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Why Should You Study Economics?
Studying economics helps to initiate professionals and students and allows them to assimilate economic reasoning. This way, they can make informed decisions in the future. Learn economics to become a good manager Understanding economics makes for a good manager. Indeed, in the context of economic policy, this manifests itself through optimal management of scarce resources..
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The Economy Is To Make Something
When people work, they usually create something. They build cars, machines, and houses. They sew clothes, bake bread, plant grain, or grow fruit. Many other examples can be added to these examples. All areas together in which people produce something are referred to as the economy. Services also belong to the economy. These are all.
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Effects Of Economic Change On Businesses
A change in the economic situation is generally accompanied by effects on the business situation of companies. Changes in the general economic conditions in companies are regularly reflected in their mood, business and earnings situation, personnel situation, investment behavior and financing conditions. Bad and good economic times In bad economic times, small companies are often.
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Can Bitcoin Help Save The Economy?
Bitcoin has tremendous potential to boost global economic growth. Although Bitcoin is a new invention in its early stages of adoption, its popularity has grown to mythical proportions in recent years. It is now the most prominent and valuable virtual currency with a market cap of nearly $1 trillion. The Bitcoin revolution started primarily with.
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Blog 2013 01 10 Uninvited From Tedx Manhattan An Open Letter
When people invest funds, lend or borrow money, or buy or sell shares of a company’s stock, they are participating in the financial markets. The third area of the field of finance is financial management. Financial management studies how a business should manage its assets, liabilities, and equity to produce a good or service. Whether.
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Blog 2013 02 06 Join Us February 16th Not Just Talk Food In The South Bronx
Institutions and Markets, presents an overview of the financial system and its important components: policy makers, monetary system, financial institutions, and financial markets. Financial institutions operate within the financial system to facilitate the work of the financial markets. For example, you can put your savings in a bank and earn interest. But your money just.
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Not Just Talk 2014 Registration
The health of economies and financial institutions and markets are linked throughout the world. European and other major foreign financial institutions were caught in the 2007–2008 financial crisis and most foreign economies suffered economic downturns near the end of the 2000s decade. Since then, European and many other economies have been slow to recover and.
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Second Annual Not Just Talk Summit
Even if your business interest is in a non-finance career or professional activity, you likely will need to interact with finance professionals both within and outside your firm or organization. Doing so will require a basic knowledge of the concepts, tools, and applications of financial management. They must focus on providing an understanding of how.
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About Us
Ask someone what he or she thinks “finance” is about. You’ll probably get a variety of responses: “It deals with money.” “It is what my bank does.” “The New York Stock Exchange has something to do with it.” “It’s how businesses and people get the money they need—you know, borrowing and stuff like that.” And.
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To most people Economics solely all about money and Finances. This is true, but there’s more to it than meets the eye. Economics is all about how people, businesses, and the Government operate. It is important because It is a key factor to determine the stability of a nation.
With the understanding of the Economy as well as its concepts and mechanics, the government can make the right decisions to ensure a stable economic growth, with low inflation and the highest possible level of employment.
Maybe you just haven’t realized yet, but Economics relates to our lives in various different ways. It is an essential, not only today but in the future days to come.
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With the potential COVID 19 vaccine being out in the market soon. We are all hoping that this will be equally distributed to all the countries. Regardless of its economic status. All countries whether great or poor suffered and felt so much loss during this pandemic. This potential cure and vaccine shouldn’t go to the highest bidder. But instead should be first offered to those who need it most. We should focus on equal distribution. Our priority is to stop the transmission of the virus and to prevent any future pandemic. The potential vaccine will help many economies recover. It will put things back to the right track.
Distribution and supply chain issues likely with COVID-19 vaccine
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A significant change in the dollar exchange rate has a major impact on international trade. A strong dollar (equivalent to, for example, a weak euro and a low euro-dollar exchange rate) means high purchasing power for Americans abroad, as the dollar’s value increases against other currencies. At the same time, however, US companies face a low level of competitiveness as a strong dollar increases manufacturing costs in the United States compared to other countries.
When the dollar is strong, it is more worthwhile for companies to produce goods outside the expensive dollar zone and sell them in the USA. A strong dollar can therefore have disadvantages for the US economy. At the same time, however, imports to the USA, for example of raw materials, are cheaper. This is why there is often a negative correlation between raw material prices and the US dollar. This means that if the dollar appreciates, raw material prices will tend to fall.
If the dollar falls in value against other currencies, exports from the USA become cheaper. This is good for the US economy as it can offer its products cheaper on the world markets. It is more worthwhile for companies to produce in the USA and sell the products all over the world. At the same time, holidaymakers from abroad receive more US dollars for their currency and can therefore afford more on a trip to the USA.
This can also have a positive impact on the US economy. However, Americans lose purchasing power abroad, so they can afford less when traveling. Imports for US companies are also becoming more expensive when the dollar is weak. For example, this could result in rising raw material prices in the United States.
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Money is generally created by the state for the purpose of financial emergency and financial management. Moreover, the major part of money making, which is about 97%, is produced the moment a licensed money lender, like commercial banks, offer a loan. Basically, it was only through faith that money is created. However, this doesn’t mean that money creation doesn’t involve any risk.
Most governments provide money on a too much basis and may therefore spawn too much inflation.
Generally, all commercial banks have the ability to produce too much money. In addition to that, banks can generate debt at an overrated status on top of the private economy. Aside from that, it also means that money also entails a great inner value. Thus, money is a simple indication of trust among the licensed money lender and the borrower.
Money, perhaps, is the ultimate resource of democracy. The social investment factors include but not limited to the following:
- Education
- Welfare
- Public service
These are all cannot be afforded by most of the general public. Why is this so? It is basically because of the absence of the magic money tree.
The creation of money by commercial banks and licensed money lender
The moment the banks lend money, it is also the time money is produced. Double entry accounting applies to this aspect. This shows the moment the banks make an asset for a new loan and thus create a liability through a new demand deposit.
Similar with other forms of customer deposits, the demand deposit is covered by the central banks which is quantified by the broad money. Through this, remember that when banks and licensed money lenders lend money, they create money as well. However, to make sense over this money, it must be entirely backed up by a loan which is essentially a new asset.
Creation of money through constrained capital
This usually happens when a bank offers a new loan which entails a new deposit. It is the time when the size of the balance sheet heightens, whereas the ratio of the balance sheet from equity reduces. In case, the bank lends too much value in which the equity cuts reaches zero, the reduction in asset prices is sufficient to make it insolvent.
Additionally, the requirements of the regulatory capital are designed to guarantee that banks and money lenders did not reach a fragile aspect. But, it is such an arguable thing that entails its purpose. Yet, it is generally wrong for the bank to lend money without restraints. This is because commercial banks and licensed money lenders do not have magic money trees.
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The growth of economy is being measured by the increase of GDP or its Gross Domestic Product. It is defined as the value of all services and goods produced (combined) in a given year. There are several aspects that do contribute to the growth of an economy such as businesses similar to https://www.southeasttitleloans.com/, casinos and everything in between.
On the other hand, you have to know that there’s no single factor that spurs consistently the ideal or the perfect amount of growth that is needed by an economy. The sad thing is, recessions are fact of life and it could be caused by a number of exogenous factors similar to geo-financial and geopolitical events.
From economists, world leaders and politicians, all of which have debated widely the best growth rate and at the same time, on how this can be achieved. It is vitally important to know how economy is growing. Meaning to say, figuring out who or what are the participants that are making the economy to keep moving forward. In the US for example, the growth of its economy is primarily driven by consumer spending as well as business investment.
Therefore, if consumers are in the market buying for new homes, for instance contractors, construction workers and home builders will enjoy economic growth. Businesses at the same time help in driving the economy when it has to hire workers, reinvest to grow their business and raise wages. A company that is buying new manufacturing plant or investing in new innovations can help in creating new jobs which then results to economic growth.
There are several other factors that can promote economic growth of course aside from business investing and consumer spending and these will be tackled below.
Tax Cuts and Tax Rebates
These are strategically designed in putting more money back to the consumer’s pockets. Preferably, consumers will be spending a portion of their money at certain businesses to which boosts their revenues, profits and cash flows. Having more cash indicates that companies will have the necessary resources in procuring capital, grow, expand and improve technology.
Utilizing Infrastructure in Spurring Economic Growth
Infrastructure spending takes place whenever a federal, state or local government spends cash to repair or build physical facilities and structures that are needed for the society and commerce. Infrastructure can be anything but not limited to ports, sewer systems, roads and bridges.
Economists who are in favor of infrastructure spending as economic catalyst arguing that having the best infrastructure boosts productivity by means of enabling businesses to function as efficient as it could be.
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There is no doubt that the Covid-19 has severely damaged several economies, most especially the developing ones. But what is the actual impact it brings? First of all, this will fall on the potential short-term disruption and the immediate action applied by the government as well as the private sector. Basically speaking, it focuses on mobilizing public resources in augmenting what private citizens do to help those who are vulnerable to the situation.
At the same time, it is to work on national macro-economic levers in an effort to sustain businesses and discuss international creditors regarding rescheduling, cancelling or repayments of some debts.
Uncertainty of Information
At the time of this writing, it’s still blurry how long the infection would last; if there’s going to be another wave; how many more would be infected and how many will catch mild or serious symptoms. One thing’s for sure and it’s that there is no accurate number of people who will recover and cases for fatalities related to the virus.
This is somehow caused by insufficient data information, particularly from developing countries that usually lack of testing facilities and partly, most victims might have preexisting conditions and establishing the main cause of death is hard.
On the other hand, we have to stay positive and have strong belief that the outbreak would already run its course just as any other pandemics the world has faced. Resources are being strategically allocated in curing the sick and ill, both private companies and the government are working hard in finding cure as fast as possible, improving diagnostic testing and developing a vaccine.
Learning from History
Aside from that, lessons from the past pandemics and from current pandemic sourced from South Korea, Singapore and China regarding early containment as well as social distancing are now majorly implemented in various countries. There’s a lot of international cooperation on all elements too. given that all countries cooperated and taken the right steps, the number of reported deaths can be significantly smaller compared to 3 great pandemics of 20th century which is the Hong Kong Flu in 1968 and Asian Flu in 1957 to 58 that killed 1 to 4 million people each and lastly, the Spanish Flu in 1918 to 1919 that took the lives of over 20 to 50 million people.
Your Move
There’s little doubt that the Covid-19 outbreak will result to a big cut in international trade due to the fall of global demand, which can impact both investments and consumptions. Sectors like tourism, construction and travel will be taking huge blow. If your business or career is in this sector, then it is probably the best time to seek for alternative ways of making money.
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Legally, bankruptcy is a procedure in which either a person or a business can discharge its debt. This is possible in case the petitioner, the person or the business that files debt for bankruptcy, does not have any possible ways to pay it within a reasonable time, even with the help of bankruptcy attorney San Diego. With this, the debtor will be given the opportunity of a brand new start. However, for some person, falling into debt with just a minimal opportunity to pay it off will be very easy. This can be applicable especially in today’s scenario of easy credit. Yet, this is not a good idea for both the person and the society.
Moreover, motivating people to work is one of the purposes of earnings and may be a factor affecting economic growth. Individuals need to pay majority of their money to the creditors and the result would lead to minimal incentive of working. Knowing this, lots of people would be possibly become slaves to those credit card companies and issuers of credits. Being able to fall on this would lead to total misery. Crime rates would increase in such a way that most individuals will have to look for ways to have money without reporting it.
Bankruptcy offers the debtors a brand new beginning in order to alleviate the possible tremendous burden.
How Bankruptcy Helps the Economy
One major advantage of bankruptcy over the economy is assisting to moderate the economic state. Further, restricting the economy from having an overheat during booms and, at the same time, stimulating the economy during recession is also its advantage.
Booms and recession on bankruptcy
At the moment the people spend much of their money at a short span of time, booms usually occur. Meanwhile, recessions may be experienced at the moment the people do not spend their money in an enough manner. Having an easy credit, individuals may have to spend extra bucks, but for paying back the debt makes them to spend less. This action is actually the cause of the boom and the crash cycles directly.
In case bankruptcy is present, creditors become prudent in the lending process. The moment the creditors extend their credits already, like to those borrowers under the subprime category, people on the poor side of the economy will have to spend money in a quick manner. This will lead the economy to heat up. Yet, the process of stimulation must need to stop due to the reason that the people can only have the ability to borrow more money. After this, the debt must need to be re-payed.
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The coronavirus epidemic can, according to the industrialized country organization OECD, put the global economy on track and is “the greatest economic risk since the financial crisis”. If the situation does not improve and more and more countries are affected, growth could fall to one and a half percent this year, the OECD said on Monday. That would be about half of the expected plus before the virus broke out. However, if the situation stabilizes soon, the global economy is expected to grow by 2.4 percent in 2020, after a comparatively weak 2.9 percent in 2019.
Coronavirus outbreak: The economic impact explained
China, where the virus first appeared, would be most affected. The consequences of the economic problems in the People’s Republic are likely to be felt quickly in the globally networked supply chains of companies, as well as for travel providers and raw material traders.
Despite this rather bleak outlook, a slight recovery was announced at least on the Asian stock exchanges. After the crash last week, the Shanghai trading center closed more than three percent in positive territory. The stock exchanges in Shenzhen and Hong Kong had also increased at the start of trading.
In Japan, too, prices recovered slightly on Monday. The leading index Nikkei, which had slumped by almost ten percent last week, climbed 0.95 percent by the close of trading. Not so with the German share index Dax. It also started the week with a plus, but then the most important German stock market barometer turned negative again.
On the one hand, investors were encouraged by the decreasing number of new infections in China, and on the other hand, various central banks had announced measures to combat the consequences of the virus epidemic. On Monday, the Japanese central bank provided the national financial system with additional liquidity in the face of the virus crisis. The Fed said on Friday that it would respond appropriately to the coronavirus epidemic.
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Is your business ready to face the potential challenges posed by Covid-19?
Early this week, when pressed on how the government plans to address the potential challenges presented by the global coronavirus epidemic, U.S. Treasury Secretary Steven Mnuchin’s statements implied that they are still on a wait-and-see position. In an interview conducted by CNBC reporter Hadley Gamble during the Riyadh G-20 summit, Sec. Mnuchi was quoted as saying:
“As of the present, it is difficult to make strong predictions on how the coronavirus will impact the U.S. economy.” “We will need another three or four weeks, to have a better idea of how the Covid-19 outbreak will affect the country.”
Although there is only a small increase in the number of coronavirus cases that had spread outside of China, U.S. financial markets are anxious if the federal government will be able to face and prevent the possibility of an economic fallout.
Apparently, finalization of the Phase 2 deal that would have ended the trade-war conflict between the U.S. and China has been stalled. The prolonged period by which Trump’s tariff sanctions are in effect, will likewise have a prolonged effect on retailers and manufacturers.
Chinese aircrafts and sea vessels are currently barred from entering the U.S. as a preventive measure against the spread of Covid-19. Moreover, the halting of air and sea travel by other affected countries will have an impact on the tourism industry. This will in turn impact other businesses including hospitality service providers, retailers and lessors of commercial spaces.
How the Covid-19 Outbreak has Affected Businesses in Other Asian Countries
In Asian countries like Hong Kong, Singapore and Malaysia, the China Covid-19 outbreak has prevented or discouraged tourists from entering another country. Moreover, since locals have been warned about the dangers of getting exposed to the virus when in crowded or even in public spaces, businesses have been met with substantial decreases in consumer traffic and business patronage.
As a result, many had reported sales that dropped by as much as 50 per cent, while some are expecting to experience an 80 percent drop during the next three months. The sharp decline has prompted many business owners to seek relief from rental costs. They are appealing to landlords and owners of shopping malls and lessors of other affected outlets, to give them 30% to 50% rental rebate for six months at the least.
After all, rental fees make up a large proportion of their operational costs. They are also faced with the additional expenses in carrying out their social responsibilities in order to protect employees and the remaining customers who continue to patronize their establishment. They are hiring extra cleaners, providing masks and hand sanitizers, as well as have conducted staff training on good hygiene practices.
Those are only examples of the effects of the coronavirus outbreak, which nearly all countries will experience when reduced tourism and transport business activities take toll. Such effects suggest that rental businesses will likewise be affected, which makes proper rental properties management and preparation essential in facing such eventualities.
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The cannabis mania is coming over and more and more time for investors to dive into this thrilling and enticing market. Due to the new discoveries of its medicinal use and its legalization over North America, the Cannabis stocks are gaining more tractions aside from those factors affecting economic growth. If you are interested to know more about this kind of industry, then let’s find out below.
Sneak Peak for the Cannabis Industry
Investing in the stock market is one of the best option to grow your money.
The stock market return is averaging on 8.65% annually for about 10 years. This is much comparable to 5.03% return of Treasury note, and 7.88% for gold. However, when it comes to weed stocks, much higher than those can be expected. A data from 2018 shows that the sales of cannabis in US alone landed on around $50 billion.
The birth of marijuana sub-sectors
Contributing to the value of the cannabis market is the addition of sub-sectors of marijuana that are continuously erupting. There are the weed cultivators, marijuana manufacturers, cannabis packaging companies, and dispensaries. On the other hand, even the manufacturers will benefit financially for this industry as the demand for weed-based products are growing enormously.
Based on market research, it is expected that, by 2027, the cannabis industry will reach about $57 billion. And speculations believe that the legalization of cannabis in US will be implemented right after the presidential election of 2020. Due to this, it is a good timing to invest in this kind of market before its gigantic burst.
Cannabis Stocks Investment for Everyone
The previous year became a good indicator for weed-based businesses as cannabis prohibition will soon end on many states. Because of that, many investors are very eager to invest on the Canadian pot stocks. Generally, it is still the same old reason why people like to invest in the cannabis stocks.
They invest primarily on the steel makers or streaming companies. And obviously, this is because they want to grow their money and wealth using this kind of industry. Further, this market is open for all who are interested to invest.
Key Notes:
Decided to invest in the cannabis stock market is closely similar with investing in other type of stocks. Basically, the process is very simple yet, finding the appropriate work to done is essential to see the right stocks. Keep in mind that investing cannot be done for a day. Meaning, you doesn’t need to stick your eye on the cannabis market 24/7 and watch its move.
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Economic growth is the increase in production of both economic services and goods in comparison form one period of time to the other. This may be measured either in real or nominal terms. Conventionally speaking, aggregated economic growth is being measured by way of its GNP or the Gross National Product or via GDP or Gross Domestic Product. Even though, there are instances in which alternative metrics are being put into used.
A Dive into Economic Growth
Simply speaking, economic growth is referring to the growth of production that an economy makes. Oftentimes but not necessarily, these aggregated gains in production is in correlation with the increased of average marginal productivity. This results to the increase of consumers in spending more and buying more. This even leads to people taking loans to open a business and create more jobs for the people. Having said that, generating higher quality materials or standard of living.
On the subject of economics, growth is frequently modeled as the function of the following:
- Labor Force
- Human Capital
- Physical Capital and;
- Technology
In other words, this is improving the quality or quantity of working age population and tools they’ve got to work with. Not to mention, the formula available in combining capital, labor as well as raw materials to deliver enhanced economic outcome.
What Does Growth mean?
There are actually a number of ways that can be done in generating economic growth. First of all is increasing the volume of capital goods that the economy has. Adding capital to economy has the tendency to boost labor productivity.
With more, better and newer tools in place, it only indicates that workers will be more productive.
For an example, a fisherman who uses a net is likely to catch more fish compared to fisherman that uses pointy stick. On the other hand, these don’t mean that we can simply disregard the latter. Someone needs to first engage in some sort of saving or compromise of their current consumption to be able to free up resources and create new capital. The new capital ought to be in the right type, right time and right place for workers in order to be really productive.
Another method of boosting economic growth is through technological advancement or development. One good example of this is the invention of fuel. Before the discovery of gasoline to generate energy, petroleum’s economic value was incredibly low. With the use of gasoline becoming more common and efficient method for transporting goods, it gradually boosts its price and value over time.
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The economic success of a country is largely measured by the economic growth it generates. Hence the strong focus on this. That is no coincidence: economic growth is crucial because it helps to achieve some of the other objectives – full employment, balanced public finances. To give an example: a certain degree of economic growth is needed to prevent a rise in unemployment if more people enter the labor market (young people, women, migrants) or to create new jobs to compensate for the jobs that disappear due to efficiency improvements in the companies.
If the cake does not get bigger, the redistribution issue becomes much more pressing.
Economic Growth Explained
Economic growth is the support on which the economic system rests. Take that away and there are major stability problems. Economic growth is needed to maintain prosperity as the population – of a country, of the world – grows. In 1950 there were 2.5 billion people on the earth, in 2000 there were 6 billion and today 7.6 billion. If there had been no economic growth, poverty would have increased considerably. Thanks to the strong growth of the world economy, poverty is substantially reduced even with a strong increase in the world population.
Economic growth contributes to political and social stability. If the cake that can be divided becomes larger, this avoids tensions between countries, between population groups, between generations. If the cake does not get bigger, the redistribution issue becomes much more pressing.
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There is a psychological effect. People want to feel that they are making progress, that it is getting better. Whoever has a job wants to see his salary rise after a while. If the level of prosperity increases for almost everyone – which is only possible with steady economic growth – then the feeling of satisfaction and happiness in society also increases, “Harvard economist Benjamin Friedman stated in his 2006 book” The Moral Consequences of Economic Growth. He went one step further. Economic growth makes societies more tolerant and makes them more open to democracy.
What Are The Effects Of Economic Growth?
Economic growth makes societies more tolerant and makes them more open to democracy.
Economic growth is also a condition for the affordability of basic social services in developed economies. Due to the aging of the population, for example, the costs for pensions and health care are increasing. In order to be able to bear this without having to cut heavy spending on other expenditures, economic growth is needed that will generate extra tax revenue for the government.
Economic growth is not only the result of government policy, but also of innovation and of productivity
Improvements in industrial companies, service companies and government administration. If economic growth is slowed down or stopped, the stimuli for technological progress will largely disappear. Both processes interact and propel each other. “Our economic system is inextricably linked to growth,” observes French Harvard professor Philippe Aghion, who works a lot on economic growth.
Economic growth brings stability to the economic and political system. That growth is desirable and necessary. But that fits perfectly with the question that it must also be balanced and sustainable.
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The economic upswing in recent years has led to optimism in large parts of Europe. After years of recession or stagnation in numerous European countries, stronger economic growth and falling unemployment have been recorded, although unemployment in large parts of the euro area remains higher than before the onset of the financial crisis. Austria also experienced a strong economic upswing, which lasted from around mid-2015 to mid-2018 and has since gradually lost momentum.
In the past few months, however, economic development in the euro area has cooled off increasingly, which is manifested in falling economic growth rates.
The German economy has been particularly hard hit, not least because of the aftermath of the tradeconflicts instigated by US President Trump and the uncertainties surrounding Brexit; it may already be in recession. Against the background of the marked economic weakness of the important trading partners Italy and Germany, the Austrian economy is also in a downturn – GDP growth for 2019 will probably have to be revised downwards.
Europe warns of political uncertainty under Donald Trump
The increase in industrial production and investment in equipment has weakened noticeably in Austria and the number of unemployed could soon start to rise again – even though the number of unemployed registered with the AMS remains at around 300,000 people, which is significantly higher than the level of approximately 210,000 unemployed before the start of the last economic downturn in 2008. This resulted in a higher number of people taking out loans even those who are in bad credit as shown by many third party agencies like New Horizons.
Real GDP growth by quarter
The experience of the last crisis shows that it is important to take measures as quickly as possible to counteract the rise in unemployment. Rising unemployment leads to negative long-term effects – for example, through a substantial drop in income for those affected by long-term unemployment who weaken consumer demand; as well as through a loss of skills that also depress long-term growth potential. In order to prevent these negative consequences, quick and determined countermeasures are required.
In addition, weak economic activity is burdening public budgets due to lower tax revenues and higher social spending, which also speaks for the rapid implementation of countercyclical fiscal policies that support the overall economy. In the current situation, a well-thought-out, deficit-financed, expansionary fiscal policy can even help the government debt ratio (measured as a percentage of GDP) to decrease further in the medium and long term compared to a scenario without a fiscal stimulus. This is in stark contrast to the often voiced claim that expansionary fiscal policies only lead to higher debts.
How should economic policy react to the downturn?
What can economic policy do to counter the economic downturn? The scope for monetary policy to stimulate the economy is extremely limited. The key interest rates in the euro area remain at zero and cannot be reduced further. How effective “quantitative easing” (large-scale bond purchase program such as that of the European Central Bank) is to achieve positive growth and employment effects remains controversial. Although it will be important for the European Central Bank (ECB) to continue its low-interest-rate policy in order to ensure effective economic policy coordination with the fiscal policies of the national governments, it is in any case at a loss when it comes to tackling the economic downturn on its own.
Given the limited scope for monetary policy, the fiscal policies of national governments must play a more important role in economic policy management. This has also been made clear in the context of the international technical debate in recent months. Well-known macroeconomist Larry Summers and Anna Stansbury recently argued that the euro area was in a monetary “black hole” – a liquidity trap in which there was minimal scope for expansionary monetary policy measures “. Fighting (future) economic downturns make it all the more necessary for national governments to pursue expansionary tax and spending policies in order to stimulate aggregate demand and thus economic growth and employment. Against this background, a new perspective on the important role of fiscal policy is emerging in the international specialist debate.
Fiscal policy in times of extremely low-interest rates
The framework conditions for Keynesian accents in economic policy are extremely favorable, especially in Germany and Austria. The groundbreaking work of the former IMF chief economist Olivier Blanchard points to this. This argues that the cost of public debt needs to be re-evaluated in an environment of very low-interest rates. Blanchard shows that if “safe interest rates” (on government bonds) are lower than nominal economic growth, there will be important consequences for fiscal policy. States can get into debt relatively easily if economic growth and government revenue grow faster than interest costs.
The interest on ten-year government bonds is now negative, which means that the Austrian government has to repay less at the end of the term than it took out on the loan. In addition, nominal GDP growth rates have been substantially higher than interest rates on average over the past three years. This fact indicates that Austria and Germany currently have a particularly large scope of action when compared to other European countries to counter the economic downturn through expansionary fiscal policies.
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If you want to enjoy financial freedom and even get rich, read some simple advice about money and investing. This will almost fit to everyone who would wanted to get
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- Why Should You Study Economics?Studying economics helps to initiate professionals and students and allows them to assimilate economic reasoning. This way, they can make informed decisions in the future. Learn economics to become a good manager Understanding economics makes for a good manager. Indeed, in the context of economic policy, this manifests itself through optimal management of scarce resources.. […]
- Trading: How Does A Country’s Economy Grow?For a value investor who maintains his focus on the long term, being aware of the existing concepts within the macroeconomic environment is extremely important. In this scenario, knowing about economic growth is very relevant. Crypto and forex traders can help with economic growth. However, they have to read writings on trading. This way, they. […]
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'Wealth is the ability to fully experience life. Real wealth is tangible things produced with tangible effort'
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