Government and the Central Bank Economic Recession Responses

Government and the Central Bank Economic Recession Responses Discuss how the government and the central bank should respond to an economic slowdown and a recession At the end of year 2008, economists suggested that the economy may be led to -or already in- a recession when economic growth was decelerating. The official definition of a recession is two successive quarters with a decline in gross domestic product (GDP). However, the National Bureau of Economic Research (NBER) identifies that a recession as a â€Å"significant decline in economic activity spread across the economy, lasting more than a few months† based on a number of economic indicators, with an emphasis on trends in employment and income. It doesnt confine itself to use the technical definition of two quarters of negative GDP growth because it is only assessed quarterly and it is subject to revisions. By the time GDP growth is negative for two quarters, the recession is already well happening. However, an economic downturn is defined less strict. For instance, we were in an economic downturn even with positive growth because the economic growth rate was slowing down, house prices were falling, unemployment rates were increasing and people could see the business cycle that moved from a boom period to bust. To respond to an economic slowdown and recession, government and central bank should take active roles in resolving economic issues through the use of two expansionary policies: fiscal policy and monetary policy. While the economy is not officially in a recession, there are signs that economic activity is slowing. According to CRS Report for Congress, 2008, economic growth in the United States was negative in the fourth quarter of 2007 after two strong quarters, but turned positive in the first and second quarters of 2008. According to one data series (graphs), employment fell in every month of 2008. The unemployment rate, which rose slightly during the last half of 2007, declined in January and February of 2008, but began rising in March and by August stood at 6.1%. The continuing financial turmoil is also cause for concern. Forecasters, while projecting slower growth in 2008, remain uncertain about the likelihood of a recession. If financial market confidence is not restored and private market spreads remain elevated, the broader economy could slow due to difficulties in financing consumer durables, business investment, college education, and other big ticket items. When the economy is down turning, economist believe the central bank should place more emphasis on short-term monetary policy as it takes fewer time to implement and its decisions to significantly decrease interest rates, and natural market adjustment, along with the already enacted stimulus, would be enough to avoid recession. When there is a massive intervention in the financial markets, the transmission of money can be stimulated into the financial sector and ultimately into the broader economy, where an important expansion of credit could significantly raise aggregate demand. It is said to emphasise more on monetary policy than fiscal policy because there are lags before a policy change affects spending. Therefore, stimulus could be delivered after the economy has already entered a recession or a recession has already ended. First, there is a legislative process lag that applies to all policy proposals — a stimulus package cannot take effect until bills are passed by the H ouse and Senate, both chambers can reconcile differences between their bills, and the President signs the bill. Many bills get delayed at some step in this process. As seen in Table 8, many past stimulus bills have not become law until a recession was already underway or finished. Is additional fiscal stimulus needed during the economy slowdown? It depends on the current state of the economy. Fiscal policy temporarily stimulates the economy through an increase in the budget deficit. Fiscal stimulus can take the form of higher government spending (direct spending or transfer payments) or tax reductions, but normally it can boost spending only through a larger budget deficit. A deficit-financed increase in government spending directly boosts spending by borrowing to finance higher government spending or transfer payments to households. A deficit-financed tax cut indirectly boosts spending if the recipient uses the tax cut to increase his spending. Economists usually agree that spending proposals are somewhat more stimulative than tax cuts since part of a tax cut will be saved by the recipients. The most important determinant of the effect on the economy is its size. Economic performance can be illustrated through shifting in aggregate demand and aggregate supply curves. Aggregate supply and demand are shown in the graph below. If consumer confidence in the economy falls and people reduce their spending, aggregate demand will fall, reducing real output and prices and possibly dropping the country into a recession (figure1). As the American economy slid into recession in 1929, economists relied on the Classical Theory of economics, which promised that the economy would self-correct if government did not interfere. But as the recession deepened into the Great Depression and no correction occurred, economists realized that a revision in theory would be necessary. John Maynard Keynes developed Keynesian Theory, which called for government intervention to correct economic instability. As fiscal policy is the use of government spending and taxes to stabilize the economy, Keynes recommends that parliament should increase government spending in order to â€Å"prime the pump† of the economy during periods of recession. At the same time, he calls for tax decreases in recessionary times, to increase consumers disposable income with which they can buy more products. Through both methods of fiscal policy, the increase in aggregate demand brought about by such actions leads firms to increase production, hire w orkers, and increase household incomes to enable them to buy more. While both tools are effective, Keynes advocated change in government spending as the more effective fiscal policy tool, because any change in government spending has a direct effect on aggregate demand. However, if taxes are reduced, consumers most likely will not spend all of their increase in disposable income; they are likely to save some of it. Referring to the graph, a rise in government spending G or a decline in autonomous taxes will cause the aggregate demand AD shift to the right, thus increasing both the equilibrium level of real GDP, Q*, and the equilibrium price level P*. When economy is running into recession, central bank is one of the agencies responsible to influence the demand, supply and hence, price of money and credit in order to keep production, prices, and employment stable. To do this, the central bank uses three tools: open market operations, the discount rate and reserve requirements. In order to bring the economy out of recession, central bank will lower the reserve requirements. Due to the act, member banks are required to keep less money, and so more money can be put into circulation through expanding their loans to firms and people. Furthermore, with the use of its open market operations for buying government securities, the central bank pays for these securities by crediting the reserve accounts of its member banks involved with the sale. With more money in these reserve accounts, banks have more money to lend, interest rates may fall, and consumer and business spending may increase, encouraging economic expansion. The discount rate is serves as an indicator to private bankers of the intentions of the central bank to enlarge the money supply. So a lowered discount rate which is announced by the central bank encourages more banks to borrow from the reserve banks. According to the graph below, a central bank open market purchase of securities, a fall in the discount rate or a decrease in the required reserve ratio will raise the money supply, thereby increasing aggregate demand and the equilibrium level of real GDP, Q*, and the equilibrium price level, P*.

Cold War and Containment Essay

Dated from 1947-1991 the Cold War was an intense economic, political, ideological, and military tension between the powers of the Western world, led by the United States against the powers of the Eastern world led by the Soviet Union. Because of Mutual Assured Destruction (MAD) these two countries never came head to head like previous wars, however they would fight each other in proxy wars. This sustained a high level of hostility throughout the war and one point if not the highest point of the conflict was the Cuban Missile Crisis. The Soviet Union placed nuclear weapons in Cuba which would be only 90 miles from the US; this would have been devastating to the United States with only Seattle outside the blast radius. The two Ideologies that were at conflict during the cold war were the United States Capitalism vs. the Soviet Union Communism. United States believed in a system where there is more than one political party, limited government interference in people’s lives and also the factors of production and freedom of speech. On the other hand the Soviet Union had the complete opposite with only one political party, Classless society, government controlled most aspects of people’s lives and all factors of production and there was no freedom of speech. Containment was strategies used by the United States to counter the spread of Communism. It was used to counter a series of moves by the Soviet Union after it tries to enlarge its communist influence in Europe and Asia. One way the United States implemented this strategy of containment was the Marshal Plan. Named after the then secretary of state George Marshal was a program of monetary support to help in the rebuilding of the European economy. The plan was in operation for four years from 1948 with an approximate spending of $13 billion. Another way they implemented the containment was the Truman Doctrine. This was put forward by the then US President Harry Truman. The doctrine, which had both economic and military elements, pledged support for countries attempting to hold back Soviet-style revolutionary Communism.

Biography of Leonardo Pisano Fibonacci, Mathematician

Leonardo Pisano Fibonacci (1170–1240 or 1250) was an Italian number theorist. He introduced the world to such wide-ranging mathematical concepts as what is now known as the Arabic numbering system, the concept of square roots, number sequencing, and even math word problems. Fast Facts: Leonardo Pisano Fibonacci Known For: Noted Italian mathematician and number theorist; developed Fibonacci Numbers and the Fibonacci SequenceAlso Known As: Leonard of PisaBorn: 1170 in Pisa, ItalyFather: GuglielmoDied: Between 1240 and 1250, most likely in  PisaEducation: Educated in North Africa; studied mathematics in Bugia, AlgeriaPublished Works: Liber Abaci (The Book of Calculation), 1202 and 1228; Practica Geometriae (The Practice of Geometry), 1220; Liber Quadratorum (The Book of Square Numbers), 1225Awards and Honors: The  Republic of Pisa  honored Fibonacci in 1240 for advising the city and its citizens on accounting issues.Notable Quote: â€Å"If by chance I have omitted anything more or less proper or necessary, I beg forgiveness, since there is no one who is without fault and circumspect in all matters.† Early Years and Education Fibonacci was born in Italy but obtained his education in North Africa. Very little is known about him or his family and there are no photographs or drawings of him. Much of the information about Fibonacci has been gathered by his autobiographical notes, which he included in his books. Mathematical Contributions Fibonacci is considered to be one of the most talented mathematicians of the Middle Ages. Few people realize that it was Fibonacci that gave the world the decimal number system (Hindu-Arabic numbering system), which replaced the Roman numeral system. When he was studying mathematics, he used the Hindu-Arabic (0-9) symbols instead of Roman symbols, which didnt have zeros and lacked place value. In fact, when using the Roman numeral system, an abacus was usually required. There is no doubt that Fibonacci saw the superiority of using Hindu-Arabic system over the Roman Numerals. Liber Abaci Fibonacci showed the world how to use what is now our current numbering system in his book Liber Abaci, which he published in 1202. The title translates as The Book of Calculation. The following problem was written in his book: A certain man put a pair of rabbits in a place surrounded on all sides by a wall. How many pairs of rabbits can be produced from that pair in a year if it is supposed that every month each pair begets a new pair, which from the second month on becomes productive? It was this problem that led Fibonacci to the introduction of the Fibonacci Numbers and the Fibonacci Sequence, which is what he remains famous for to this day. The sequence is 1, 1, 2, 3, 5, 8, 13, 21, 34, 55... This sequence  shows that each number is the sum of the two preceding numbers. It is a sequence that is seen and used in many different areas of mathematics and science today. The sequence is an example of a recursive sequence. The Fibonacci Sequence defines the curvature of naturally occurring spirals, such as snail shells and even the pattern of seeds in flowering plants. The Fibonacci Sequence was actually given the name by a French mathematician Edouard Lucas in the 1870s. Death and Legacy In addition to Liber Abaci, Fibonacci authored several other books on mathematical topics ranging from geometry to squaring numbers (multiplying numbers by themselves). The city of Pisa (technically a republic at that time) honored Fibonacci and granted him a salary in 1240 for his help in advising Pisa and its citizens on accounting issues. Fibonacci died between 1240 and 1250 in Pisa. Fibonacci is famous for his contributions to number theory. In his book, Liber Abaci, he introduced the Hindu-Arabic place-valued decimal system and the use of Arabic numerals into Europe.He introduced the bar that is used for fractions today; previous to this, the numerator had quotations around it.The square root notation is also a Fibonacci method. It has been said that the Fibonacci Numbers are natures numbering system and that they apply to the growth of living things, including cells, petals on a flower, wheat, honeycomb, pine cones, and much more. Sources â€Å"Leonardo Pisano Fibonacci.†Ã‚  Fibonacci (1170-1250), History.mcs.st-andrews.ac.uk.Leonardo Pisano (Fibonacci). Stetson.edu.Knott, R. â€Å"Who was Fibonacci?† Maths.surrey.ac.uk.

Impact of telecommunications in the work setting Free Essay Example, 2000 words

The Impact of Telecommunications in the Work Setting David Shope National The Impact of Telecommunications in the Work Setting Introduction The term ‘telecommunications’ is broad and encompassing across different root words: telephone, telegraph and communications. As one searched on more accurate definition of the term, the search engine came up with more than 60.1 million results in a matter of 0.24 seconds (Google, 2013). One simple definition indicated that it is the â€Å"is the exchange of information over significant distances by electronic means† (Rouse, 2007, par. 1). Another more detailed definition of the term disclosed its meaning as the â€Å"science and technology associated, in general, with communications at a distance. A telecommunications system requires a analog or digital transmitter, a compatible receiver, and a physical (cable or wire) or non-physical (wireless) connection† (Web Finance, Inc. , 2013, par. 1). Messerschmitt (1996) revealed that â€Å"the term telecommunications is derived from â€Å"tele†, meaning at a distance, and â€Å"communications†, meaning exchanging of information† (p. 1). If defining the term apparently generated voluminous results, one was more intrigued on how telecommunications have evolved and impacted the contemporary work setting. We will write a custom essay sample on Impact of telecommunications in the work setting or any topic specifically for you Only $17.96 $11.86/pageorder now In this regard, the current discourse aims to present the impact of telecommunications in contemporary work settings, or how telecommunications have significantly shaped the work place. Historical Overview of Telecommunications A discussion on the historical background of telecommunication actually traced its origins from the discovery of the telephone by Alexander Graham Bell in 1876 (von Alven, 1998), 137 years from now. Previous to that, it was interesting to note that forms of communication included fire signals, carrier pigeons, and even a line of canon that relayed relevant messages (von Alven, 1998). Also, other communication patterns such as the Chappe brothers’ semaphore system which â€Å"consisted of movable arms on a pole whose positions denoted letters of the alphabet† (von Alven: Early Beginnings, 1998, par. 1) and the electric telegraph were also noted. Telecommunications in the 21st century has evolved in a rapidly changing pace due to the merging with the computer industry and the emergence of the Internet (Messerschmitt, 1996). As such, it pervaded vast industries and endeavors that transformed diverse facets of the work setting through increased access to information and t hrough the use of new technologies and communications facilities that provided new applications in faster, greater and wider scope.