President’s Dilemma – Final Reflection

May 20, 2011 at 3:29 am (IB Economics: Section 3)

My group presented our President’s Dilemma presentation today and I think it went very well! For our presentation Pat did most of the presentation, Will took most of the questions, and I did a bit of both. According to our feedback, our group did well in both presenting and answering questions. In all honesty, I was a little worried about the presentation at first because Pat wasn’t completely confident during our practice but we both reviewed what we wanted to say and knew our information really well so our presentation ended up sounding very clear and concise, at least to my ears. I think we also did a good job when creating our policies. Of course they weren’t perfect but they went well together and we were able to cover all three sections of the panel and satisfy them all without causing too many more problems.

I enjoyed this activity but I felt too much time was spent on the beginning parts of the presentation and then suddenly it was time to present and no one was really ready for the practice day because we hadn’t realized it was coming up so quickly. I felt the keys to our success though were having some clear solutions to the problem that were easy for us to both understand and explain. I also have to give Will credit for staying calm under pressure. He did a very good job in responding to the questions. I thought the three of us worked well as a group and I am glad that we were the smallest group because it made it easier to collaborate. In fact, I heard from the other class that they actually thought their groups were too big and I tend to agree. I think the groups should be kept to three of four persons, if possible.

In the end though, I enjoyed this project and I think the presentation in front of adults, instead of just the class, was a very good experience.

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The President’s Dilemma – Blog Post #4

May 11, 2011 at 1:17 am (IB Economics: Section 3)

How can demand and supply side policies help William M. Jorgeson, CEO of Henry J. Car Corporation?

Demand-side policies are any government policies designed to influence AD in the economy, thus affecting the average price level and real national output. Similarily, supply-side policies are any government policies designed to shift the LRAS curve to the right, thus increasing potential output in the economy. Both of these types of policies can utilize both fiscal and monetary.

Jorgenson requests that we do something about his fallen profits that are caused by increased oil prices which then caused an increase in automobiles and less sales of these automobiles. There are a couple possible solutions that can be considered to help Jorgenson here, but all have their trade offs:

  • Through the use of the fiscal policy, either personal or business taxes could be decreased, however this would only cause a greater deficit for the United States, which is something we are trying to avoid. The effect on the deficit could be decreased though if the lowering in taxes for personal incomes and businesses could be countered by raising sin taxes.
  • We could look into reducing unemployment benefits or weakening the unions to provide greater flexibility in labor costs and choices. This, however, would make Joe, who is already unemployed, very angry.
  • The government could also use some of the redistributed spending to fund investments into infrastructure and small businesses. Still this redistribution would be causing spending that could have been used elsewhere and won’t necessarily show immediate improvements to the problem.
  • Our final idea, though still with its drawbacks, shows the most potential. If the government were to offer half of a person’s unemployment benefits for one year as an incentive to hire this unemployed person, these businesses may be more willing to take the risk of hiring the unemployed in this difficult time. Then hopefully, by the time these benefits run out, the economy will be back in a place where the company will continue to allow these people to stay on their labor force in order to sustain their level of output.

We feel this final solution will make both businesses and the unemployed happy in the short term to give us time to implement our long term plan.

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The President’s Dilemma – Blog Post #3

May 10, 2011 at 5:48 am (IB Economics: Section 3)

How can monetary policy be used to help people represented by the Silver Cougars of America?

In the short run, interest rates could be decreased to encourage spending and raise employment. This wouldn’t make the Silver Cougars very happy because prices would increase even further but they would have to know that it is in the best interest of their grand children and the rest of the economy. Also, they would be assured that the poorest of the elderly would be taken care of but for now, it was important that they simply learn to live with less and know that they are helping others.

This decrease in interest rates would also cause an increase in aggregate demand because people would be willing to spend more with lower interest rates. This money could be accumulated and saved to help the elderly and to use to combat the higher prices.

In the long run, our solution would be to reallocate government spending so that it can be given to the unemployed in subsidies as an incentive to either move to where there are more job opportunities or to use to purchase further training for a new job that you would like to obtain. This reallocation would also give more money to sectors of the economy such as education and transportation. Education would mean that in the future, unemployment wouldn’t be as large of a problem because people would have more education and training making them more appealing to countries who are looking to hire. Transportation is important because it affects many different aspects of the society such as business owners who would be more willing to transport their goods across the country with better roads that wouldn’t do as much damage to their vehicles and therefore save them money in the long run. This would also provide the opportunity for more jobs, therefore helping unemployment even further.

Our comity is sad to say that while we understand that the Silver Cougars of America are suffering, they also must realize that we have bigger problems to take care of. Of course, there are options for those who truly are not able to support themselves but others must simply deal with the hardship because others are suffering far worse.

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The President’s Dilemma – Blog Post #2

May 8, 2011 at 11:19 am (IB Economics: Section 3)

How can the fiscal policy be used to help the unemployed?

Fiscal policy involves government spending and taxation. When using the fiscal policy to help Joe Brezinski, we have to be very careful. Simply lowering taxes won’t be helpful to Joe and, in fact, it may even make him feel worse. Lowering income taxes would simply mean that the people who already have jobs are better off because less of their income is being taken away be the government but because Joe is unemployed this would be of no help to him.

While direct changes to income tax will not be helpful in this case, changes in other types of taxation may prove to be beneficial. For example, the fiscal policy is said to change the distribution of the income by evening out the distribution of wealth. If taxes were to be increased for higher income brackets of the economy, the extra money the government received from these taxes could be used to “provide training for individuals that lose their jobs” as Maria Bautista, the Policy Analyst in the Campaign for Job Security, suggested in her memo. Another measure that could be taken to help out Joe Brezinski, and other unemployed persons, is to decrease business taxes. With lower taxes for business owners, they would be more willing to spend on labor and other resources. With more money available for labor costs, they may hire back some of the unemployed workers, such as Joe Brezinski.

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The President’s Dilemma – Blog Post #1

May 4, 2011 at 11:15 pm (IB Economics: Section 3)

We have just started an assignment that allows us to take a look at the current economic situation in the United States and decide on possible solutions to the problems. As we have just started this project, at the moment we are just taking a look at general information from both the past and the present that allows us to evaluate whether the current situation in the United States is really as dire as it seems. To decide this though, we have to take a look at both leading and lagging indicators. Leading indicators are changes that show in an economy before the general economic activity occurs. These types of indicators allow economists to predict how an economy may do in the future based on data they have now. Lagging indicators, on the other hand, are changes that show in an economy after the general economic activity occurs. These indicators can be misleading for many economists because they can make the situation appear devastating when, in reality, it is actually showing some improvement.

If we take a look at the lagging indicators, such as unemployment rate, percentage change in Consumer Price Index (CPI), and interest rates, we can see that they have all increased in recent years. As economists, though, we know that this isn’t necessarily a truly devastating statistic because these indicators are often misleading because they don’t change until after the economic activity has occurred. This could mean that the economy has actually improved but these indicators simply make it seem otherwise. As economists, we should look at leading indicators instead, such as money supply, stock prices, and changes in debt. Unfortunately, as we can see from the information we have been given that these too are increasing and therefore we can conclude that, in fact, the United States is facing a problem that needs to be fixed and it is our team’s job to create a solution to this problem over the course of the next few weeks.

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Underemployment is a Problem in the United States

April 30, 2011 at 6:52 am (IB Economics: Section 3)

Underemployment is when workers are employed for fewer hours or in less desirable jobs than they would prefer and are qualified for. This is starting to become a major problem in the United States as nationally, 18.9% of Americans were unemployed in 2010. Surprisingly, some of the states with the highest percentage unemployment are states like California, Illinois, Nevada, Florida, and a few more. Most of these states have had a specific down turn in a strong industry within their state, making it hard for the residents to find jobs. For example, Nevada has had a down turn in its gambling industry recently, giving the well known city of Las Vegas a hard time. North Dakota, on the other hand, is one of the best states in the US where underemployment is concerned. It also measures well in economic confidence and job creation.

For more information on underemployment in individual states can be found here.

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Formative Assessment Reflection

April 22, 2011 at 3:39 am (IB Economics: Section 3)

After taking my formative AS/AD model diagram formative assessment today in class, I realized I was missing a few key elements that would earn me a top mark on the IB scale in my summative test next week.

First, I simply need to read the question more carefully. The questions asked for diagrams and I only drew one diagram to explain the causes of inflation. As my teacher pointed out, I obviously knew the information but I just didn’t write it down on the test. Honestly, that is the worst kind of mistake to make because it is so stupid.

Besides that though, I need to start being more thorough with my definitions. I wrote the definition for inflation but I didn’t include the definitions for aggregate supply and demand. Those were easy points I could have gotten.

Otherwise though, I did relatively well on this first test (6/10) considering my mistake and I feel that with just a little more studying I will be able to receive a top grade on the final test next week.

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My Mind Map – Fiscal Policy vs. Monetary Policy

April 19, 2011 at 3:08 am (IB Economics: Section 3)

You can also find the link to this image here.

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Key Terms in Global Economic Development

April 18, 2011 at 8:50 am (IB Economics: Section 3)

Listed below are some key terms in macroeconomic development that I feel I now understand after reading this article.

  • Reserve ratio – The portion of depositors’ balances banks must have on hand as cash. This is a requirement determined by the country’s central bank. The reserve ratio affects the money supply in a country.
  • Interest-rate – the rate at which interest is paid by a borrower for the use of money that they borrow from a lender
  • Inflation – a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services.
  • Appreciation – the increase in the value of an asset – the opposite of depreciation
  • Commodities – a good or service that is exchanged for monetary gain
  • Imported inflation – When inflation in another country causes a rise in price for imported goods for the original country. Often this causes an increase in the demand for domestic goods, but it doesn’t completely rule out the need to import foreign goods because they are needed for production.
  • SDR – Special Drawing Rights – a monetary unit of international reserve assets defined and maintained by the International Monetary Fund (IMF). The unit does not represent a currency, but represents a potential claim on the currencies of the IMF members for which it may be exchanged.
  • Gross domestic product (GDP) – The total monetary value of all goods and services produced domestically by a country.
  • Speculative capital – The funds earmarked by an investor for the sole purpose of speculation. This capital is often associated with extreme volatility and a high probability of loss
  • Boom-bust cycles – A type of cycle experienced by an economy characterized by alternating periods of economic growth and contraction. During booms an economy will see an increase in its production and GDP. During busts an economy will see a fall in production and an increase in unemployment.

For more information on these terms, please visit Wikipedia, Investopedia, or the Triple A Learning Economics Glossary.

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Enemployment and Economic Freedom

April 8, 2011 at 12:42 am (IB Economics: Section 3)

The Neoclassical theory states that if there is no government intervention that everything will eventually work itself out. More specifically, unemployment rate will be practically zero because the market will balance itself out, as long as the government doesn’t intervene. To test this theory, we took a look at a sample of countries and compared their economic freedom rank with their unemployment rate. The findings were that it was a relatively positive correlation. For the most part, the more freedom the country had, the lower their unemployment rate. This wasn’t true for all countries though and even the country with the highest freedom ranking, Hong Kong, still had a 4.3% unemployment rate.

Personally, I don’t believe in the Neoclassical view point. Though I don’t think governments should have total control over the economy, I don’t think complete freedom would be beneficial either. I think, depending upon the country, a balance needs to be struck between the two to help the country’s economy be most productive.

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