve, but the number of positions available decreases on the demand curve. What results is a...
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...Michael Kennedy Supply and Demand Simulation ECO/365 University of Phoenix March 4, 2014 Supply and Demand Simulation Supply and demand is a very important part of business. However a large supply with no demand is not a good thing. There must be balance between the two so that neither the supplier nor the customer has to suffer. This balance point for these two is where businesses get their equilibrium price. The equilibrium price is the price toward which the invisible hand drives the market (Colander, D. C. (2010). In the simulation, the first of the scenarios has to do with lower the vacancy rate. This can be related to the unemployment rate of a country. In order to lower the vacancy rate the company had to lower the prices for the apartments. By doing this GoodLife has made a supply of housing. To lower the unemployment rate there would have to be larger supply of jobs. One of the microeconomic concepts is a monopoly. A monopoly is a market structure in which one firm makes up the entire market (Colander, D. C. (2010). In the case, the apartment company GoodLife is the only provider of apartments to the resident of Atlantis. The other microeconomic concept has to do with the supply and demand. In the simulation an organization, Lintech Inc, move into Atlantis creating a demand for housing. In order for GoodLife to keep up with this increase in demand, the company had to raise the prices for its apartments. GoodLife did not increase its supply of apartments, so...
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...responsibility of educating people on what they do and how they do it through many different channels of media, such as: speeches, publications, web sites, and educational seminars. What are the factors that would influence the Federal Reserve in adjusting the discount rate? When it comes to the Federal Reserve adjusting the discount rate there are a few factors that play an influential role. The current state of the economy and the direction that the economy is moving are the biggest factors. Should the economy be growing too fast, prices becoming inflated, and a noticeably large amount of money in the economy then the Federal Reserve would want to slow down the economy a little by increasing the discount rate, or interest rate. This increase would help to take some money out of the economy which will slow down economic growth and reduce price inflation. If...
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...Laws of Supply and Demand Antoinette Mitchell ECO/365 August 30, 2014 Darrell Watts Laws of Supply and Demand The collaboration between the supply resource and the demand for a particular resource can affect the particular equilibrium price, quantity plus decision making of the consumer. If the supply is low and the demand is high, the price will be high. In dissimilarity, the larger the supply and the lower the demand, lower the price will be. Microeconomics vs. Macroeconomics The supply and demand simulation displays different facets of economic structures. Even though typically concentrated on microeconomics, the simulation shows a unimportant aspect of macroeconomics. The principles of microeconomics will apply to a drop in rent prices to escalate the supply being demanded. An additional microeconomic principle displayed in the simulation is the rise in demand if the cost of rent is dropped. Macroeconomics principles come into play when the rise in demand for apartment was a direct product of the founding of a new company in town. The same principles of microeconomics relate to a surplus supply generated by a price ceiling applied by the government. While navigating through the simulation I was a focused on supply and demand and how it relates to the housing market in the city of Atlantis. It was a challenge as a property manager of Goodlife Management, superintending properties and forming the correct decisions to provide appropriate costs with the new scenarios...
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...Homework Solutions 2. During Christmastime, when the public’s holdings of currency increase, what defensive open market operations typically occur? An increase in currency holdings causes the currency ratio to rise and the money multiplier to fall. As a result, there will be a decrease in the money supply. To maintain the money supply, the Fed must make a defensive purchase of bonds on the open market, raising the monetary base to counter the decline in the multiplier. 6. “The only way the Fed can affect the level of borrowed reserves is by adjusting the discount rate.” Is this statement true, false, or uncertain? Explain your answer. This statement is false. The Fed could affect the level of borrowed reserves in two ways. First, they could directly limit the amount of discount loans an individual bank can take out. Second, they could reduce non-borrowed reserves to such a point that even with a fixed discount rate, borrowed reserves will rise, as outlined in the diagram below: In the diagram above, the Fed cuts non-borrowed reserves by making open-market sales of bonds. This causes the federal funds rate to rise above the discount rate, prompting banks to borrow from the Fed. As a result, the total reserves held by banks (R2) will be equal to NBR2 supplied by the Fed and reserved borrowed directly from the Fed (BR). 7. Using the supply and demand analysis of the market for reserves, show what happens to the federal funds rate...
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...of funds from trade in goods and services. The Central Bank raised the interest rate by 0.25% to 7.5%. Moreover, recently in August Indonesia faced a hike in the inflation rate, thus raising the interest rate would also help to control the inflation. Inflation is a sustained increase in price levels of an economy. As mentioned in the article, the Central Bank predicted that they could ease the current account deficit to $8.4 billion in the third quarter, from $10 billion in the second quarter by raising the interest rate. Raising the interest rate is a deflationary monetary policy that is aimed to reduce the Aggregate Demand in the economy. This can be depicted through figure 1.0. The Central Bank raised the interest rate to correct the current account deficit. With higher interest rates, consumers are encouraged to save money instead of spending money, thus the Aggregate Demand would decrease. This also means that the consumption of imports would significantly drop to some extent, which helps to correct the current account deficit. The decision made by the Central Bank to run an expenditure-reducing policy by raising the interest rate of Indonesia has its advantageous and disadvantages. Recently in June the government cut its subsidies on fuel, which caused a hike in inflation rate. Raising interest rate would lead to a lower inflation rate would lead to greater competitiveness of export products because the average price level would be relatively less expensive. With more...
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...lenders are being more generous, how the Feds buying mortgage backed securities are raising the home value, and if there is any concern with distressed home sales and if that will interrupt the recovering in 2013. Matthews mentioned how lenders of banks are being more generous with financing for homes. This is causing an increase in demand, allowing even more buyers to enter the market in return raising the value of homes even more. Referring to Graph A, you will notice that the financing is causing a shift to the right for demand. Resulting in a mortgage that is more affordable and with the home value on the rise it gives the buyers a sense of making a good investment. Equilibrium price and quantity both increase caused by the increase shift in demand for the housing market. Due to the demand increase this causes producer surplus to unambiguously increase while consumer surplus is ambiguous. The record low mortgage rates, which is mostly caused by the Feds buying mortgage-backed securities, has increased home value as well. Matthews collected analysis from Tim Iacono, showing that a buyer can buy a home from these low rates, that is about fifty percent more pricey than what he or she could possibly afford using the average mortgage rate over the last twenty years or so. Graph B will show that the purchasing of mortgage-backed securities is causing an increase in demand and supply. Increase in demand is from...
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...followed the trend of growth rate of average earnings. 3. Exchange rate is the price of one currency in term of another. In this case, the falling of sterling (the UK pounds) means the purchasing power of the UK citizens has fallen because the imported raw material and components are more expensive for the UK firms; whereas the exports are cheaper for consumers from foreign countries. The price of raw materials and components increases, therefore the cost of production increases. According to the AS/ AD diagram below, AS1 shifts to the left to AS2 and causes the Price level to rise from PL1 to PL2. In the same time, the RNO fallen from Y1 to Y2 this represent a negative economic growth in certain period. The cost-push inflation is the process of rising prices is initiated and sustained by rising costs, which pushed up the cost. Another of inflation is called the demand-pull inflation, it occurs when the demand exceeds supply. Refer to the following diagram, AD shifts outwards form AD1 to AD2, and the price level shifts from PL1 to PL2. The demand pull...
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...May 10, 2012 Exercise 1: Microeconomic Issues Reported ethical issues involving a company or its products can have a major impact on that company’s market position, social image, product demand, and resulting market value (price). Some markets are more sensitive to these issues than others, such as healthcare. Abbott Laboratories has been in the news in the past few weeks due to an ethical issue reported to the government. It was reported that Abbott was marketing their popular medication Depakote for health conditions that it was not approved for by the FDA. “Depakote is an anti-seizure and mood-stabilizing drug prescribed for bipolar disorder. However, the company admitted that it marketed the drug for unapproved uses, including treatment of schizophrenia, agitated dementia, and autism.” (Yost, 2012). This admission will cost Abbott $1.5 billion in fines and settlement costs. More importantly, this admission may cost Abbott far more than the money. It may cost them market share and a damaged public image. Depakote is a very popular medication, but poor press around the company’s behavior around the marketing of the product can change the company image in not only the public, but with their direct customers such as hospitals and physicians. This can greatly impact demand for their product, impacting market price and profit for the company. Abbott does have a very large market share compared to their competitors and have diversified to include hospital equipment...
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...and foreign exchange, there are a few questions which must be considered. What factors affect the demand and supply of Australian dollars in the foreign exchange markets? Distinguish between the possible causes and effects of currency depreciation and a currency appreciation on the Australian economy. What forces have come into play, if any, in the past few years that have affected the value of the Australian dollar? In addition to looking further into those questions, it is helpful to know what the word Exchange Rate means; it is defined as, “The rate at which one unit of domestic currency is exchanged for a given amount of foreign currency.” A BRIEF HISTORY OF THE AUSTRALIAN DOLLAR Until 1971, the Australian dollar (AUD) was “pegged” to the British pound. This meant that the AUD rose or fell in line with the pound. In 1971, the AUD became pegged to the US dollar instead. These currencies were fixed currencies, which meant that the Australian currency would only change value when a major world currency also changed. This system lasted only until 1974 when the AUD became pegged to a trade-weighted selection of other currencies. This was still a fixed currency. In 1976 this selection of currencies became moveable. Small shifts were able to take place when needed. In 1983 the AUD became a floating currency. This means that the value of the dollar is determined by supply and demand. Initially, the Reserve Bank of Australia was not intended to intervene in the market however since...
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...effects under the economical principle of short-run. Lowering the interest rates would mean that the money supply in the economic will increase, thereby, giving consumers the opportunity to spend more which, will help to stimulate the demand for goods and services. This will, in turn, signal businesses to increase production of goods and services. In addition, higher production means that more units must be supplied to meet increasing demand. At this point, employers must increase their workforce by at least hiring temporary workers to match output demands, which essentially reduces unemployment rate for the short-run. However, lowering the interest rate could negatively impact those people who depend on saving investments to survive. When the interest rates are low, this also affects the return on investments for CDs, investments such as stocks and, other saving accounts. Furthermore, when interest rates are low, people will not be willing to invest with banks because of low or little ROI. This can further damage the deposit reserve by limited the amount of money the banks can loan at any given period. Respond to Ms. Lee: Maintaining the right amount of taxation is a very difficult subject that directly deals with taking hard earned money away from consumers. Raising taxes can have a few benefits. First, raising taxes will help to decrease the money supply by allocating the government a higher percentage of workers’ wages to help reduce the national debt....
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