Economy Topics

Question 1: "The firm's entire marginal cost curve is its short-run supply curve." True or False? Why? In my opinion, the above statement is partially true. A firm’s entire marginal cost curve is not equal to its short-run cost curve. I would argue that only a portion of the marginal cost curve equals the short-run supply curve. As stipulated by Irvin Tucker (223), it is only the portion of the marginal cost curve that forms the upper part above the minimum point that is equal to the firm’s supply curve. This is due to the fact that firms that operate in a perfectly competitive market usually ...

Exchange Rates and International Trade

“Exchange rates are the relative prices of moneys. Evidently, they have monetary causes. But if they do not have a price which is determined by fundamentals in the customary sense, then a further pillar of economic thought begins to totter: the ‘non-neutrality’ of exchange rates is the most important reason for the non-neutrality of money even in the long run”. Exchange rates compose the price of the monetary unit of a country; it is expressed in the monetary units of the other country. The functioning of the currency market and the dynamics of the exchange rates are closely connected with th ...

Financial Crises and Bank Regulation

The financial sector is very critical to any country’s economy. The banking sector plays an integral part in the well-being of the countries’ macro- and microeconomic. Banking regulations, therefore, exist to guide transactions between the banking sector and its clientele, either individuals or corporate entities. Given the dense network of the financial sector and its corresponding value to the country’s macro and microeconomics, it is imperative for the regulatory authorities to establish best practices within the sector. As stated by Brunnermeier, Crockett, Goodhart, Persuad, and Shin (2009 ...

Monetary and Fiscal Policy

Fiscal policy refers to the term of government policy and it is considered as one of the main methods of state intervention into the national economy in order to reduce the business cycles fluctuations and provide a stable economic system in the short term. The main instruments of fiscal policy are the revenues and expenditures of the state budget, taxes, transfers, and government purchases of goods and services. The main goal of fiscal policy is to control aggregate demand by changing the rates of taxation and government spending. Government fiscal policy is able to affect the following objec ...

Recent Financial Crisis

The rationality of human beings when it comes to making decisions on economic matters is a highly controversial issue. Over the past decades it has been believed that markets are rational entities and that they will regulate themselves in an efficient way. However, the economic crises that people have faced during some of the years, and especially the most recent economic crisis of 2008, has led to some opposing and new ideas of the way the markets are organized. In the documentary “Mind over Money” the argument is that when it comes to making decisions about money-related issues humans are la ...

Rent Seeking Behavior

Economic inequality has been eminent in the United States, and according to Joseph Stiglitz, the inequality has been created by the market forces, which are protected by the government policies. Stiglitz blames the government for the inequality that exists in America today. He asserts that the inequality emanates from what the government does, or what it fails to do. The government has the power to distribute resources from the top class across the middle and low income earners. He cites various causes of inequality in the United States, but points out rent seeking as a key cause of the rising ...

The Great Depression Causes And Impacts

Introduction The Great Depression was a worldwide economic decline which occurred in 1930’s. It was the longest period of unemployment beginning from 1921 to 1930s. It was majorly caused by the drop in the stock values which saw many stockholders loosing large amounts of money. Many Banks, factories and stores closed and left millions of Americans jobless and vulnerable of the effects of poverty. Most families which were initially independent had to survive on charity donations as people became jobless. The effects of the Great Depression had worldwide social, economic, and political impacts. ...

The Epoch of Globalization

The epoch in which humanity lives nowadays is constantly changing and there are a number of reasons for that. Due to development of computer technologies, mobile phones and the Internet, the spread of information and the pace of living have fastened dramatically. For a person living in developed countries today it is virtually impossible to escape the idea that the world has become a more globalized place to live in. Boundaries between countries are being blurred; cultures are penetrating each other and creating totally new formations. One can freely move to different places of the planet and ...

The Entrepreneurial Process

There is no doubt that the entrepreneurship field has attracted much attention recently and this aspect is of a particular interest for many scholars nowadays. Recent studies show that an emphasis is mainly made on such a phenomenon as a new venture creation and a great number of both theoretical and empirical approaches have been used in order to investigate it. Such significant interest can be explained by the significant role new enterprises have in modern economy. Modern entrepreneurship studies are quite different from the early ones as they are focused on a wider range of aspects aside f ...

Tariffs and International Trade

International trade relations are guided by mutual trade agreement between two or more countries. One of these rules is tariffs. A tariff is a duty or a tax policy imposed by the domestic government to regulate the amount of goods and services that flows in and out of the country (David & Stewart, 2010). This paper intends to discuss the trade relations between the United States and China and the effects of imposing tariffs on both parties. Commercial trade relations between the U.S. and China have been taking place since 1981. China is the United States’ second largest trading partner ...