Macroeconomics
Government borrowing is too high and interest rates are too low in many countries; fiscal stimulus does not work and cheap money leads only to inflation. Explain and discuss the various caveats of this macroeconomic problem and what policy measures will you suggest and Why if you are hired as a Junior Policy Advisor in an Advisory Board of Economists in one such country including Canada? Use economic theory, policy, and data to illustrate and validate your answer.

Government borrowing is the money or debt under the jurisdiction of the country. Government borrowing represents the money belonging to the public owed by the central bank of the country's economy. The main source of government funds is tax from the citizens of the country. This makes government debt or borrowing to be an indirect debt of the citizens. In some economic terms, government borrowing refers to public or national debt. In the…...

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References

Country Intelligence: Report: Canada. (2012). Canada Country Monitor, 1.

De Andrade, J., & Pires, M. (2011). Implications of Public Debt Indexation for Monetary Policy Transmission. Journal of Applied Economics, 14(2), 257-268.

Gans, J. (2011). Principles of economics. South Melbourne, Vic: Cengage Learning.

Midthjell, N. (2011). Fiscal policy and financial crises - what are the actual effects of fiscal policy? Economic Bulletin (Norges Bank), 8224-38.

This is problematic, because it allows government waste and inefficiency to increase, which this makes it more difficult to: fire or layoff non-essential employees. As a result, there has been a concentrated effort to eliminate this power, in order to improve the state's ability to adapt to shifts in the economy. (Weitzman)
However, many of the public employee unions and liberal Democrats have been fighting this law. The reason why, is because they believe that under the basic Constitutional principles: the Governor and the Legislature simply cannot pass a law to strip employees of this power. This has led to a campaign of resistance among Democrats opposed to the law, who were refusing to vote on it. (Weitzman)

After this political strategy failed and the law was passed, is when the focus was changed to challenging its legality in court. As the public employee unions would claim that they are being…...

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Bibliography

Weitzman, Hal. "Judge Blocks State's Union Rights Law." FT, 2011. Web. 19 Mar. 2011.

Macroeconomics
The AD-AS model explains how full employment can be reached from a situation of deep recession, assuming no fiscal policy stimulus. The underlying assumption of this theory is that when the economy improves, that this will have an impact on employment. The model therefore assumes a pre-globalization world where increases in aggregate supply on the part of companies in the U.S. will actually be made by U.S. workers. The thesis statement for this paper is that technological innovation is the most likely means by which the economy can return to full employment under the circumstances described.

In this situation, without fiscal stimulus, the economy is not going to see any increase in aggregate demand because of persistent high unemployment and likely fears about the state of the economy. Businesses are likely to begin this recession with excess capacity, keeping them from making investments as well. However, the economy will still be…...

Macroeconomics Models
The Classical Model (1776-1935)

The classical model largely follows the conclusions reached in Microeconomics. The fundamental equilibrium is in the supply and demand for labor. The Demand for Labor and Labor Supply, Income Taxes, and Transfer Payments are the major microeconomic references in the Classic Economic Models (Hicks and Keynes, 1937).

Keynesian Models (1936-1969)

The simple keynesian model, a greatly oversimplified view of the economy, constructs an equilibrium without referring to the labor market. This shows that the economy can be in an equilibrium that is far from full employment (Gordon, 1990).

The keynesian IS/LM model shifts from the Classical Model's focus on the wage rate to a focus on long-term and short-term interest rates. These interest rates are taken to be equal. Income and the interest rate are the variables that adjust to achieve equilibrium. The model is presented in two versions, one with fixed prices and one where the Aggregate Supply/Aggregate…...

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Bibliography

Adam Smith, The Wealth of Nations, 1776.

Daniel Defoe, The Life and Strange Adventures of Robinson Crusoe, 1719.

John Maynard Keynes, The General Theory of Employment, Interest and Money, 1936.

John R. Hicks, Mr. Keynes and the Classics, 1937.

Macroeconomics
Why is economics considered as a social science? What role does economics play in your personal and professional lives?

Economics is considered as a social science because it deals with human behavior as to how individuals try to satisfy unlimited wants with the limited or scarce resources. (Sowell, 2010)

Economics has a very important role in our lives, we may not realize it but any decision we take, anything we do, economics is involved. Looking at it at a personal level, deciding whether to study or sleep highlights the concept of opportunity cost. In our professional lives, the economy guides us as to how the company is supposed to run and the strategies and decisions that are to be made.

What is the difference between real and nominal GDP? Does GDP accurately reflect the nation's welfare? Why or why not? How can a country's GDP be manipulated? In your opinion, is the U.S.…...

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References

Brue, S., Flynn, S., & McConnell, C. (2011). Macroeconomics. McGraw-Hill.

Mankiw, N.G. (2002). Macroeconomics. Worth Publishers.

Sowell, T. (2010). Basic Economics. Basic Books.

Macroeconomics
In this case, there are a number of monetary policy prescriptions that apply, all of them expansionary. In terms of open market operations, the Fed should buy Treasuries. This will pump money into the banking system, providing greater means for investment. This will provide the groundwork for economic growth, in particular it will signal that the Federal Reserve is committed to restoring economic growth and halting the growth in unemployment. This policy should improve national income. As investors are not investing, however, this strategy is unlikely to succeed on its own. The Federal Reserve should lower interest rates as well. Investors may be convinced to invest is the risks associated with investment are reduced, and this means reducing the cost of money. This strategy will not inject more money into the banking system, but will encourage investors and consumers to spend more money, increasing liquidity in the system. The national…...

Macroeconomics
Investopedia provides a list of major macroeconomic indicators, of which several are relevant to FedEx. FedEx is considered to be a bellwether organization in that its client base spans a broad swath of business. Thus, the GDP is the most important macroeconomic indicator. The amount of business being conducted in the economy will reflect in how many customers use FedEx's service. In addition, because FedEx is a premium service, businesses often reduce the degree to which they rely on FedEx in situations where they are facing cost reductions. By 2010, FedEx had restored operations to roughly pre-recession levels (Risher, 2010) and the company predicts slow economic growth going forward (Malone, 2011).

A second indicator that can provide insight into FedEx's operations is the Consumer Confidence Index. This report from the Conference Board (Barnes, 2012) has three headline figures relating to how people see the health of the U.S. economy. FedEx builds…...

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Works Cited:

Barnes, R. (2012). Economic indicators: Overview. Investopedia. Retrieved May 21, 2012 from  http://www.investopedia.com/university/releases/#axzz1vXYdJy3q 

Malone, S. (2011). FedEx CEO: Economy not slipping back to recession. Reuters. Retrieved May 21, 2012 from  http://www.reuters.com/article/2011/10/06/us-FedEx-economy-idUSTRE79539C20111006 

Risher, W. (2010). FedEx restores flight hours to pre-recession levels. Memphis Commercial Appeal. Retrieved May 21, 2012 from www.commercialappeal.com/news/2010/may/26/FedEx-restores-flight-hours/

Macroeconomics
The Federal eserve System has been the central bank of the United States since 1913 and since its formation; the bank provides flexible, safer, stable financial and monetary system. Presently, the major duties of the Federal eserve is to influence the monetary and credit conditions in the economy to pursue stable price, maximum employment, and moderate long-term interest rates. Open market operations, the reserve requirements and the discount rate are the monetary tools that the Federal eserve uses to implement monetary policy. Federal eserve uses these three tools to influence the supply and demand of balances in depository institutions and thereby alter the interest rates. However, changes in the federal funds rate could trigger a chain of events and affect economic variables such as:

short-term interest rates

Foreign exchange rates

Long-term interest rates

Amount of credit and money in the system,

Employment

Output

Inflation (Increase in prices of goods and services), and Investment.

Objective of this essay is…...

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References

Blanchard, O. Giovanni, D. And Paolo, M. (2010). Rethinking Macroeconomic Policy,

IMF Staff Position Notes, International Monetary Fund.

Blinder, A. (2000) .Monetary Policy at the Zero Lower Bound: Balancing the Risks, Journal of Money, Credit, and Banking. 32.4: 1093-99.

Board of Governors of the Federal Reserve System. (2005).The Federal Reserve System: Purpose & Functions (Ninth Edition). Library of Congress Control Number 39026719.

Macroeconomics -- Review of Age-Old Economic Concepts through the Eyes of Current Events in the Newspapers of Today
It has been a unique privilege to embark upon the study of economics during this period in our nation's economic history. One might be tempted to say this is a strange statement, at first. Would it not be better to begin to study economics during a boom period, such as the nation enjoyed during the 1990's? But one must disagree. The most interesting things about today's economy are the many contradictory aspects of its current, halting and painful economic recovery from a recent recession.

The Federal Reserve System and Recent Fiscal Policy

When the economy first began to sour, one of the first things the Federal Reserve chairman, Allan Greenspan, did was to lower interest rates. Lowering interest rates means that it is not in the consumer's interest to save money, because banks give very…...

In regard to education, it can also be noted that the same also has a significant impact on productivity. Where education helps individuals to be more specialized in firms, productivity is more likely to increase. This is in line with Taylor's (2006) assertion that "specialization of workers at a firm adds to productivity." Further, the author is of the opinion that to enhance the productivity of workers, many companies choose to provide their employees with on-the-job training. In a way, the skills such workers develop while undergoing training or furthering their education is what ends up impacting positively on their productivity. Hence for a nation with a highly educated workforce, productivity levels are bound to increase.

When it comes to &D, it can be noted that an increase in research and development spending tends to increase or enhance productivity. This phenomenon can be looked at from several points-of-view. For instance, as…...

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References

Taylor, J. (2006). Principles of Macroeconomics. Cengage Learning.

For instance, it is possible to determine the increase or decrease in the general price levels by looking at the national income figures. National economies can use national income figures to determine how much income individuals are spending on consumption goods and hence their levels of saving. With such information, national governments can come up with ways of keeping inflation and deflation in check based on investment, saving and consumption figures.
Third, national economies can determine the economic positions of their countries through a comparison of their GDPs with those of other nations. If a nation's GDP is significantly lower in comparison to that of other nations, it becomes clear to policy makers that the standards of living of individuals in such an economy could be low. Further, GDP figures in this case can be used to determine the purchasing power of individuals. If the GDP results in this case…...

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References

Sexton, R.L. (2010). Exploring Macroeconomics. Cengage Learning.

" Some types of government expenditures, for example, stretch the definition of economic activity. e know that an order for new office chairs at city hall is economic activity, but what about transfers to government agencies to run prisons? Or loans made by government to bail out banks or automakers. Those were expenditures. Something like the AIG bailout was an investment. But even investments are not necessary part of the GDP. Commissions paid on investments are, but are the investments themselves? Sorting out what is and what is not included in the GDP is another challenge for calculating national income.
Also, EconPort (2006) note that welfare is not measured. Again, this is a disbursement that is not taken into consideration in the accounting, until it is spent at a later point in time. It is worth noting that this particular disbursement is a transfer of wealth not unlike spending, and is…...

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Works Cited:

EconPort. (2006). Limitations of national income accounting. EconPort. Retrieved December 8, 2011 from  http://www.econport.org/content/handbook/NatIncAccount/Limitations.html

An adverse supply shock would be the opposite. The above Toyota example is a temporary supply shock, one from which the company has probably recovered at this point. But an adverse supply shock is more permanent in nature. Aggregate supply decreases permanently, and this increased scarcity is reflected in higher prices. For the shock to be permanent, there must be barriers to firms increasing production. If the firms in the industry were able to increase production in order to meet the new high price the good would simply return to a state of equilibrium. Instead, something must constrain the ability of firms in the industry to respond in that way. If a key input becomes scarce, that would be an example of an adverse supply shock. Often, this involves the depletion of a key natural resource.

Over time the market may adjust to the adverse supply shock in any number of…...

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Works Cited:

CNN. (2011). Toyota making drastic production cuts after Japan quake, tsunami. CNN. Retrieved December 15, 2011 from http://articles.cnn.com/2011-04-20/world/japan.toyota_1_toyota-motor-engineering-production-manufacturing-north-america?_s=PM:WORLD

Investopedia. (2011). Definition of supply shock. Investopedia. Retrieved December 15, 2011 from  http://www.investopedia.com/terms/s/supplyshock.asp 

McEachern, W. (2011). Economics: A contemporary introduction. Mason, OH: Cengage Learning.

Burgen, Meyer and Tasci (2012) argue, however, that Okun's Law has not been broken, and that the pace of growth in the GDP is consistent with the decline in the unemployment rate. The nature of the ratio in Okun's Law is at issue in these different views about what the recent economic numbers mean for Okun's Law. The authors note that the most recent quarters' worth of performance fall on the trendline created by comparing the two figures.

Even if Okun's Law is broken, there are potential reasons for this. For example, a decline in the GDP growth rate could coincide with more people removing themselves from the workforce. The unemployment rate would not be improved by people finding work, but rather by people giving up. Another potential explanation, given that the unemployment improvements in the past couple of months have not been strong, is that GDP growth is falling in…...

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Works Cited:

Burgen, E., Meyer, B. & Tasci, M. (2012). An elusive relation between unemployment and GDP growth: Okun's law. Federal Reserve Bank of Cleveland. Retrieved May 8, 2012 from  http://www.clevelandfed.org/research/trends/2012/0412/01labmar.cfm 

Walker, S. (2012). Okun's law broken as U.S. jobless rate unexpectedly declines. Bloomberg. Retrieved May 8, 2012 from  http://www.bloomberg.com/news/2012-02-13/okun-s-law-broken-as-u-s-jobless-rate-unexpectedly-declines-tom-keene.html

It can also be negative which is known as deficit. The most vital point to consider is that going by the definition the aggregate of every sector's financial surplus/deficit must be equal to zero. This is due to the fact that borrowings by deficit sectors must be matched by an equal lending by sectors which are surplus. (National Income Accounting -the Overall Systems of Accounts)
GDP is the market value of all the final goods and services which is produced in the nation during a particular year. It does not include production overseas by U.S. companies but includes the production facilities in U.S. By overseas companies operating in U.S. like for example Toyota Motors. On the other hand GNP is the market values of all goods and services produced by domestically owned factors some of which might be situated overseas. It is estimated from GDP by adding on net property…...

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References

An Introduction to National Income Accounts. Retrieved at Accessed on 16 March 2005http://www.sussex.ac.uk/Units/economics/introec/ielec_11.doc.

Johnson, Rhys. Macro-economics - an Introduction. 1 January 2000. Retrieved at   on 16 March 2005http://www.accaglobal.com/publications/studentaccountant/43892Accessed 

Macro Notes 5: Aggregate Demand and Supply. Retrieved at Accessed on 16 March 2005http://faculty.uwb.edu/danby/notes/notes14.html.

National Income Accounting. Retrieved from www.lmu.ac.uk/lbs/epia/people/beachill/macro2/mac2ch1.doc+National+Accounts+and+the+relationships+between+GDP,+GNP+and+NNP&hl=en"   Accessed on 16 March 2005http://www.lmu.ac.uk/lbs/epia/people/beachill/macro2/mac2ch1.doc .

Impact of Inflation on the Purchasing Power of Money
Inflation is a sustained increase in the general price level of goods and services in an economy over time. It erodes the purchasing power of money, which is the amount of goods and services that can be purchased with a given amount of money.
How Inflation Impacts Purchasing Power
Inflation reduces the purchasing power of money by increasing the prices of goods and services. As prices rise, the same amount of money can buy fewer goods or services. For example, if the inflation rate is 3%, a loaf of bread that cost $1 last....