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Macro & Microeconomics Essay

Mortgage Backed Securities and their role in the economic crisis
Economic crisis refer to a situation where the economy of a nation or a country undergoes a sudden downturn which is brought about by financial crisis. This will normally lead to a fall in the countries’ GDP, a rising and falling of prices because of inflation and deflation and a drying up of liquidity. It normally can take a form of recession or a depression. The economic crisis began with bursting of the united states housing bubble and high default rates on subprime adjustable rate
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Micro economics
This could be understood very easily as the main aim of a supplier is to air for maximizing his profit levels. This aim could easily be achieved when more goods are sold at higher prices as compared to selling smaller quantities of goods as lower prices.There are many factors which play a pivotal role in determining the supply of a project. The price of the good itself is an important factor determining supply alongside, the price of related goods (both substitutes and complementary goods),
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Macro12.13
The fact that the economic agents exhibit rational behavior by making a forecast of the economic variables taking into consideration the past as well as the present information available. If the government announces an inflation rate and chooses a different rate and increases the money supply, producers would increase output following the increase in prices. In the short run, this would increase output level in the economy, but with rational expectations, the agents would endogenize the
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Many authors and commentators argue that income inequality is among the most pressing current problems of our era. The received wisdom is that inequality has significantly increased on both sides of the Atlantic in recent decades. In view of this trend, c
Socialist country, where deliberately low inequality characterized by the absence of private profits and salaries and wages are harmonized depriving the citizens the incentives required for their active participation in economic activities. It is considered that socialist equalization of salaries and wages translates to poor discipline and lack of initiative among workers. Other effects include reduced quality and restricted variety of goods and services, marginal technical growth which
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Minimum Wage is a frequent topic of political debate. Analyze the pros and cons of such a policy using the relevant theoretical construct. Illustrate your arguments with empirical (real world) examples. Compare with other states or cities or provide an
This would depend on the amount of the wage set because a minimum wage of $1 per hour would not attract anyone, but student workers could consider a $4 per hour. Setting up the minimum wage law disrupted the functioning of supply and demand system because it dictates what employers should pay, instead of letting the two factors standardize the field on their own. Market factors of demand and supply govern the number and type of jobs available along what each job category would pay (Schmidt,
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Market Economy
This therefore explains the rise in inflation represented on the curve below:Alternatively, as the people continue to influx the labor force over the period the unemployment rate would reduce significantly (Jossa and Marco, 1998). This also will be directly influence the cost incurred by the hiring companies (Babiak, 2007). In this effect, the prices of goods and services will expectedly increase leading to inflation. During this period of 2002-2012, as the EU was trying to reduce the
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Money and banking
They are commonly known as treasury bonds. The yields on these bonds are also not taxable.Expected rate of return or interest rate is one of the key factors that affect the demand for a bond in the market. If the rate of return is expected to rise in the near future, the values of the bonds will in decrease hence the demand will also decrease.According to Helpman (2004), wealth affects the demand for bonds in such a manner that its increase will result in a subsequent increase in the demand for
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Microeconomics:Cost minimizing input combination, Cobb-douglas
In that case, to produce the same amount of output, the same amount of labour L1 will be chosen. Therefore, in this case the cost minimizing choice does not change. However, the cost of producing the same level of output is higher.In case 2, capital is cheaper. If the price of labour rises, capital becomes even cheaper. Therefore, the cost minimizing choice still remains K1 amount of capital and zero labour. Additionally, in this case, since the price of capital has remained the same, the cost
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Managing the Economy
Classical theorists also maintained that wages and prices are flexible, which is why they change proportionately. Complying with this theory, Classical theorists believed that during a period of recession a reduction in wages will be followed by a proportionate reduction in prices, which was not the case.The Great Depression of the 1930s has been a central event in the history of economic policies. Classical theorists held that a decrease in wages during the Great Depression would imply a
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Macroeconomics Interview Assignment
To numerous factors; however, the primary ones include the inability of homeowners to submit the mortgage payments due to predatory lending and speculation factors. Other factors include high level of personal and corporate debts, poor monetary and housing policy, global imbalances and inapt government regulation, which aimed at expanding homeownership. It is imperative to note that, the MBS, CDO and credit default swap caused the disproportionate housing debt.For the case of the home sellers
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Macro Economics Essay
Capital as a means of seeking out future profitability.1 Although it is true that credit existed long before the highly evolved and developed representation of financial institutions as they exist today, the reality of the fact is that the cost of obtaining this credit and the terms through which an individual could have the potential to shop around or leverage one offer in lieu of another was drastically reduced.2 With this being said, it must also be understood that even though financial
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Microeconomics 300
Quality phone, differing only on performance as the fake phones are slow and contain inefficient browser; therefore the buyer might not be able to distinguish between the two, by viewing the catalogue.At a price lower than, SL no phones will be supplied, alternatively if p is greater than SL but less than SH, only low quality phones are produced and when P> 250 a mix of the two types will be made available.Recall that consumers know very little about the quality of products. Notably,
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Memo Writing
Projections show that if the current contribution policy continues, then the Social Security may become bankrupt by 2035. As such, the government must put measures to avert a crisis or buffer the beneficiaries in case of a crisis.Congress can enact several policies to avert the looming crisis in the Social Security. The admission by the government that the crisis is real and that the Social Security cannot cope with the current contribution and benefits mechanism is a grave concern to Social
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Market Structure
Is because; the oligopoly market structure has created a great barrier to entry into the automobile engines and transmission parts supply market that AutoEdge serves, since there are high barriers to entry into the oligopolistic market (Friedman, 1983). The high barriers to entry arises either from the high capital requirement for the firms entering the market or from the high level of specialized skills that are demanded in such a market segment (Fudenberg & Tirole, 2013).Therefore,
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Mexico 1994 Crisis: Real Sector
In terms of liquidity, favourable interest rates, currency exchange rate and inflow of foreign capital which might lead to further enhancement of consumption and investment (Luong, 2009).However, some of the policies taken during that pre crisis period had left marked implication on the financial crisis on 1994 (Irving, 2010). Measures of reform such that adopting an exchange rate regime to encourage capital inflow in the short run led to current account deficit due to mismanagement of real
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Macro Economics: 1.Critically assess the reasons of the disappearance of the original stable Philips curve (as outlined by Philips in 1958) with the support of economic theory and empirical evidence
Of labour market in which the demand and the demand and supply of labour equals, then the unemployment is by its definition considered to be zero. Since we know that an unemployed person is one actively searching for employment and has not yet found one. At the equilibrium wage w* there is no individual who wishes to work extra hours than he has already, thus zero unemployment. We consider that there is a “natural” rate of unemployment in the economy being that individuals optimally choose
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Micro economics homework
The fact that firms that make up a part of the market can only make hefty or abnormal markets in the short run; while in the long run profit making is limited to normal profits. Generally, perfectly competitive markets do not require a lot of regulation from the government, besides ensuring that that market remains competitive at all time and no anti-free market factors come into play.Perfectly competitive markets yield that maximum positive consumer surplus and economic welfare. Moreover, the
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Managerial Economics
The organizations would have benefits for developing the organizational goals that helps in the organizational decision making process. It is said when the organizational members experience bounded rationality, managing the situations becomes much more difficult and the organizations are supposed to use both formal and informal control mechanisms in order to make the employees perform rationally (Simon, 2001).A theory of rational behaviour involves both the rationality of the individual as well
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Management economics
The managers of Apple Inc. fix the prices of the products manufactured by the company considering the fixed as well as the variable costs for the products. The large companies like Apple Inc. are said to be more profitable compared to the small companies due to the economies of scale (Angulo, 2009). Economies of scale occurred in Apple Inc. as the company specialises mainly on the smart phones and computers and launches the best quality smart phones in the international market (Pache and
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Macro economics
This is one main reason why we see a rise in savings ratio during recessions.Also, a fall in household savings reduce credit availability such as borrowing to finance surplus spending sums as less saving. The credit crunch makes it hard to get new loans. Less savings means less taxation of saving and tax efficient savings structures such as Individual Saving Accounts. The need of saving to repay debts – an instance would be property owners wedged in negative equity whereby their house are
Pages: 11 (2750 words), Essay
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