Unemployment, Inflation and Production

Unemployment, Inflation and Production

Normally, unemployment takes place when an individual who is actively searching for is actually unable to secure work. With this, any country globally uses the unemployment concept to determine the health of its economy. In essence, the unemployment rate is the most used measure of unemployment which is basically the actual number of unemployed individuals divided by people within the labor force. Thus, in any country, there happen to be unemployment even though the economy is at full employment because of frictional and structural unemployment (Hakim, 2015).

First and foremost, frictional unemployment takes place when people keep transitioning from their old works to new ones during a certain period. This kind of unemployment is actually considered a voluntary one since workers decide to remain unemployed in an economy instead of taking up the first job opportunity offered. Hence, this kind of unemployment is normally present because a significant number of people consistently keep on searching for new employment opportunities (Dullien & et al., 2018). Equally, structural unemployment take place when market conditions, as well as business cycles, keep on changing due to oversupply of employment opportunities and individuals are fundamentally willing to work, however they are not qualified for these employment opportunities; hence, it is absolutely impossible for unemployment to be zero in any economy (Johnson, 2017). 

Lastly, individual, societal, and country costs are primal costs associated with unemployment. In essence, unemployed people are actually subjected to massive loss regarding income earnings, hence, reducing their living standards. With this, the societal is compelled to spend more in order to provide the needs of unemployed population and unemployment benefits paid by the government keep on increasing whilst the government is unable to collect enough income tax as before; hence, increasing government borrowing or reduce its other expenditures which reduce economic growth (Hakim, 2015).

Unemployment and Consumer Price Index

Produced by the Bureaus of Labor Statistics, the Consumer Price Index (CPI) is used to measure the inflation rate in America. Normally, the CPI is determined by taking price changes of every item in the predetermined product basket and then averaging them. In essence, the CPI adjusts payments to inflation in order to effectively assess the price changes associated with the cost of living. However, CPI’s accuracy has been questioned to a number of biases that actually make it to overstate the effectiveness of the inflation rate.

First and foremost, when the prices for products in the consumer basket substantially increases and consumers opt to substitute them with lower priced ones, there exist substitution biases. This is because the CPI cannot precisely predict the price increase effect on consumers’ budget given the fact that the CPI is based on a fixed-weight price index (Dullien & et al., 2018). Moreover, the CPI does not take into consideration new products when determining the index until they fundamentally become ordinary. Above all, sudden decline in product prices normally linked with new technology ones and advanced increase in life and usefulness of products are not whatsoever depicted in the index. Lastly, when consumers shift to new outlets, the CPI is unable to account for this given the fact that the product basket is predetermined. With this, the CPI is not able to precisely measure a change in the cost of living standard over time (Johnson, 2017). 

Dependability of Government Tax Revenue and Spending on the Economy’s State

In any country, when the economy expands so does people’s income rises since more employment opportunities are created and people are employed. Even if the government cannot actually raise the taxation rate, it can still collect more taxes. This is because the tax revenue base keeps on becoming big as more and more people are able to secure employment and pay income taxes; hence, the government is able to increase its expenditure.

Contrary to this, when an economy is unable to create employment opportunities and citizens are unemployed, the tax revenue base is small since people have no income on which taxes can be levied from. Subsequently, the government is forced to reduce its expenditure whilst increasing borrowing in order to provide unemployment benefits. Thus, the nature and composition of an economy’s state influence government tax revenues, government expenditure and social welfare (Hakim, 2015).

Limitations of Gross Domestic Product as an Indicator of Living Standard and Unemployment

As the total monetary value of final output produce within a nation’s borders in a specified time period, the Gross Domestic Product (GDP) is normally calculated either quarterly or annually. In essence, the GDP incorporates all total output of the country by adding up all private and public consumptions, government expenditure, investment, and net export to measure the economy’s overall activity as an indicator of nation’s economic health and its living standard (Dullien & et al., 2018). With this, the GDP measure a nation’s output produced and retailed in legal markets whilst omitting productive activities such as prostitution and individual fixation of water leak which have no market transactions; hence, the GDP does not perfectly measure the living standard within a certain country.

Unemployment Inflation Production
Unemployment, Inflation and Production

Moreover, the GDP does not measure the environmental quality in determining the living standard of the nation. By an economy having significant GDP does not necessarily indicate that its people have a quality life when air, water, soil or even other natural resources are actually polluted. In essence, the GDP totally fails to measure the contribution of environmental sustainability to the country’s living standard. Equally, the GDP does not take into account how leisure time actually contributes to the country’s living standard. Although a country can have higher GDP if its economy is 12 or 24 hours one, this does not imply that people are better off given the fact that leisure time is vital in living standard (Johnson, 2017). 

Therefore, the prevalent alternative to GDP as an indicator of living standard is the Human Development Index (HDI). Besides considering a country’s GDP, the HDI emphasis on people more specifically on their opportunities to achieve work and live satisfaction. In essence, in addition to the GDP, the HDI uses health and education statistics to measure the living standard within a certain country.  By partially using purchasing power, which measures the actual cost of the same basket of output produced with a country’s border, the HDI can adjust the GDP to better measure living standard of a country (Dullien & et al., 2018).

References

Dullien, S., Goodwin, N., Harris, J. M., Nelson, J. A., Roach, B., & Torras, M. (2018). Macroeconomics in Context. Routledge.

Hakim, T. A. (2015). Introduction to Macroeconomics.

Johnson, H. G. (2017). Macroeconomics and monetary theory. Routledge.

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Federal Government United States

Federal Government

The federal government is a system of government in the United States that has got three main branches that are the legislative, the executive, and the judiciary. It splits up the power between the national and the local governments connected to each other by the national government. The constitution created a representative government that incorporates the three branches. It developed the federal system by restricting the civic government activities to a few areas, for example, collecting and paying taxes, controlling the commerce, lending money on credit, coming up with smaller courts, making currency, defense provision, and providing patents. The constitution encountered amendments for the 10th parliament, and it vested the other remaining powers to the states. Therefore, any power not given to the federal government remains to be the powers of the state or national government. The purpose of this paper is to examine the politics of the government cabinet, the bill of rights in the constitution, the public officials, and racial diversity in the learning institutions.

The first ten amendments to the United States Constitution constitute the bill of rights. It addresses the majority of the rights of the citizens and limits the federal government powers to protect the rights of all America citizens. The bill of rights protects the religious freedom, speech freedom, authority to bear and keep arms, the petition freedom, and the assembly freedom. It prevents self-discrimination, cruel punishment, and amongst all forbid the federal government from stripping the life any citizen, property or the liberty without following the law process. The rights that are in the Bill of Rights was intended for the federal government and not the local or state governments (Black, p. 35). The individuals’ rights safeguarded from the state interfering only by the institutions of the state themselves.

The new slaves entered after the American Civil War and this changed with the introduction of three amendments for the protection of their rights. Primarily, this forbids slavery and protect the voting rights from racial discrimination. The Supreme court rejected and refused this view stating that specific rights in the Bill of Rights are fundamental, when the state denies, it denies the law process. Every state safeguards the rights of every citizen. The antifederalists labeled the federalists as manipulative, hungry for power and dismissive of the peoples’ rights (Berkin, n.d. p. 21). Therefore, each state should protect the fundamental rights of all citizens within the state.

Federal Government and Congress

The committee system in the Congress is beneficial to the lawmaking process. The lawmaking process starts with a bill introduced then sent to the committee where the chairperson submits the bill to the subcommittee, and maybe the hearing can be held. The committee system is a method to provide the division of labor in the legislature and specialization. The committees and the subcommittees performs most of the legislature work in the Senate and the house. There is the committee formed called conference committee that constitutes an agreement between the Senate and the house on the maters of legislature actions. The house committee suggests the time taken on a debate for most bills. The committee system provided a solution problem of collection, that is, allowed the House to perform legislation. The system was effective in the enactment of bills of farm and public-works (Sinclair, p.23).

The president nominates the cabinet appointees to the government. The President does this before the inauguration process takes place. Most of the appointees have got a broad political relationship with the president regarding the party, or they are respected people due to their level of expertise and skills. I think the cabinet appointees should primarily be making their decisions and formulating opinions since the president requires them to perform (McKeever & Davies, p. 104). The civil servants are supposed to disband the political considerations and give advice which is neutral and free from political inclination. Since politics ended when the president was elected, then the work should begin, and every appointee is neutral of any political party and work for the state.

Federal Government United States
Federal Government United States

The politics and legal issues are so intertwined that one cannot separate as there is a thin line between them. Majority of the politicians have studied law and a political system founded on a majority rule was perceived as unwise because the societies include the more ordinary individuals than the elite thinkers. The supreme court bases their work on laws which are noticeable but should not include the composition of seasoned politicians since whenever there is a case involving a senior person in the government, he or she is swayed easily. The power of competence regarding law should only have the career jurists included in the composition of the court. The court is a representative of the democracy that provides the citizens its total belief in them.

I don’t agree with the fact that college or a university should not promote racial diversity during the admission process. The ethnic diversity supports racial discrimination which goes a long way into the society. In the United States, the institutions exercise slavery and segregation which restrict specific racial groups from getting into the colleges and universities. The non-Americans and other minority ethnic groups are left out of the education since the system will become selective against them. The admission should only be made available to those who deserve regarding merit and not racial diversity since there are those who deserve but they are from the ethnic minority groups. They undergo discrimination in their thirst for education.  

The “Revolving Door” laws have been criticized and accepted in the same measure. Those who support the system argue that the interconnection between public and private sectors enables pool cultivation of people with knowledge about policies and business which gives a benefit to both sides. There is knowledge exploitation by the new employers to achieve privileged access, and there are employment conflicts when senior officials get employment in the new institutions. The transition allows sharing of costs and pooling the information that the private companies would not get access (Harris, p. 166).

The public officials gain more favor regarding allowances in the fact new transitional allowances given for their independence. Also, on the other hand, this transition leads to the brain drain to some extent, the knowledge expertise when they leave moves with their talents to the new employers. The commission must prevent the interests from private sectors in buying the bids from the public officials by giving them high-income jobs once the public officials go out of the public service. Commissioners could exploit the initial status to influence the former staff on the representation of the new employees.

Voting should not be restricted to those with a college education. Primarily, this is entirely against democracy, and this could lead to people from a wealthy community leading the government for many years. The uneducated, the poor, unrepresented and the oppressed are discriminated and suffer forms of bad governance. Allowing the people to vote is a fundamental right in the U.S.A, and everyone should be entitled to participate in the voting process. Instead, the state should educate the people to make better decisions rather than restricting the uneducated from participating. Moreover, it would be unfair to the people who cannot afford to attend the college education and feel the desire to vote. I think in my opinion, there are innovators like Mark Zuckerberg and Bill Gates who never went to school but are great people in the society. They should be able to vote.

Regressive tax in the tax that occupies a more significant percentage as the income drops, while the progressive tax is the tax that takes a more significant income percentage as the income increases. The flat tax, on the other hand, occupies a fixed income percentage. I believe the flat tax is fair since the tax is directly proportional to the income, as the income increases the tax also increase but at the same rate as the tax. Therefore, no matter the income level, the tax remains proportional. Moreover, this cannot oppress those who are earning less, but the tax is higher. All the taxpayers especially in this category those earning less are taxed equally and do not feel the pinch so much taxation.

Works Cited

Sinclair, Barbara. Legislators, Leaders, And Lawmaking. Johns Hopkins University Press, 1998. Pp. 23

McKeever, Robert, and Phillip Davies. A Brief Introduction To US Politics. Taylor And Francis, 2014. Pp. 104

Harris, Paul G., ed. Routledge handbook of global environmental politics. Routledge, 2013. Pp. 166-167

Berkin, Carol. n.d. The Bill Of Rights. Pp. 21

Black, Hugo L. “The bill of rights.” NyUL Rev. 35 (1960): 865. Pp. 35

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Emerging Markets Project

Emerging Markets

The contemporary world economy gets its support from the phenomenon of the emerging markets and its consequential development of emerging markets multinationals (MNCs) (Sinkovics, et al. 167). The new re-engineering of the modern economic and political order is as a result of the state of international emerging markets that is much conspicuous in the recent past. According to the international business, the term emerging markets get referred to nations that are in constant motion and also have the capability of gaining a significant economic and political power (Cavusgil, Tamer, et al. 40).

The emerging economies showed the ability to endure a recession that bypasses even the major economies during the Financial Crisis that the world faced at the primary stages of the new millennium. They include the best emerging 20 (E20) countries selected based on their recorded GDP, the population, and the overall influence on both regional and international trade (Cavusgil, Tamer, et al. 46). For example, the E20 consists of Brazil, Chile, China, Argentine, Poland, Colombia, Saudi Arabia, South Africa, Malaysia, Mexico, Thailand, Russia, Philippines, Republic of Korea, South Africa, Turkey, Indonesia, India, Nigeria, and Iran. This report aims at examining the emerging markets from the E20’s enhanced economic growth, the ever-growing influence across the world economies, and increased technological advancements.

Emerging Markets and Economic Growth

The E20 savings are known to be dominated by a substantial and rapidly growing number of people. According to world census conducted recently, emerging markets population account for 50% of the total four billion estimated world population. For example, in a comparative perspective, 18% of the world’s population stays in OECD nations; an approximated 11% lives across the G7 countries which also recorded yearly population growth of a rate of 0.0051 of the total population (Cuervo-Cazurra, Alvaro, and Ravi Ramamurti 230). On the hand, E20 nations are also prone to an increase in annual population by 0.01 (Sinkovics, et al. 169).

Also, demographically, emerging markets consist of a community of the young generation who are at their prime ages. Even though the youths are demanding regarding the money allocated to the education and higher learning institutions, they act like a source of wealth to a country. For example, a learned young generation provides skilled and advanced technical know-how to their economy, the source of cheap labor to the available industries, and a potential market for the ready manufactured goods and services. Conversely, in the United States, Japan, and Europe the majority comprises of working age population. 

A nation with working age as the majority is at crossroads since the working age has the capability of ether impact the economy positively or negative (Cuervo-Cazurra, Alvaro, and Ravi Ramamurti 230). For instance, a country with a majority of working age must have implemented a beneficial education and healthcare system because the working class is aging very fast and the possibility of an increased dependency ratio. However, some of the E20 countries showcased an age structure that consists of a rapidly aging population such as China and Korea. Nevertheless, E20 states still well placed to have a productive working force that other developed economies (Cuervo, Alvaro, and Ravi 230).

Integration into the international Markets

With the high population in E20 countries, there are readily available markets for the produced goods and services (Hill, Charles, et al. 77). According to world consumer research conducted in 2010, the United States and Europe take the lead in the world consumer market. However, there is the likelihood that Asia will overtake them by 2030 due to rapidly growing emerging economies. The recent paradigm shift indicates how emerging economies are gaining firm ground across the international market arenas.

E20 countries learned a lot of world market influence between the early year 2000 and 2015 by a margin increase of approximately 6%. However, E20 nations have suffered currency volatility for not less than twenty years, which was worth declared a crisis among them. For example, Mexico, Asia, Russia, Argentina, and Brazil were the witnessed victims in the late 1990s. Fortunately, the emerging markets with the firm ground established in the contemporary international economy have the upper hand to maintain their positions (Hill, Charles, et al. 79). 

Furthermore, the emerging markets have increased their total exports to the world markets averagely 20% and that some countries stand as major commodities exporters. Emerging countries are the majority of the states with the most significant manufacturing products applying the advanced technology. For instance, China, Korea, and Malaysia use the highest technology in manufacturing their exports and that they also enjoy the lion’s share of FDI, therefore raising their international investments. The economic growth resulted in a well-consolidated world economy that boosted technology and innovation knowledge (Brannen, Rebecca and Susanne 141).

Technological Advancement in Emerging Markets

Growth and development of a nation must get measured by the level of technology and innovation present. Initially, high technology and innovation was only a reserve for the developed countries. However, in the current days, emerging economies have concentrated their efforts to improve their technological know-how through boosting research and development sector by providing resources and human capacity by embracing the right education system (Hill, Charles, et al. 79).  For instance, innovation improvements have greatly addressed the local problems to match the general atmospheres in the already developed countries.

Innovative cultures in emerging economies contributed to the development of new technology in the banking industry, telecommunication, and to the overall savings which not only benefited the locals but also spread to the rest of the world (Peng, Mike, and Sergey 12). Therefore, the emerging markets end up pioneers of some world innovations and technological advancements.

Emerging Markets Project
Emerging Markets Project

The E20 countries paid much attention in research and development funding both public and private sectors of the economy. Research and development are significant indicators of technology and innovation in any economy of the world (Peng, Mike, and Sergey 19). For instance, Korea and China are the leading nations which took more significant strides in R&D followed by Turkey and Malaysia.

Moreover, the emerging economies witnessed to embrace the right education system that promote innovative talents and that they use the most significant art of public expenditure on education. For example, Argentina, Mexico, South Africa, Malaysia, and Brazil were among the emerging nations with the highest education allocation. The E20 countries take education seriously since it is the critical factor that influences the full and sustainable economic growth.

Globalization

The emergence of interconnectivity of world nations through cooperation laid a firm ground for the emerging economies (Brannen, Rebecca and Susanne 139). The world’s economic and political order experienced a paradigm shift where countries were aiming to form multilateral cooperation resulting into formation of world developmental institutions like development bank and Asian Infrastructure Investment Bank and International Monetary Fund. The establishment of the last global institutions facilitated the emerging market’s contribution in global affairs, international trade, and investment (Brannen, Rebecca and Susanne 141).

Conclusion

The emerging economies managed to transform the global economy by constant and robust economic growth and the trend seeming to continue because of some reasons identified by this report. First, the emerging economies have both principal actors and regional powers than developed nations. Second, the majority of the emerging markets anchored the economic development on the right pillars such as technology and innovation.

Finally, these emerging economies enjoyed the current world readiness for international cooperation. Despite the possible challenges that particular emerging economy shall experience, there rise in general marked a milestone in the global landscape.

Work Cited

Brannen, Mary Yoko, Rebecca Piekkari, and Susanne Tietze. “The multifaceted role of language in international business: Unpacking the forms, functions and features of a critical challenge to MNC theory and performance.” Language in International Business. Palgrave Macmillan, Cham, 2017. 139-162.

Cavusgil, S. Tamer, et al. International business. Pearson Australia, 2014.

Cuervo-Cazurra, Alvaro, and Ravi Ramamurti, eds. Understanding multinationals from emerging markets. Cambridge University Press, 2014.

Hill, Charles, et al. Global Business Today Asia-Pacific Perspective. McGraw-Hill Education, 2017.

Peng, Mike W., and Sergey Lebedev. “Intra-national business (IB).” (2017): 241-245.

Sinkovics, Rudolf R., et al. “Rising powers from emerging markets? The changing face of international business.” 0969-5931 23.4 (2014): 675-679.

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Airbnb Economic Space Project

Airbnb as an Economic Space

Title: Airbnb as an economic space. An economic space is either physical or non-physical system that creates a model through which people can design and interact with financial values. There are numerous platforms that can be classified as economic spaces including social websites such as Airbnb and Facebook. These platforms create spaces for people to gather and interact. Basically, the interaction of individuals within an economic space is determined by its structure and design. Each economic space has specific behaviors and traits associated with the social systems it forms. Airbnb has numerous benefits as an economic space because of its scale, allowing people to list and book accommodation from any part of the world.

Airbnb as an Economic Space

Airbnb is platform that allows peers to list and reserve housing around the world. Individuals with vacant rooms are allowed to register on Airbnb as hosts in order to list their properties. Similarly, guests enroll on the platform as hosts and are permitted to verify their identity using their online profiles or government-issued documents before they are allocated an accommodation. The platform is accessible through mobile application and websites. Recently, I interacted with Airbnb as a guest and experienced the numerous benefits associated with the space. It is easier, cheaper, and accessible from every part of the world. The listed properties are of diverse sizes and prices and are in locations that allow tourists to stay with the local people during their travel period. Airbnb is global in terms of scale because like many internet-based platforms, it is utilized by a global audience (Coe, Kelly, & Yeung, n.d.). Guests have the option of choosing the listing based on diverse criteria such as region, city, price, date, and features of property.

Nonetheless, the platform can be categorized into several scales that include a global, regional, national, urban, and local scale. One aspect of the platform that should be noted is that it is operated from a particular region although it is global. The listing of the products occurs from any place in the globe and hosts can easily update if their space is already booked.

Airbnb Economic Space
Airbnb Economic Space

Airbnb is fascinating because complementary economic activities are occurring concurrently at multiple scales (Coe, Kelly, & Yeung, n.d.). The accommodation services enabled by Airbnb are part of the sharing economy where users share assets and services using digital intermediaries. The difference between Airbnb and the traditional accommodation services is in the way of delivering these services. Because of the unique model utilized by Airbnb, there are numerous advantages for the hosts, the guests, and the populations at local levels. While searching for a suitable accommodation based on the available budget, I interacted with numerous hosts and the diverse properties available to clients across the globe. Basically, the actions of both the guests and hosts are shaped by the design of the platform, with each having a personalized interface to mediate the interactions.

Airbnb Interventions

Regarding interventions aided by Airbnb, it is not easier to isolate one scale of the system because the processes at a particular scale depend on the activities at another scale. The decisions that lead to the success of the business model are made at different levels of the systems. In this context, the human effort is augmented by digital structures. Each of the consumers is beneficiaries of the knowledge invested in the web platform. In the contemporary economic spaces, technology is the main tool to enhance the efficiency of the everyday activities. However, it is apparent that Airbnb platform does not overshadow the essence of ordinary work in the physical sense.

The design of the platform reveals what is an economic space and what it can do. Airbnb is a hallmark of economic globalization that braved the traditional methods of looking for accommodation. Consumers across the globe can choose from a variety of available spaces. Airbnb is a unique form of economic geography that has rationalized the tourism and travel industry (Walker, n.d.).  Essentially, the analysis of Airbnb as an economic space is not confined in a singular scale but rather understanding that different scales are performing and active at the same time. When the platform is considered in one scale, we create a restricted and ambiguous understanding of the digital model used (Coe, Kelly, & Yeung, n.d.).

Conclusion

Airbnb is popular because it allows efficient and easier listing of properties that serve a global clientele. It is a digital system that allows people to undertake economic activities in a worldwide scale. There are numerous economic benefits associated with Airbnb because of the several scales that allow economic activities at the individual, local, national, and international level. The platform can be accessed through the website or mobile application and lists properties of diverse features, prices, and location. At all scale levels, the activities occur simultaneously. Listing and booking of accommodation occurs from any part of the world and the activities of one scale depend on the performance of the other. Airbnb is different from the traditional accommodation services because it offers benefits to people at different scales of the economic hierarchy simultaneously.

References

Coe, N. M., Kelly, P. F., & Yeung, H. W.-C. (n.d.). Thinking geographically. In Conceptual Foundations.

Walker, R. A. (n.d.). The geography of production.

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Circular Flow Model Economics Report

Circular Flow

Title: Economic Circular Flow. Everyday expenditure is determined by the current treads on the economic status of a country. The prices of commodities has been influenced greatly by the prices treads of the energy generating fuels such the prices of the petroleum products. In addition the economic stability of a country is another key factors that determine the prices. For example in a country that is experiencing inflation, the prices of most commodities are relatively high, a fact that is contributed by poor performances in exchange rate earnings.

In most cases, the interest rates are mostly determined by the central bank. They are used as the main monetary tool that is used by policy makers and the economist to control the supply of money in the economy thus regulating the inflation rate in the economy. The central bank is there to issue loans to the commercial banks so that they can circulate the money to the citizens. In addition the commercial bank gives the commercial banks the directives on the minimum rate at which they are going to lend their customers. Therefore the federal system is the main determinant of the interest rate irrespective of the market forces on demand and supply of money.

Basically interest rate are use as incentive as well as disincentives to the people willing to take loans from any commercial banks. As an incentive, the commercial banks well give out loans at an affordable interest rate that will attract many business and other people willing to take a loan. This will increase the aggregate money supply in the economy. This is commonly used in case an economic stimulus is necessary. On the other had high interest rates discourages business taking loans.

The action leads to reduced business transactions and hence less amount of money circulation in the economy. The action is used during the period of inflation. When the interest rates are high, the prices of commodities are also relatively high, the consequence is high cost of financing the loans. For this reason people tend to purchase commodities that are of lower prices, this is always subject to quality. During my purchased the interest rate were lower therefore the price of my vehicle was relatively low. At the period the interest rate was about 14% compounded on reducing balance.

The price of gasoline was relatively lower compared to the previous prices. In every economy the prices of the petroleum products greatly influence the prices of other commodities. This is due to the transportation of commodities from the area of manufacturing to the market. Lower prices of gasoline in during the time of the purchase therefore ensured that the prices were lower and affordable. The prices for the crude oil and other related products were also low. Therefore even the maintenance of the vehicle was cheaper. When I made my purchase the prices of gasoline were dropping which was an implication that the future prices are going to be lower. This was just a prediction that is always necessary thing to do before buying any consumable good.

Securing a loan requires collateral and other securities. Most banks will. Always give loans to individual who after a careful appraisal shows the ability to pay the loan. In addition to this banks prefer giving loans to the people who are employed or business people who show to have a sustainable businesses that can be able to finance the acquired loan. I went for a loan after I was employed having considered all the above factors. These are the once that led to a successful loan application.

During the recession period the economy is characterized by high inflation rate meaning that the prices of most commodities are considerably high. During the purchase the interest rates were lower a probable recession times. The lower interest rates in the commercial banks were to encourage more people to take loans. This is a move that facilitates the increment in the supply of money circulation in the economy. In addition to this reduced interest rate facilitates more investors to borrow loans to set up more investments. This action is there to improve the production business cycle that improve the production of an economy.

During recession period there are chance of unemployment and therefore it’s risky to take a loan during the period. However when taking a loan it is important to reconsider other sources of income that can fund the loan once the source of income is suddenly withdrawn. Before making my decision on whether to take the loan or not I had considered other factors that will finance my loan in case of such uncertainty.

Due to the great recession of 2008 that the country realized its impact the government is still operating on with the fiscal expansionary policy measures despite of the deficit that the country was experiencing. Fiscal policies involved reduction on taxes and adjustments on government expenditures. The tax relieve lowered the prices of the vehicles greatly which gave me a good opportunity to purchase a good Car of my choice.

In addition the international monetary fund study had realized a possibility of positive multiplier effect on the expansionary fiscal policies that had been set. The effect was subjected unemployment and future output. More output and employment implied better future of the economy. These were encouragement to the foreign and local investors, consequently there were prospects of high future productivity. This gave me a prediction that there is a larger probability of retaining my source of income as well as creation of more sources that will cater for the maintenance and financing my loan.

The united state environmental protection agency has been trying over the years to fight the environmental pollution has been a problem in our cities and towns. One of their effort is to encourage the vehicles and other fuel users to purchase machines that are fuel saving and those that operate with complete combustion of fuel to minimize the release of carbon monoxide to the environment.

These efforts should not be ignored as the implication on pollution is both health and economic problems, a fact that a well productive economy is composed of healthy people. For this reason I had to choose a simple vehicle that has low fuel consumption capacity.

The emissions such as carbon dioxide causes acid rain that has adverse effects on metallic structures which most of our houses and other structures are made of. In addition there is adverse effect on agriculture which is one of the source of raw materials for our industries. The emissions also may cause diseases after inhaling these poisonous diseases. This consequently minimizes the production level of the nationals and hence lower GDP.

Basically the circular flow model is made up of two sectors which determine income output and expenditure. Equilibrium state is arrived at when the tendency of income levels, expenditure and output does not exist. This is an implication that income, output and expenditure are equal. The buyer expenditure in this case becomes the sellers’ income. The income gained from sale of their product is also spent to pay for other factors of production. During the processes, there is transfer of income to the owners of these factors. These expenditures consequently leads to the circular flow of payments.

The Circular Flow Model

Circular Flow Model
Circular Flow Model

For many years the position of the circular flow economy has greatly influenced the prices. This is due to the monetary and fiscal policies that an economy takes either to control inflation or to correct a recession. Introduction of injections and stimulus of the economy also influence the expenditure. When the interest rate are high the money in circulation is reduced thus most consumers will have little money to consume. In addition due to uncertainty people will tend to hold money due to fears of the deflation and recession. Uncertainty about future tend to influence people to either hold money or use money in making future investment.

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