...Bus 305 Week5 Module 5 Case March 17, 2010 Recessions and Economic Stimulus A recession is a period of decline in total output, income, employment, and trade. This downturn, which last 6 months or more, is marked by the widespread contraction of business activity in many sectors of the economy. But because many prices are downwardly inflexible, the price level is likely to fall only if the recession is severe and prolonged-that is, only if a depression occurs. Why a recession might occur? The aggregate demand aggregate supply model is a variable-price model that enables analysis of simultaneous changes of real GDP and the price level. The aggregate demand curve is down sloping because of the real-balances effect, the interest-rate effect, and the foreign purchases effect. The real-balance effect indicates that inflation reduces the real value or purchasing power of fixed-value financial assets, held by households, causing cutback in consumer spending. The interest-rate effect means that, with a specific supply of money, a higher price level increases the demand for money, thereby raising the interest rate and reducing investment purchases. The foreign purchases effect suggests that an increase in one country’s price level relative to the price level relative to the price levels in other countries reduces the net export component of that nation’s aggregate demand. The determinants of aggregate demand consist of change in consumer spending (consumer...
Words: 1017 - Pages: 5
...Recession In economics, a recession is a business cycle contraction. It is a general slowdown in economic activity.[1][2] Macroeconomic indicators such as GDP (gross domestic product), investment spending, capacity utilization, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock or the bursting of an economic bubble. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation. Definition In a 1975 New York Times article, economic statistician Julius Shiskin suggested several rules of thumb for defining a recession, one of which was two down consecutive quarters of GDP.[3] In time, the other rules of thumb were forgotten. Some economists prefer a definition of a 1.5% rise in unemployment within 12 months.[4] In the United States, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating US recessions. The NBER defines an economic recession as: "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment...
Words: 3886 - Pages: 16
...decline in economic activity. It is generally agreed to have occurred between 1929 and 1939. Although parts of the economy had begun to recover by 1936, high unemployment persisted until the Second World War. Background To Great Depression: * The 1920s witnessed an economic boom in the US (typified by Ford Motor cars, which made a car within the grasp of ordinary workers for the first time). Industrial output expanded very rapidly. * Sales were often promoted through buying on credit. However, by early 1929, the steam had gone out of the economy and output was beginning to fall. * The stock market had boomed to record levels. Price to earning ratios were above historical averages. * The US Agricultural sector had been in recession for many more years * The UK economy had been experiencing deflation and high unemployment for much of the 1920s. This was mainly due to the cost of the first world war and attempting to rejoin the Gold standard at a pre world war 1 rate. This meant Sterling was overvalued causing lower exports and slower growth. The US tried to help the UK stay in the gold standard. That meant inflating the US economy, which contributed to the credit boom of the 1920s. Causes of Great Depression Stock Market Crash of October 1929 During September and October a few firms posted disappointing results causing share prices to fall. On October 28th (Black Monday), the decline in prices turned into a crash has share prices fell 13%. Panic spread throughout...
Words: 2820 - Pages: 12
...CORRUPTION IS REGRESSIVE TAXATION CORRUPTION The Merriam Webster’s collegiate dictionary of English Language says the word The word corruption originated from the Latin word rumpere meaning to break. This means that something is broken such a law or ethic, protocol or code of conduct. The World Bank and IMF see corruption as the abuse of public office for private gains. Osoba (1996) defines corruption as an antisocial behavior conferring improper benefits contrary to legal norms and normal norms and which undermines the authorities capacity to secure the welfare of the citizens. Finally Todaro and Smith (2009) sees corruption as the abuse of public trust for private gain. Corruption is a global issue which is endemic to most governments of the world. It is the biggest obstacle to development. According to Tanzi (1998) corruption is the intentional noncompliance with arms length relationship aimed at deriving some advantage from this behavior for oneself or for related individuals. However, not all act of corruption culminate into bribe taking. For example not reporting to duty for which you receive monthly salary for is an act of corruption, because you are committing economic sabotage by not giving commensurate value for your salary. A governor or president who diverts projects meant for the equal development of all regions to his town or village is an act of corruption that doesn’t involve taking or giving a bribe. Therefore corruption has no universally...
Words: 2306 - Pages: 10
...Money, Purpose and Function Antonio Carter ECO 212 January 31, 2011 Dr. Sam Hancock Money, Purpose and Function In this paper, Team C will explain the purpose and function of money. Money is considered to be a heavily thought about issue. The religious people say “money” is the route of all evil. The rich lose their minds when they lose their money. The poor people spend money on lotteries and gambling in the attempt to become rich. The few people who win the ‘Big Payoff’, and they are few and between, are soon poor again because they do not know or understand how to handle money and make the money work for them. The definition of money is described by how people are commonly keen to accept as a reward for services produced or compensation of services owned (Hubbard & O'Brien, 2010). Assets are commonly defined as important possessions owned by a person or a firm (Hubbard & O'Brien, 2010). If 100 different people are asked what is the purpose or function of money, the result would receive at a minimum 50 different answers. It perceived in many situations how some people will use money to manipulate people and situations in their favor. Some people have just enough money to live on until the next paycheck arrives, and some have just about enough to juggle and pay their bills bi-monthly. Reported instances were published describing people who must have the best everything. The best cars, Cadillac Escalades, Mercedes; the name brand clothes and purses, Doonie...
Words: 1083 - Pages: 5
...have claimed to have focused on 4 primary causes to the overall factor of the company. First off when you talk about Target you also have to mention their greatest competitor which is Walmart. So, the first stage of these factors is Competitors. The main and well known strategy that they use is very low prices that are resonated with the consumer. This all started when the economy took a plunge into recession and consumers were trying to savor every penny they had in pocket. This led to a decline in market share for target because Walmart then has the largest microenvironment as a competitor with a low costing store. Next on the list of factors is the customers that buy from these stores. As mentioned in the beginning as the recession started customers started relying more on coupons and other ways to save a dollar. This was so wide spread over the U.S. because unemployment rates rose to their all-time highs. Target is very well-known for their style and having slightly higher prices than Walmart for the “better quality” that a customer didn’t have a problem paying before the recession. Overall this idea of being fashionable and spending a few extra dollars on merchandise led to a decrease in customers for Target because they were not being cost savvy for the average customer. If they had done a better job in fulfilling customer satisfaction than Walmart did then they could have had the higher numbers of customers coming through their doors to buy things. If values were reasonable...
Words: 814 - Pages: 4
...water rapid describes change that takes place in uncertain and dynamic environments. The stability and predictability of calm water metaphor do not exist. Most managers never get out of the rapids with constant changing environments, such as changing structure, changing technology, changing employees. People can be resistant to change due to uncertainty, habits, concern over personal loss, belief that change is not in the best interest of the company. Environments change every day and will continue to change there are ways to reduce resistance by education, participation, negotiation, manipulation and corporation. The calm water metaphor is not realistic for today’s constant changing environment. Successful managers will have to learn to adapt and succeed in a white water environment. Chapter 7 review 3 There are many ways managers might change structure, technology, and people. Managers can change the structure by choosing how the job gets done and who does it. Changes in structural design can be done by reporting relationships, coordination on mechanisms, employee empowerment, and job design. Managers could combine...
Words: 1523 - Pages: 7
...Increase the GDP and Lower Unemployment By: Danielle Sandlin According to (http://www.investopedia.com/articles/04/051904.asp) Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply. These two policies are used in various combinations to direct a country's economic goals. Inflation is when the money supply increases faster than underlying economic growth, which is why the goal is to keep inflation low. Fiscal policy is not the typical measures to use to try to control inflation. Their impact on inflation is uncertain in many cases. The more effective approach to controlling inflation is to use monetary policy measures, because this controls the money supply. In the case the inflation is low, which is good but the GDP is too low and unemployment rates are too high. The expansionary policy must be used. To use the fiscal expansionary policy while keeping inflation low, raise the GDP, and lower unemployment rates there are some steps. The first step would be government can increase government spending and reduce taxes, which will help increase AD (aggregate demand). Decreasing taxes will give households more disposable income with which they can buy more products. Through both methods of fiscal policy, the increase in AD encourages firms to increase production, which will cause...
Words: 1096 - Pages: 5
...AFTER DINNER SPEECH I asked the chairman how long I should speak for this evening and he said; “Speak for as long as you like; but we’re going home at ten.” Before I start my speech, the management of this hotel have asked me to point out that the sign in the gents ‘Wet Floor,’ is a warning not an instruction. Before coming here today, I was forced to give my wife a lecture on home economy; and believe me there are going to be some changes. For starters I will be giving up drinking. I am afraid I have 2 disappointments for you today; the [eg Prime Minister] couldn’t make it;---but our next speaker could. Police cordoned off Liverpool City Centre this morning, when a suspicious object was discovered in a car. It later turned out to be a tax disc. I am sorry to report that # was in trouble with the Police recently for alleged assault, although he swears it was self defence. He was in B&Q, when an elderly man with orange overalls asked him if he wanted decking. On the way here I stopped in the local village and asked a man, “Which is the quickest way to [place you are at]?” He said, “Are you in a car or on foot?” I said, “In a car”. He said, “That’s the quickest way.” Another sign of growing older is, when you are faced with two temptations; And you chose the one that will get you home by 9 o’clock. I am not trying to say that Dave is a bad driver; but I would feel safer being driven home by Richard Hammond. One of the most bizarre MP’s expenses...
Words: 958 - Pages: 4
...basis, e.g. motels, rehabilitation centers, shelter homes, etc., or a place that is intended to be used as an institution, e.g. schools, hostels, etc., or a place that is not intended to be used as a nighttime residence (temporary or permanent) i.e. places like public parks, bus stops, subways, streets, etc. So this concludes our definition of Homeless. Now we shall take a look at some statistics obtained through reliable national data sources. Speaking broadly, people face homelessness because they cannot afford suitable housing. In fact, homelessness is clearly visible in urban areas of the country, where people lag enough resources to meet their housing requirements and eventually end up homeless. Homelessness can attributed to lack of money, higher living costs, scarcity of economic residence, etc. Moreover, data gathered by the United States Department of Housing and Urban Development, through point-in-time count shows that; a) There are 610,042 people facing the problem of homelessness on any given night in America[2] i.e. almost 19 people in 10,000 will be suffering from Homelessness. b) Of these homeless people, 222,197 are with families whereas; the remaining 387,845 are individuals [2]. How Do People End Up Homeless? The data gathered by the “National Alliance to End Homelessness” gives us a quick view of the reason behind homelessness. The report [3] suggests, families usually end up homeless because of some unpredicted mishap or a financial crisis, some major accidents...
Words: 1711 - Pages: 7
...through in order to survive during the recession. Research Paper Supervisor: Mrs. Gaitor Name: Ariana McWeeney Word Count : 2,518 Table of Contents Page Cover Page ………………………………………………………………. 1 Abstract …………………………………………………………………….3 Introduction…………………………………………………………… 3-4 Body ………………………………………………………………………. 5-14 Conclusion …………………………………………………………….. 15 Bibliography……………………………………………………………16-17 Abstract In this research paper I will be studying how Bank of The Bahamas continues to survive through the recession and the extents in which they went through in order to not suffer. The purpose of this research paper is to analyze the bank and the efforts they undertook to survive such a devastating time to the economy. The key resources used in this research paper was primary research in which I had an interview with the managing director of Bank of The Bahamas. In addition to that I’ve used reliable online articles and IB Business and Management textbooks to investigate this topic to my fullest extent. INTRODUCTION This investigative report will demonstrate the extents in which Bank of The Bahamas went through in order to survive during the recession. This topic interests me because the recession is impacting not only The Bahamas but also everyone around the world. Many banks and businesses have had to close but Bank of The Bahamas in particular went through many different extents to survive through the recession and continue to grow which is a remarkable...
Words: 2701 - Pages: 11
...403: Public Policy Final Exam April 13, 2011 Causes of the Great Recession The Great Recession was something terrible and ugly in the making. This creature had been brewing since the late 70’s and was as fierce as ever by 2007. The Great Recession of 2008-09 has not one cause but several that were clearly underestimated by those in charge as well as average citizens of this country. The left will argue that there was a complete lack of regulation put in place to observe what was happening with mortgage lending. Robert J. Samuelson believes that “there was enough oversight that alert regulators should have spotted problems and intervened to stop dubious lending” (Samuelson, 19). They also say that there were numerous incentives for regulators and investors to ignore the risks that were being taking, which entails a tremendous amount of greed on their part of the matter. The left also states that there was a ‘mindless devotion to free markets’. Now their opponents on the right side of the fence will argue that interest rates had been too low for too long, and that the housing bubble had to pop eventually. They also insisted that the government’s housing policy was to get as many citizens to purchase a house as possible. They used tax incentives, rebates, and low interest rates to get homebuyers to act. I felt it was important to mention what the left and the right believed caused the Great Recession of 2008-09. Once we look at this disaster from afar and under a microscope...
Words: 2186 - Pages: 9
...argue that the tax cuts fueled increases in revenues. The 2001 and 2003 tax cuts were not a good idea because it added about $1.7 trillion to deficits between 2001 and 2008 and because they were financed by borrowing which increases the national debt. In an effort to bolster economic performance, President George W. Bush signed the Economic Stimulus Act of 2008 on February 13, 2008. More than two thirds of the $152 billion bill consisted of economic stimulus payments that were sent beginning in May 2008 to approximately 130 million households. As part of the ten-year tax cut bill passed by Congress in the spring of 2001, the Treasury mailed tax rebate checks of up to $300 for single individuals and up to $600 for households from late July and through late September 2001.Of those households receiving the rebate, almost 20% had reported that they would spend it and almost 32 % had reported that they would save the rebate, and 48% had reported that they would pay debt with the rebate. Concerning the impact of the rebates, the conventional wisdom is that the tax rebate signed by President Bush failed to stimulate the economy. The argument that the 2001-2003 Bush tax cuts...
Words: 1802 - Pages: 8
...marketing. Health spending is essential because it fulfills personal and social needs for medical service that are set in place to better health, increase productivity, and save lives (Squires, 2012). In comparison with the many other sectors of the economy, a significant portion of the health care is publicly funded. When viewing other countries, we notice that they have adopted a universal healthcare system. This means that the systems are financed through taxes. In the United States, there are systems in place such as Medicare and Medicaid (Squires, 2012). Medicare is an insurance program for persons who are either elderly or disable. Medicaid is insurance coverage for families who have low-income. It is public funds that assist people with health care in these two insurance programs. There are also tax policies that promote and provide support to employer-based health insurance and delivery systems such as, Veterans Health Administration. Due to the fact that the public sector has a lot of pull in regards to healthcare, it has become had to make sure that we are gaining value for the time and money spent. From decade to decade we have seen the United States health care spending increase. It was reported in the year 2010 that the U.S. had healthcare expenses that cost $2.6 trillion dollars. This is ten times over the amount that was spent on healthcare in 1980, which was $256 billion dollars (Kaiser Family Foundation, 2012). Shinning some light on the...
Words: 1222 - Pages: 5
...Market Crash “The Impact of housing Market Crash on Global Economy” The housing market in the United States became a nightmare for many people who had taken out loans found and they were not able to pay their mortgage repayments. When the value of homes decreased, the borrowers realized themselves with negative capital. The negative movement of housing sector did effect the United States economy. Individual house owners and investors could not react to the situation and their properties lost value. Rates of mortgages increased extremely high that’s why mortgages no longer became affordable for many people, and thousands of mortgages defaulted. Many banks and investment organizations start have difficult time finding money due to massive losses in mortgage. This also caused slow down the housing market, growth of new home building and putting many people in unemployment environment. Depressed housing prices made many homes worth much less than the mortgage value therefore some owners chose just walk away instead of pay their mortgage. The housing sector is one of the most important chains in the economy. After the housing market crash, the economy could not run as usual because this chain had a big impact in the United States economy. Therefore the other fields and sectors ruined by the circumstances. Briefly, the domestic crisis started to change the consumer behaviors. People reduced their spending and that effected the volume of the import and export....
Words: 2394 - Pages: 10
