Economics RST: 6 ArticlesMr.
KennedyMorgan CuttsJanuary 19, 2018Chapter 12: Monetary PolicyBank of Canada holds interest rate target at 0.5%Source: Blatchford, Andy. “Bank of Canada holds interest rate target at 0.5%.
” Global News. N.p., 07 Dec. 2016. Web. 9 Jan. 2018.
Summary:The Bank of Canada has decided to hold its benchmark interest rates at 0.5% since the economic conditions are moving along with the expectations. The central bank said while the global economy has strengthened, constant international uncertainty has continued to have a negative effect on business confidence and investment among Canada’s trading partners. Although Canada’s growth performance had also been close to its expectations, including a strong rebound in the third quarter, Canadian inflation was slightly below what it had anticipated, in large part because of lower food prices.
The bank also said Canada saw gains in employment, but that considerable economic slack was still present when compared to the United States. It also predicted the recent tightening of financing rules for real estate would help slow the continued rise in Canadian household debt. Experts had long predicted the economy to bounce back from the second-quarter slump, which was largely due to oil-production shutdowns linked to May’s Alberta wildfires.Economic Vocabulary:Interest Rate- the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.Monetary Policy- a process by which the government affects the economy by influencing the expansion of money and credit.Infrastructure- the basic physical and organizational structures and facilities needed for the operation of a society or enterprise.Bank Rate- the rate of interest charged by the Central Bank to the chartered banks, which serves as a benchmark for the interest rates charged by financial institutions to their customers.Connection to Course Material:In this course we discussed the different types of Monetary Policies, expansionary or contractionary, and how they affect Canada’s economy.
We noted that the government uses monetary policies to adjust interest rates, like mentioned in the article. The government has just recently made the base interest rate 0.5% which shows that the Canadian government is putting in place and expansionary monetary policy when choosing this interest rate. We also talked about the roles of interest rates and how they affect our decisions as consumers about both saving money and borrowing money.
The higher the interest rate, the less likely we are to borrow. With a base interest rate at 0.5% Canada is trying to get consumers to borrow money therefore putting money into the economy’s stream. But since the interest rate is so low it isn’t attracting foreign investors since they won’t want to put their money into Canadian bonds since the interest rate is low.Questions:Should Canada raise their interest rates to attract foreign investors or keep it low to get consumers to borrow money?When would a contractionary monetary policy be put in place?What would be the effects on Canada’s economy if they were to raise the benchmark interest rate?Chapter 14: Employment, Recession and RecoveryAustralia has an underemployment problemSource: Heath, Michael.
“Australia has an underemployment problem.” The Sydney Morning Herald. The Sydney Morning Herald, 31 Aug. 2017. Web. 9 Jan.
2018.Summary:Although the unemployment rate in Australia has fallen in the past year, most of the jobs created in that period were part time meaning that those employed can work from 1 hour a week to 35. The mass of part time jobs created is due to the fact that the labour market is changing producing more jobs in the service industry which consists more of part time jobs. The only thing that will potentially bring a renewal of full time jobs growth is a “material lift” in business investment. In the short term they don’t see much hope for a turnaround. The central bank noted that underemployment remained high and there has been no decline in the amount of workers wanting to work more hours.Economic Vocabulary:Underemployment- a measure of employment and labor utilization in the economy that looks at how well the labor force is being utilized in terms of skills, experience and availability to work.Labour Market- the availability of employment and labor, in terms of supply and demand.
Inflation- a general increase in prices and fall in the purchasing value of money.Interest Rates- the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.Connection to Course Material:During this course we learned about the participation rate and how the higher the participation rate is the higher the proportion of available human resources actually employed and contributing to a nation’s aggregate production. In australia, their participation rate is not high because there are not a lot of people that want to work. We also talked about how underemployment isn’t really detected due to the fact that part time workers are recorded as fully employed workers. It was mentioned that some people work part time by choice but others would prefer full time but cannot find it, in Australia’s case it looks like the majority choose to only work part time.
The inflation in australia is weak right now meaning that the price levels are not rising making it easier for people in australia to make purchases even when not working a full time job, in the course we talked about ways to raise employment one of them being cost-push inflation, where they increase the prices, this forces people, like in Australia, to stop being lazy and get jobs so that they can actually provide for themselves.Questions:Why do you think Australian’s don’t want to work full time?What other ways would you suggest getting Australian’s to start working?Do you think using a cost-push inflation strategy will help lower the underemployment rate?Chapter 17: Trade Theory, agreements and PatternsBoeing and Bombardier Trade Clash Poses More Risks for NaftaSource: Swanson, Ana. “Boeing and Bombardier Trade Clash Poses More Risks for Nafta.” The New York Times, The New York Times, 18 Dec. 2017Summary: Boeing (American) and Bombardier (Canadian) are both jet maker companies. Trade tension between the two nations are high.
These companies are on trial because Boeing claimed that Bombardier was planning to sell their CSeries to American customers at below market prices and that they cheated American trade rules by accepting subsidies from the Canadian government. A few months ago, the Commerce Department raised the tariff to 300 percent on the Bombardier CSeries. As a result, Canada announced earlier this month that it would scrap a $5.2 billion purchase of new fighter jets from Boeing and purchase Australian jets instead. Trump wants to renegotiate the NAFTA agreement and if the United States does decide to tax Bombardier’s products, the decision could be appealed through a panel of judges constituted under NAFTA. Boeing is saying that Bombardier’s sales in the United States pose a risk to sales of Boeing’s own competing aircraft, known as the Max 7. Bombardier argues that the Max 7 is significantly larger than its CSeries planes, and that the two jets do not directly compete. Bombardier claims that Boeing is trying to use the United States government to wall off its market from foreign competition.
Economic Vocabulary: Tariff- a tax on imported goodsFree trade zone- a region where a group of countries agrees to reduce or eliminate trade barriersNAFTA- made trade easier between U.S, Canada, and MexicoImport- a good that is brought in from another country for saleExports- a good that is sent to another country for saleConnection to Course Material:In this course we learned about why countries choose to trade instead of developing domestic industries to provide those same goods and be self-sufficient. But no country can be totally self-sufficient, the economic costs would be too great. That’s why countries rely on trade to export and import needed goods. In this article, Bombardier is attempting to sell their jet in the United States, but they placed a tariff of 300%, making it too expensive to sell, and causing a huge loss in the Canadian economy. The reason behind this is because Boeing (a U.S. airplane making company) claims they are stealing all of their competition.
This issue caused Canada to back out on a $5.2 billion purchase of fighter jets from the U.S. This problem will have an effect on NAFTA, which is an agreement for no tariff barriers between the U.S., Canada and Mexico, which President Donald Trump signed an executive order to renegotiate.Questions:What is the benefit of NAFTA? What are the cons? How does this tariff on Bombardier affect the Canadian economy? What is the importance of exporting and importing? Chapter 9: Intro to MacroeconomicsHow 3D Printing Could Disrupt Asia’s Manufacturing EconomiesSource: Christopher Lim & Tamara Nair, “How 3D Printing Could Disrupt Asia’s Manufacturing Economies.” Usnews.
com. Jan 10, 2018. Summary: A popular product being used more often is 3D printing, which can manufacture objects by layering materials with just a little bit of programming. The 3D printer makes things a lot easier because it reduces costs substantially by, avoiding multiple steps in which a manufacturer would have to do and only a maximum of 3 to 4 workers are needed to work the printer. The printer also creates a lot of opportunities for the future, for example, instead of products being shipped to businesses, designs would be shipped instead, avoiding transportation costs. Once the designs are shipped the businesses can then print the design themselves. Although there are a lot of opportunities with the new technology, it is replacing lots of people’s jobs and can cause a domino effect in the economy as a whole.
Jobs are becoming limited and some not needed at all in the end, therefore is technology helping or hurting the economy?Economic Vocabulary:Capital requirements- How much liquid capital you need on hand for a certain level of debt.Supply chain- the process involved with the manufacturing and distribution of a product.Logistics- The way the resources are retrieved, stored and shipped in the making of a product.
Infrastructure- These are the basic physical needs of an economy for transportation primarily and necessities for a country. The government usually has to make big decisions for the investment since it is very costly. Examples of infrastructure are building bridges, roads, hospitals and electrical systems.
Connection to Course Material: The 3D printer is taking over the work force and lots of manufacturers jobs. This can also be known as technological unemployment, this results from industries using more technology, such as in this case, the 3D printer is very advanced and does not need as many people to work on making the product. The problem with this is that the unemployment rate can become very high because there is a chain of jobs that come just from the production of certain object, ie. transportation, the construction workers building the warehouses, the people designing the warehouses and the manufacturers of the product. When unemployment becomes very high, it limits the economy for its full potential of production because now the amount of people it would take to normally make the product is being reduced to over half, being replaced by the 3D printer. Unemployment not only has a great effect on the economy but on the people being laid off as well. Statistics show that after being unemployed, those people have a tendency to be linked to crime, have tension socially with others and low self-esteem. Therefore with the technology coming into the workforce there is a lot of potential for problems occurring in the economy.
Questions:What are the future benefits of the workforce with a technological environment?Will the 3D printer create more jobs in the future to make up for the job loss?What challenges will the 3D printers face when trying to expand their industry?Chapter 4: Demand and supplyFears Over Zika Drive Demand for Mosquito-Repellent ProductsSource: Entis, Laura. “Fears Over Zika Drive Demand for Mosquito-Repellent Products.” Entrepreneur. N.
p., 10 Feb. 2016. Web. 15 Jan. 2018.
Summary:With the Zika virus making it’s way over to America there has been a spike in demand for mosquito repellent products. There was a 400% increase in demand for invisaband’s signature blue wrist band in the month of february, where demand is usually low due to the wintery weather. So far no one has contracted the disease through a mosquito bite in the U.S., but there is a growing concern it will spread throughout the country with the arrival of mosquito season in the spring, therefore people are wanting to buy mosquito repellent products even in these cold months.
For companies that produce mosquito-repellent products this means recalibrating demand. “We are going to run out of stock,” says the founder of Invisaband. Because Invisaband’s manufacturer is in China, and won’t open for production until mid-February, new orders can’t be delivered until early March. Bigger companies are also working to ensure they won’t run out of inventory. S.C.
Johnson, the maker of Off products, is ramping up production at its factories. People do not believe the virus is going away anytime soon and that means big business for these companies.Economic Vocabulary:Demand- the quantity of a good or service that buyers will purchase at various prices during a given period of time.Outsourcing- the practice to save on costs by contracting out work to be done outside companies that are often located is less developed countries.Supply- The quantities that sellers will offer for sale at various prices during a given period of time.Stock- the goods or merchandise kept on the premises of a business or warehouse and available for sale or distribution.
Manufacturer- a person or company that makes goods for sale.Connection to Course Material:During the course, one of the main topics was Supply and Demand. In this unit we discussed that the amount of a product a consumer will purchase often depends on the price. If the price is higher, the consumer is likely to buy less and vice versa. We also talked about quantity demanded in relation to quantity supplied based on the market equilibrium, which is when the quantity demanded equals the quantity supplied. Therefore if the quantity demanded exceeds the quantity supplied then there will be a shortage, and if the quantity supplied exceeds the quantity demanded there will be a surplus. In this article, it highlights the increase in demand for a product and how that can affect the company’s stock. When there is a sudden rise in demand, companies must find a way to adjust and make sure that they get the right amount of supply in order to meet the demand, and if they don’t that can lead to a shortage, like the founder of invisiband said.
Questions:What will happen if there is an increase in quantity supplied where demand stays the same?How does outsourcing help a company?What are strategies to increase supply when demand rises quickly?Chapter 5 : Applications of Demand and SupplyOPEC Confounds Skeptics, Agrees to First Oil Cuts in 8 YearsSource: Nayla Razzouk, “OPEC Confounds Skeptics, Agrees to First Oil Cut in 8 Years.” Bloomberg. November 30, 2016.
Summary: OPEC (The Organization of Petroleum Exporting Countries) finally agreed to make its first oil cut in eight years. There is a huge oversupply in inventory, especially since a lot of countries hit their record of the most oil output in years. They reduced output by 1.2 million barrels a day which is designed to reduce the amount of oil stored everywhere so that it doesn’t go to waste.
Instantaneously after the cut, prices shot up on energy around the world. People are not sure whether OPEC will go through with the deal and it will only workout if all the producers stay true to the cut.Economic Vocabulary:Quotas- A restriction on the amount of a product that can be made that is imposed by the government, they control the amount of imports being transported into the country.Exports- Purchased products that are transported to other countries.Output- Total made of a product by manufacturers.Sanction- The government can put restrictions on trade to stop political ideas that are not right. Sanctions bring political pressure to stop the country in the wrong and make a change.
Connection to Course Material: Governments intervene for three different reasons; if they believe consumers are paying too high of a price for an item, if sellers are receiving too low of a profit or they will intervene for social or environmental reasons which is when they would introduce a quota. In this case OPEC is the group that set the quota into place due to environmental reasons (oil is going to waste and being stored in whatever they can find). When the quota was put in place, it was due to the oversupply in oil and because there is not as much oil being made, the price increased by up to 10%. As shown in the figure below, the supply curve shifts to the left, showing that not as much oil is being supplied and the price is going up because of that.
At the same time, the demand is going to decrease however the supplier’s revenue will stay the same due to the raise in prices.Questions:What problems could arise with the OPEC agreement in the future?Is oil elastic or inelastic?How does this affect the supplier’s?OPEC plans to meet again in May and extend the cuts by another six months, could there be a potential shortage in oil supply in the future?Why do most deals like this fail?