Global Econ

In: Business and Management

Submitted By dasom
Words 4500
Pages 18
Short answer

The main macroeconomic cause of gfc

US households actually reduced their savings from 2000. The household savings rate in the US actually became negative!
Graphs ppt People save more when higher IR, Spend more when low IR
1. Monetary policy (low short term IR)
The literature has identified a number of channels through which monetary policy might have contributed to the build-up in financial imbalances. Most of these are thought to have worked through policy rates that were kept low for too long.8
Loose monetary policy (a low short-term rate) may have i) reduced the cost of wholesale funding for intermediaries, leading those intermediaries to build-up leverage ii) may more generally have caused banks to take more risks, including credit and liquidity risks
(iii) may have increased the supply of and demand for credit (mortgages), causing asset (house) prices to rise

2. Global imbalances ( low long term IR)
Rising global imbalances are associated with a greater spread of current account positions across countries and larger net flows of capital between countries. global excess of desired savings relative to desired investment—a “savings glut(과잉)”— had reduced long term rates globally, including in the United States.(significant increase of supply of saving cause a low ir), it argued that high capital inflows were an important reason of low IR from 2003- 2007
High capital inflows in turn
(i) can reduce the cost of wholesale funding for domestic banks in international markets
(ii) may reduce long–term interest rates (and thus compress spreads), causing financial institutions to lever up and investors to “search for yield” and (iii) may increase the total supply of credit to the domestic economy, causing local asset (house) prices to rise (inflation) (Risk of asset bubbles) it encourages investment , accumulation of reserves.…...

Similar Documents

Econ

...Econ Homework Chapter 3:Problem 2 2. Consider an economy in which taxes, planned investment, government spending on goods and services, and net exports are autonomous, but consumption and planned investment change as the interest rate changes. You are given the following information concerning autonomous consumption, the marginal propensity to consume, planned investment, government purchases of goods and services, and net exports: Ca=1500-10r ,c=0.6 ,T=1800 Ip=2400-50r ,G=2000 ,NX=-200 a. compute the value marginal propensity to save is as follows: 1-C=1-0.6=0.4 b. Autonomous planned spending, Ap, equals Ca − cTa + Ip + G + NX = 1,500 − 10r −.6(1,800) + 2,400 − 50r + 2,000 − 200 = 4,620 − 60r. Therefore, at an interest rate equal to 3, autonomous planned spending equals 4,620 − 60(3) = 4,440. c. Since the marginal propensity to save equals 0.4 and the equilibrium level of income equals Ap /s, the equilibrium level of income equals 4,440/.4 = 11,100, given the interest rate equals 3. d. Since autonomous consumption changes by 4 percent of any change in household wealth and the decline in the housing market in 2006–09 and drop in the stock market of 2007-09 reduces household wealth by 3 trillion dollars, the decrease in autonomous consumption that results from the decline in household wealth equals .04(3) = 120 billion. e. Since the decrease in autonomous consumption that results from the decline in household wealth equals 120 billion, autonomous......

Words: 326 - Pages: 2

Econ

...ECON 191, Fall 2012 Guidelines for Writing an Economics Research Paper Writing a good economics paper is both an exciting and a nontrivial task. It requires a sustained effort in identifying an important question and in developing a credible model to think about that question or a testable hypothesis to answer it. In many cases it may require collecting data that gives the opportunity to test the hypothesis that you develop. You are encouraged to structure your paper in four parts: introduction, literature review, body, and conclusion. A brief abstract of no more than 100 words should precede your paper. Introduction Identifying a significant and well formulated question is the single most important part of the research process and the most difficult as well. A good research question has to be concise (remember, you are writing a 15-page paper, not a book), feasible and important. Choosing a research question requires balancing importance and feasibility. Feasibility means tractability for theoretical research and data availability for empirical research. Whenever you come up with an idea for a research question, always try to think about a critic sitting in front of you asking “Why should I care about this?” Consider this question to be a first filter for your research question. Identify a well-defined research question. The introduction is where you (1) present the research question, (2) motivate why it is important and briefly outline (3) how you go about answering it...

Words: 1405 - Pages: 6

Econs

...econs Question 1: HCI Prelim 2007 The unemployment rate in Singapore increased from 2.7% in 2001 to 4.2% in 2005. | (a) | Explain the main causes of unemployment in Singapore in recent years. | [10] | Introduction Define unemployment. State that there are mainly 3 causes of unemployment in Singapore. Cyclical unemployment in Singapore State Cyclical unemployment is related to the business cycle. Elaborate During an economic downswing (recession or depression), aggregate demand decreases and firms find they cannot sell all their current output, and stocks pile up. Firms will then adjust to the deficiency of demand by cutting back on production and reduce workers, leading to an increase in cyclical unemployment. Exemplify Over the last 2 decades, recessions or economic slowdown have been largely triggered by external shocks to our economy such as the Asian Financial Crisis in 1997/98; global dotcom crisis in 2000/01; September 11 terrorist attacks in 2001; the SARS epidemic in 2003 and most recently the Global Financial Crisis (US sub-prime mortgage crisis) in 2008/09. The economy went into sharp contractions as a result of these external shocks. These shocks badly affected our export trade with the rest of the world, tourism and international banking as well as financial services sectors. In short, it hit our export revenue (X) and investment (I) components of AD causing domestic output to fall. And since exports from Singapore are......

Words: 2027 - Pages: 9

Econ

...Econ Problem Set #3 1. Suppose that a comic book publisher pays an annual licensing fee of $20,000 for the rights to an artist’s character. Which would have a larger impact on the number of readers of the comic using this character: (i) an increasing in the printing costs associated with publishing the comic, or (ii) an increase in the artist’s licensing fee to $22,000. Please carefully explain your reasoning. The increase in printing cost would have the larger impact on the number of readers of the comic. Because the increase in printing cost could be thought as a variable cost increase. The increase in cost would vary when the quantity increases. The increase costs per book could be easily realized and thus the publisher would choose to increase the price of goods. The number of readers would thus decrease due to increase of selling price. For the increase in license fee, it would be considered as fixed cost, which is more important in the short run business instead of long run businesses. 2. A firm's total cost schedule and the demand for its product are summarized in the table below (a) Complete the table and use the tools discussed in the online lecture and in the book to determine the level of output that maximizes the firm's profit. Costs | Revenues | Quantity Produced | Total Cost | Marginal Cost | Quantity Demanded | Price | Total Revenue | Marginal Revenue | 0 | 0 | - | 0 | 155 | 0 | - | 1 | 70 | 70 |...

Words: 505 - Pages: 3

Econ

...Wisconsin-Madison. I have worked at a managerial level in a large multinational enterprise. I have taught a wide range of courses--International Business, International Marketing, The Global Village, Self-Marketing, Marketing Internship, Principles of Marketing, Consumer Behavior, Marketing Research, Seminar in Marketing, and Marketing Management at undergraduate, graduate and executive levels. My research interests are in international business, business sustainability, international marketing ethics, advertising ethics, self-marketing, export marketing, cross-cultural marketing, experiential education, and effective pedagogy. My research articles are published in numerous journals that include International Journal of Business Strategy, The Journal of Current Research in Global Business, Competition Forum, Journal of the Northeastern Association of Business Economics and Technology, Journal for Advancement of Marketing Education, Applied Business Review, Journal of Promotion Management, Journal of Global Business, Journal of Marketing Education, and Journal of the Academy of Business Education. Catalog Description  A study of those activities necessary to the design, pricing, promotion, and distribution of goods and services for use by organizations and ultimate consumers. Prerequisites  ECON 122 Principles of Economics II Junior Standing  Message from Dean’s Office: There will be absolute enforcement of every pre-requisite requirement for the course work offered......

Words: 1615 - Pages: 7

Econ

...subsidies, and inflation targeting.[144] In Steady State Economics 1977, Herman Daly argues that there exist logical inconsistencies between the emphasis placed on economic growth and the limited availability of natural resources.[145] Issues like central bank independence, central bank policies and rhetoric in central bank governors discourse or the premises of macroeconomic policies[146] (monetary and fiscal policy) of the state, are focus of contention and criticism.[147] Deirdre McCloskey has argued that many empirical economic studies are poorly reported, and she and Stephen Ziliak argue that although her critique has been well-received, practice has not improved.[148] This latter contention is controversial.[149] During the 2007–2012 global financial crisis, an increasing number of teachers argued that the specialized economics textbooks, some written by experts who did not see the crisis coming, were almost useless because their elaborated content was divorced from reality.[141] A 2002 International Monetary Fund study looked at "consensus forecasts" (the forecasts of large groups of economists) that were made in advance of 60 different national recessions in the 1990s: in 97% of the cases the economists did not predict the contraction a year in advance. On those rare occasions when economists did successfully predict recessions, they significantly underestimated their severity.[150] Criticisms of assumptions Economics has been subject to criticism that it......

Words: 17785 - Pages: 72

Global Econ

...Global Econ – Luis California Department of public health Trough the Medical Cannabis Dispensary program and Medical Marijuana Program (MMP), the California Department of public health regulates, permits and inspects medical cannabis dispensaries in cities like San Francisco Medical Cannabis Dispensary Program This program regulates medical cannabis dispensaries in accordance with the state and local laws, it has the duty to inspect per permitted medical cannabis dispensary twice annually and respond to complaints. The California Department of Public Health (CDPH) administers the Medical Marijuana Identification Card (MMIC) program.  The Medical Marijuana Program (MMP) was established to provide a voluntary medical marijuana identification card issuance and registry program for qualified patients and their caregivers.  What is the Medical Marijuana Program (MMP) and what does it do? The California Department of Public Health (CDPH) manages the State’s MMP as authorized by SB 420.  Several counties also use the term “MMP” for their programs.  The MMP developed the “Medical Marijuana Identification Card” or “MMIC” and operates the internet system to verify these MMICs. The MMIC identifies the cardholder as a person protected under the provisions of Prop 215 and SB 420.  It is used to help law enforcement identify the cardholder as being able to legally possess certain amounts of medical marijuana under specific conditions. In order to qualify for it the......

Words: 2304 - Pages: 10

Econ 310

...ECONOMICS 310: PUBLIC FINANCE Department of Economics Western Washington University Dr. Julia L. Hansen Fall 2013 Office: PH 339, Office Phone: 6503204 Office hours: TR 1-2 p.m. and 4-4:30 p.m. (or by appointment) Additional office hours will be scheduled prior to exams. E-mail address: julie.hansen@wwu.edu Canvas address*: http://canvas.wwu.edu *Please visit the course page on Canvas for access to course documents, additional readings and links to relevant information on the web. COURSE READINGS: Gruber, Public Finance and Public Policy, 4th edition Additional readings as listed on the course outline COURSE PREREQUISITES: Econ 206 and Econ 207 COURSE DESCRIPTION: Public Finance deals with the taxing and spending activities of government. It is alternatively called Public Sector Economics or Public Economics. The focus of the course is on the microeconomic functions of government, and in particular the way that government affects the allocation of resources and the distribution of income. The analysis of the spending activities of government will include a discussion of public goods, externalities, education, welfare programs, Social Security and health care. On the tax side, we will build a framework for tax analysis, and then apply this framework to the personal income tax, the corporation income tax, and other U.S. taxes. COURSE OBJECTIVES: 1. To understand the economic......

Words: 795 - Pages: 4

Econ

...ECON 2113 Homework 2 L4 Hu Weiwei 20268464 Xu Lili L4 Hu Weiwei 20268464 Xu Lili 1a. The demand curve is estimated as Qd = 1600-2400P and the supply curve for pay telephone service is Qs = 200+3200P. When equilibrium is reached, the quantity demanded is equal to the quantity supplied. Thus, we can solve 1600-2400P = 200+3200P to find out the equilibrium price. By calculation, the equilibrium price P = $0.25. Substitute P = $0.25 into the demand curve equation, Q = 1600-2400(0.25), the equilibrium quantity Q = 1000. Therefore, the equilibrium price is $0.25 and the equilibrium quantity is 1000 pay telephone calls per month. 1b. With the effective price ceiling at $0.10 on local pay phone service in long run, it is below the equilibrium. Since the quantity demanded is larger than the quantity supplied after the price ceiling is imposed, shortage is resulted. As the price is restricted at $0.1, though Qd = 1600-2400(0.1) = 1360, Qs = 200+3200(0.1) = 520 < Qd = 1360. The quantity supplied is not enough to satisfy the quantity demanded. It results in a shortage of 1360-520 = 840 pay telephone calls per month.Therefore, the maximum......

Words: 2075 - Pages: 9

Econ

...Will Bury Business Proposal Econ/561 March 2, 2011 To: Whom it May Concern From: Will Bury Date: March 2, 2011 I have gathered you here today to discuss the future of my company Will Bury’s Digital Books. My company’s structure is monopolistic competition, which mean as demand increases, prices decrease. To make any profits, I have to make sure that my product is in demand (Halmos, 1995). After that, it is in my best interest to determine ways to increase revenue, minimize cost, profit maximizing quantity, concepts of marginal cost and marginal revenue, pricing and non-pricing, barriers to entry, and product differentiation. The things I have listed will ensure the success of my company. Increase Revenue and Minimizing Cost Increasing revenue and minimizing cost is what we strive to do as an organization. Many things considered in the process of creating a plan to increase revenue and minimize cost. I believe that I first need a budget to be set so I do not overspend; therefore, I will minimize cost because I will not spend any unnecessary money. One way to cut cot is to do just in time processing; orders are produced when orders are complete. This will prevent overstock. Instead of hiring a high school graduate or overseas staff, my plan is to partner with local colleges and getting some interns. I can get interns to work free; this will cut cost and ultimately increase revenue and minimize cost. Minimizing my variable cost is also away to minimize cost and......

Words: 1199 - Pages: 5

Econ

...ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma Extra Problems #1 Suggested Answers and Comments Notice: (1) This set of extra problems contains 25 multiple-choice problems and 6 analytic (short-answer) problems. These problems are not homework and will not be graded. The aim of these problems is to provide you with additional exercises. (2) I will give solutions of the assignment and the “extra-problem” set after the due date. Page 1 Problem 1~25: Multiple choice problems 1. C 2. A 3. D This problem helps you pay attention to the difference between variables and functions. First, whether prices (wages are prices for labor) are assumed to be flexible or 4. C sticky depends on the time horizon. In other words, the assumption of flexible prices is proper in a long-run model while the assumption of sticky prices makes sense in a short-run model. Second, a large part of macro-theory is based on the optimizing behavior of individual agents, such as households and firms, but the main concern of macroeconomics is the movement of the whole economy aggregated from those individual decisions. 5. B Economists, as well as most other social scientists, cannot do controlled experiments. 6. A Consider the National Income Accounts Identity: Y = C + I + G + NX 7. B 8. C Inventory is a kind of investment, so the sale of inventory can be understood as a decrease of investment, but there is an increase in consumption in the same......

Words: 1249 - Pages: 5

Econ

...25 markers Econ The term inflation means a persistent increase in the level of prices. The question believer that an increase in aggregate demand can cause inflation, however there can also be other factors that can cause inflation. The term aggregate demand is that total planed expenditure in the economy. Known by the identity C+I+G+(X-m). In macroeconomics there are 2 types of inflation, demand-pull inflation and cost-push inflation. The demand-pull inflation is caused by an increase in total spending (aggregate demand), the economy is producing beyond the economy’s ability. The aggregate demand in an economy strongly outweighs the aggregate supply, which cause the price to increase. As the economy reaches full capacity, firms will be struggling to produce enough to meet the rising demand. As you can see from the figure, AS is slow curving up and becoming inelastic because of full capacity. The demand curve then shifts to the right because of a high demand, from AD1 to AD2. This causes involuntary stock depletion due to a low supply. When this happens, firms will choose to increase price to widen the profit margins. So price level increase from P1 to P2. Furthermore, as employment in an economy increase, the demand in goods and services will be much more inelastic. This allows firm to increase the price more without any significant fall in demand. There are various reasons that can cause an increase in aggregate demand. First of all, a decrease in exchange rate......

Words: 626 - Pages: 3

Econ

...ECON Project I. Introduction The efficient market hypothesis says that these returns should not be systematically related to the information known in 1990. We have the data of the return of the stock prices from various firms over the four-year period between the end of 1990 and the end of 1994. If the characteristics of a firm reflected the return of the stock, this could help with predicting the stock price in the future. We hypothesize that the return of the stock are related to debt capital ratio, earnings per share, salary of the CEO, net income, logarithm of net income and salary, and the stock price at the end of 1990 and 1994. II. Literature Review We are formulating how the CEOs compensation can affect the stock prices within a four-year period between the end of 1990 and 1994.An investigation based on the use of individual evaluation in CEO’s incentive plans that contrasts with objective stock price based measures may involve. Using complementary data evidence can be shown that individual performance evaluation increases growth opportunities (Bushman p. 161-193). An examination of the executive compensation structure of 153 randomly-selected manufacturing firms in 1979–1980 provides evidence supporting advocates of incentive compensation, and also suggests that the form rather than the level of compensation is what motivates managers and CEOs to increase firm value (Hamid p. 163-184). III. Data and Methodology Our data is a list of observations from 142......

Words: 1407 - Pages: 6

Global Econ Study Guide

...Global Economic Perspectives Exam II Objective List BASIC CONCEPTS * Exchange Rate Risk * Selling dollar-denominated bonds but not having dollar-denominated sales * China’s real estate bubble * How to avoid: * Currency swaps * Future markets * Currency pegs * Setting the currency equal to a specified value * What factors determine exchange rates (pegging and managed floats) * High interest rates Appreciation & recession – increased demand & price * Stronger currency favors importers (trade surplus) * Low interest ratesDepreciation & Expansion * Weaker currency favors exporters (trade deficit) * The role of the IMF * Make emergency loans to countries with balance of payment problems * Ensures stability of national monetary system * Fiscal Policy * Government changing taxes and/or government spending in effort to increase or decrease business activity * Expansionary FP leads to increased spending but downside is budget deficits * Contractionary FPleads to budget surpluses or smaller deficits * AKA Austerity (attempt to shrink growing deficits) * Monetary Policy * Central Banks changing the MS to increase or decrease the availability of credit in an effort to increase or decrease business activity * Primary tool is Open Market Operations * Buying and Selling short...

Words: 2520 - Pages: 11

Global Econ and Enterprise Management

...Domestic business is any transaction that has to deal with the commercial activities conducted within a single nation. The economic transactions that are made by a domestic business within the borders of its nation typically have the advantage of only having to deal with the local currency, such as the dollar for the United States. It also has the advantage of dealing with the local customs, religions, government, culture, tax system and regulations. Domestic business is usually where your stronger customer base lies so it might be useful to direct most of your focus at first. It is much easier to establish good domestic business interaction when you are interacting with like people. Once it is decided your nation’s domestic business is in good standing, then you can focus more on international business being done with other countries. I believe it is very important to have a separate course on how to deal with international business because it is so much more complex than dealing with transactions taking place within one single nation. With international business, one has to learn how to manage transactions taking place in places with different currencies, customs, religions, government types, cultures, tax systems, regulations and even tastes. For example, the drink Coca-Cola tastes different in every country you go to because the taste preference of people in those countries is different. It can be difficult negotiating with two or more countries that have different......

Words: 363 - Pages: 2