Chapter 8 – Stabilization Policy
We need immigrants, not Bill C-50
http://www.canada.com/abbotsfordtimes/news/upfront/story.html?id=fb082261-5871-4109-918f-e9f45066a05f
Bill C-50 is Stephen Harper’s way of limiting immigration applicants and to focus more on skilled immigrants. However, his action will cause several negative effects due to Canada’s current economic situation. With the baby boomers retiring, more jobs are becoming unfilled and Canadian citizens do not have human resources and capital to fill these jobs. The article argues that by introducing Bill C-50, immigrants will not be able to bring the rest of their families into Canada once Canada reaches its cap. However, Canada needs these parents who are immigrants. Canada needs to place children into conventional education systems so that these children can benefit and thrive from future job opportunities. Canada needs people who will jobs that the baby boomers leave behind. The article ends by saying that if Canada does not have enough people to fill the demands of labor, and then the Canadian economy will stall.
Stephen Harper’s Bill C-50 will destabilize the economy. The immigration policy is created so that qualified workers will be let in so that the supply of labor can match the labour demands better. However, it was created to meet humanitarian needs as well. Immigrants are needed so that they can settle in areas which are less populated so that the geographic dimension of structural employment will be reduced. Also, there are jobs which are unfilled and Canadians do not have the skills to take these jobs. When jobs are unfilled, productivity levels are lowered and perhaps a state of disequilibrium will occur when the quantity demanded exceeds the quantity supplied. Then the prices will also increase and people will be less willing to spend, therefore there will be a decrease in circulation of money and causing a stall in the economy.
With the increasing job openings in Canada, Stephen Harper’s Bill C-50 and his way of limiting immigration applicants may cause a problem –a decrease –with our productivity level in Canada. When the baby boomers retire, many of the government pension plans will be brought to them. We need to bring people to fulfill Canadian jobs to stabilize our increasing GDP, and taxes. I disagree with the implementation of Bill C-50. Immigrants who are unskilled can become trained and can adapt to Canadian jobs. With the Human Resources Policy, governments have already started many programs to help reduce structural unemployment. Restricting immigrants to come in not only dissatisfy humanitarian needs, but also labour demands as well by keeping our jobs unfilled and slowing down the economy.
Monday, June 16, 2008
Sunday, May 4, 2008
Overview
http://www.economist.com/markets/indicators/displaystory.cfm?story_id=11090698
Within this economist article, an overview is given for Canada, Norway, and the euro area. The bank of Canada has lowered its bank rate to 3% from it 3.5% due to their expectations of an extended American slowdown of the economy which will in turn harm the Canadian exports and credit conditions and decrease spending. Canada also wants to increase their inflationary rate from 1.5% to 1-3% target by using the monetary policy. Next, Norway raised their interest rates from 5.25% to 5.5% because they are more concerned with their high inflationary rate rather than about a slowdown in the economy. Then, the manufacturing firms were less busy and have less activity due to the strong exchange rate which caused the euro to fall. As well consumer prices in Australia have increased by 4.2% which is above the 2 to 3 % target. The interest rate will rise and the aussie dollar will then rise above the $0.95 mark. Finally, the economist reported that the homes in America had fallen by 2% in March.
Within Chapter 7, we learned about the Bank of Canada, Monetary Policy, and the Money Multiplier. We learned that the Bank of Canada can manipulate the economy by changing the bank rate and the reserve ratio. I can now understand the reason why Canada wants to lower their bank rate from 3.5% - 3.0% is because they want to increase the money supply then increase spending to counteract the harm done by the American economy slowdown. To counteract the high inflationary rate, Norway raised their interest rates from 5.25% - 5.5% in order to slow down inflation. Next, we can see that the manufacturing firms are less busy and had less activity because of their strong exchange rates. This caused a decrease in demand and an increase supply which causes the euro to fall. We can also see that Australian consumer prices have increased due to inflation as well.
Overall, I believe that even if Bank of Canada increased decreased the bank rate, Canadians are more likely to spend the money within our neighbor’s economy rather than within the Canadian economy. Since prices are cheaper within the United States and the dollar value is almost equal now, consumers would much rather spend the money within the states. On the other hand, the increased money supply will enable consumers to be able to afford more within Canada. Also, I believe that Australia can lower their interest rates in order to decrease the inflationary rate as well.
Within this economist article, an overview is given for Canada, Norway, and the euro area. The bank of Canada has lowered its bank rate to 3% from it 3.5% due to their expectations of an extended American slowdown of the economy which will in turn harm the Canadian exports and credit conditions and decrease spending. Canada also wants to increase their inflationary rate from 1.5% to 1-3% target by using the monetary policy. Next, Norway raised their interest rates from 5.25% to 5.5% because they are more concerned with their high inflationary rate rather than about a slowdown in the economy. Then, the manufacturing firms were less busy and have less activity due to the strong exchange rate which caused the euro to fall. As well consumer prices in Australia have increased by 4.2% which is above the 2 to 3 % target. The interest rate will rise and the aussie dollar will then rise above the $0.95 mark. Finally, the economist reported that the homes in America had fallen by 2% in March.
Within Chapter 7, we learned about the Bank of Canada, Monetary Policy, and the Money Multiplier. We learned that the Bank of Canada can manipulate the economy by changing the bank rate and the reserve ratio. I can now understand the reason why Canada wants to lower their bank rate from 3.5% - 3.0% is because they want to increase the money supply then increase spending to counteract the harm done by the American economy slowdown. To counteract the high inflationary rate, Norway raised their interest rates from 5.25% - 5.5% in order to slow down inflation. Next, we can see that the manufacturing firms are less busy and had less activity because of their strong exchange rates. This caused a decrease in demand and an increase supply which causes the euro to fall. We can also see that Australian consumer prices have increased due to inflation as well.
Overall, I believe that even if Bank of Canada increased decreased the bank rate, Canadians are more likely to spend the money within our neighbor’s economy rather than within the Canadian economy. Since prices are cheaper within the United States and the dollar value is almost equal now, consumers would much rather spend the money within the states. On the other hand, the increased money supply will enable consumers to be able to afford more within Canada. Also, I believe that Australia can lower their interest rates in order to decrease the inflationary rate as well.
Friday, April 11, 2008
A stimulating notion
http://www.economist.com/finance/displaystory.cfm?story_id=10697166
This article presents an argument of whether Keyne’s theory is effective. The Monetary Policy seems to have been quite popular for a while due to the rising budget deficits for countries that have adopted to Keyne’s theory. However, after several years, Keyne’s theory is back in the spotlight. George Bush declared that there will be tax rebates and temporary investment incentives—a concoction which he has whipped up by using the fiscal policy. Spain and Britain are already following Bush’s lead by becoming keynesian. However, others such as the president of the European Central bank, the IMF’s former chief economist and several others seem to refute the theory. Evidence was then given. An example are the fiscal deficits of both US and Britain. On the other hand, evidence was given that the fiscal policies worked when it is put into place properly and at the right time. And also, recent studies have shown that the fiscal policy is giving positive effects to America’s economy since 2001. In the end, it seems like Keyne’s theory does give positive feedback and more countries are now adopting to it. The article ends by using one of Keyne’s lines, “ the government could boost demand by digging holes.”
This article presents some evidence on the effectiveness of Keyne’s theory. The article mentions using taxation cuts and increase of spending to stimulate the economy. Also, other ways were presented. These include introducing a project for building infrastructure and temporary investment incentives. Just like the depression in the 1930’s, Keyne’s theory has taught the western government to take action. As you can see, several governments have adopted this theory. Also, several other developing countries are also converting into Keynesians. With Bush’s tax rebates, studies show that people are spending more and putting it back into the economy which has shown positive effects.
I believe that Bush did a good job on implementing that stimulus. In addition, I believe that after instilling that stimulus, providing long-term benefits would be even better.
This article presents an argument of whether Keyne’s theory is effective. The Monetary Policy seems to have been quite popular for a while due to the rising budget deficits for countries that have adopted to Keyne’s theory. However, after several years, Keyne’s theory is back in the spotlight. George Bush declared that there will be tax rebates and temporary investment incentives—a concoction which he has whipped up by using the fiscal policy. Spain and Britain are already following Bush’s lead by becoming keynesian. However, others such as the president of the European Central bank, the IMF’s former chief economist and several others seem to refute the theory. Evidence was then given. An example are the fiscal deficits of both US and Britain. On the other hand, evidence was given that the fiscal policies worked when it is put into place properly and at the right time. And also, recent studies have shown that the fiscal policy is giving positive effects to America’s economy since 2001. In the end, it seems like Keyne’s theory does give positive feedback and more countries are now adopting to it. The article ends by using one of Keyne’s lines, “ the government could boost demand by digging holes.”
This article presents some evidence on the effectiveness of Keyne’s theory. The article mentions using taxation cuts and increase of spending to stimulate the economy. Also, other ways were presented. These include introducing a project for building infrastructure and temporary investment incentives. Just like the depression in the 1930’s, Keyne’s theory has taught the western government to take action. As you can see, several governments have adopted this theory. Also, several other developing countries are also converting into Keynesians. With Bush’s tax rebates, studies show that people are spending more and putting it back into the economy which has shown positive effects.
I believe that Bush did a good job on implementing that stimulus. In addition, I believe that after instilling that stimulus, providing long-term benefits would be even better.
Friday, March 28, 2008
Chapter 5: Canada's Aging Labour Force
http://www.canada.com/victoriatimescolonist/news/story.html?id=84c83203-de2c-42bf-9eba-b75bf6a41057&k=37551
According to the Labour Force Census of 2006 released on March 4th 2008, Canada's work force is now comprised of more workers who are over 40 years of age than those who are younger. You can find these workers more frequently working in retail stores rather than in factories. This situation reflects the consequences of the increased value of the dollar. However, after comparing the 2001 census with that of 2006, Canada has more workers in 2006. As well, in comparison with the employment growth of other industrial economies, Canada has the strongest and is increasing at 1.7 percent in average annual rate. Because of this stable economic growth, older workers are motivate to stay within the workforce. Then, concerns about the aging baby boomers and their retirement were brought up. Because the generation that follows consists of fewer people, labour shortages would soon become a problem. At this moment though, Canada's Job Market seems to be in good condition because employment rate has risen almost everywhere and in almost every sector. Although this is the case, educated workers are still preferred above those who are not.
This article discusses the employment and unemployment. Unemployment was said to be a concern for Canada. However, Canada is nowhere near the danger zone. Because unemployment rate is down, more money is being put into the flow of money within Canada's economy. Next, the trend of the shift of employment away from goods producing sector to service providing sector within the last 50 years seem to hold true and is even more so due to the strong dollar. This represents Frictional Unemployment which is in my opinion the best type of unemployment. Because the opening of more jobs, people are now leaving their jobs in search of a better one.
In my opinion, although the job market seems to be looking well for Canada, it does not look well for Canada's economy. Because of increase of Canada's dollar, foreign exchange with Canada has decreased. Now that it is cheaper to purchase from other countries, goods within Canada is being purchased less from Canada and foreign investors with companies set up in Canada are now moving back to where it is less expensive. As well, Canadians are now going to the states to purchase things. Does that mean that the money that workers earn in Canada is going to be spent elsewhere?
According to the Labour Force Census of 2006 released on March 4th 2008, Canada's work force is now comprised of more workers who are over 40 years of age than those who are younger. You can find these workers more frequently working in retail stores rather than in factories. This situation reflects the consequences of the increased value of the dollar. However, after comparing the 2001 census with that of 2006, Canada has more workers in 2006. As well, in comparison with the employment growth of other industrial economies, Canada has the strongest and is increasing at 1.7 percent in average annual rate. Because of this stable economic growth, older workers are motivate to stay within the workforce. Then, concerns about the aging baby boomers and their retirement were brought up. Because the generation that follows consists of fewer people, labour shortages would soon become a problem. At this moment though, Canada's Job Market seems to be in good condition because employment rate has risen almost everywhere and in almost every sector. Although this is the case, educated workers are still preferred above those who are not.
This article discusses the employment and unemployment. Unemployment was said to be a concern for Canada. However, Canada is nowhere near the danger zone. Because unemployment rate is down, more money is being put into the flow of money within Canada's economy. Next, the trend of the shift of employment away from goods producing sector to service providing sector within the last 50 years seem to hold true and is even more so due to the strong dollar. This represents Frictional Unemployment which is in my opinion the best type of unemployment. Because the opening of more jobs, people are now leaving their jobs in search of a better one.
In my opinion, although the job market seems to be looking well for Canada, it does not look well for Canada's economy. Because of increase of Canada's dollar, foreign exchange with Canada has decreased. Now that it is cheaper to purchase from other countries, goods within Canada is being purchased less from Canada and foreign investors with companies set up in Canada are now moving back to where it is less expensive. As well, Canadians are now going to the states to purchase things. Does that mean that the money that workers earn in Canada is going to be spent elsewhere?
Tuesday, February 19, 2008
Ch 4 Flat Tax
http://www.canada.com/vancouversun/columnists/story.html?id=202a8923-2f74-4cd6-9e3d-13e067816ddf
In summary, a non-partisan lobby called the Canadian Taxpayers Federation is proposing adopting a flatter tax approach for Canada instead of the progressive taxation approach that Canada currently use. This new system includes taxing Canadians with taxable income up to $80,000 15% and those earning 10% more –25%. Even after switching to this approach, it will continue to maintain the progressive characteristic of taxation. For example those with higher income will still pay more. As well, $9,600 basic personal deductions in taxable income will increase to $15,000 that will help get 1.4 million people with low income off of tax roll and tax credits will be kept for RRSPs. As a result, relief will add up to $25 billion dollars by the year of 2012. This article talks about how this idea will lower income taxes for everyone, no one will pay an excessive amount in income taxes, and no one will need to bother with tax returns.
This article relates mostly to the proportional approach for taxation. Proportional means that people earning income at all levels will be taxed with the same tax rate. However, this article presents flat tax rates with a new tweak. This article presents a perfect summary on a flat tax rate and how it can be adjusted to create a more progressive nature. The progressive approach is when the high income earners pay a larger amount than those with low income. With this new approach, there are two different flat tax rates. The first one is for those earning $80,000 and below and the second is an increased rate for those who earn more than $80,000. Within the article, they mention points and which coincide with the ideas and arguments presented within the textbook. They present a good argument of how there will be less work done when filling in the income tax form, however, the equality on RRSP can be argued for.
In my opinion, the advantages of the adopting this new approach is arguable. There is a larger range of income levels than the two mentioned within the article. Those on the low end of the category of income earners below $80,000 will suffer more and those on the high end of the category can afford higher tax rates. The low income earners will bear the bigger burden with the tax rate because they need that money to buy essential items. However, the high income earners already have enough money to buy luxury items even when they have to give up 10% more. As well, RRSP is more beneficial for high income earners because they have more money to put into their retirement fund and receive a larger tax benefit, while the low income earners do not. Finally, because the gap between the rich and the poor is bigger with the high income earners earning more, and the low income earners earning the same amount for several years, this flat tax approach will only continue to widen the gap. With the income inequality increasing, adopting this flat tax rate is not a good idea and should not be done.
In summary, a non-partisan lobby called the Canadian Taxpayers Federation is proposing adopting a flatter tax approach for Canada instead of the progressive taxation approach that Canada currently use. This new system includes taxing Canadians with taxable income up to $80,000 15% and those earning 10% more –25%. Even after switching to this approach, it will continue to maintain the progressive characteristic of taxation. For example those with higher income will still pay more. As well, $9,600 basic personal deductions in taxable income will increase to $15,000 that will help get 1.4 million people with low income off of tax roll and tax credits will be kept for RRSPs. As a result, relief will add up to $25 billion dollars by the year of 2012. This article talks about how this idea will lower income taxes for everyone, no one will pay an excessive amount in income taxes, and no one will need to bother with tax returns.
This article relates mostly to the proportional approach for taxation. Proportional means that people earning income at all levels will be taxed with the same tax rate. However, this article presents flat tax rates with a new tweak. This article presents a perfect summary on a flat tax rate and how it can be adjusted to create a more progressive nature. The progressive approach is when the high income earners pay a larger amount than those with low income. With this new approach, there are two different flat tax rates. The first one is for those earning $80,000 and below and the second is an increased rate for those who earn more than $80,000. Within the article, they mention points and which coincide with the ideas and arguments presented within the textbook. They present a good argument of how there will be less work done when filling in the income tax form, however, the equality on RRSP can be argued for.
In my opinion, the advantages of the adopting this new approach is arguable. There is a larger range of income levels than the two mentioned within the article. Those on the low end of the category of income earners below $80,000 will suffer more and those on the high end of the category can afford higher tax rates. The low income earners will bear the bigger burden with the tax rate because they need that money to buy essential items. However, the high income earners already have enough money to buy luxury items even when they have to give up 10% more. As well, RRSP is more beneficial for high income earners because they have more money to put into their retirement fund and receive a larger tax benefit, while the low income earners do not. Finally, because the gap between the rich and the poor is bigger with the high income earners earning more, and the low income earners earning the same amount for several years, this flat tax approach will only continue to widen the gap. With the income inequality increasing, adopting this flat tax rate is not a good idea and should not be done.
Thursday, January 17, 2008
Stampede to Stimulus
In response to the recession happening in the United States, the government wants to present a stimulus to the economy. This means higher government spending and tax cuts. The stimuli can jumpstart the economy so that it will make its way up again. The criteria of the stimulus will be based on three “T”s: timely, well-targeted, temporary. The stimulus must be presented to the American economy before the recession is over. It also has to target the people who will give the best results. Finally, the situation after the stimulus is presented must not permanently cause the government’s budget position to be worsened. Many ideas which may fit the criteria have been presented. However, none has been confirmed on. The final decision will be announced on January 28th 2008.
The situation presented within the article is a very good real-life example of fiscal policy. Fiscal policy is the adjustment of government spending and tax policy to economic conditions and is used to correct periods of slow economic growth and high unemployment. Within the article, they mention higher spending and tax cuts to jumpstart the economy during the United State’s recession in housing. As you already know, homes have become expense to own and mortgages are expensive to pay off. Construction activities have slowed down and many mortgages foreclosures have been made. Many ideas have been presented. Some of these include a temporary tax-rebate, help for the jobless, payroll tax holiday, a $250 tax cut, housing assistance, home-energy subsidies, expanding payments to the unemployed, and building of infrastructure to provide jobs. Many of these ideas also fall under the economic rationale of income distribution as well as being an example of the fiscal policy.
I personally believe that in order to help improve the economy of the United States, not only does the spending of the government need to be increased, perhaps setting a price ceiling for housing needs to happen. Since the recessions seems to be rooted from housing problems, perhaps the lowering of the pricing of houses will cause houses to be more affordable so that more people will be able to buy one. This may decrease interest for banks and may help prevent losses. This may free up some money for consumers to spend to get the economy to move again. I believe that many of the ideas presented by the authority will help, but only temporarily. What happens after the stimulus is taken away? The United States does need a stimulus, but a permanent one and they need something else to become the pillar of the economy instead of housing.
http://www.economist.com/world/na/displaystory.cfm?story_id=10534098
The situation presented within the article is a very good real-life example of fiscal policy. Fiscal policy is the adjustment of government spending and tax policy to economic conditions and is used to correct periods of slow economic growth and high unemployment. Within the article, they mention higher spending and tax cuts to jumpstart the economy during the United State’s recession in housing. As you already know, homes have become expense to own and mortgages are expensive to pay off. Construction activities have slowed down and many mortgages foreclosures have been made. Many ideas have been presented. Some of these include a temporary tax-rebate, help for the jobless, payroll tax holiday, a $250 tax cut, housing assistance, home-energy subsidies, expanding payments to the unemployed, and building of infrastructure to provide jobs. Many of these ideas also fall under the economic rationale of income distribution as well as being an example of the fiscal policy.
I personally believe that in order to help improve the economy of the United States, not only does the spending of the government need to be increased, perhaps setting a price ceiling for housing needs to happen. Since the recessions seems to be rooted from housing problems, perhaps the lowering of the pricing of houses will cause houses to be more affordable so that more people will be able to buy one. This may decrease interest for banks and may help prevent losses. This may free up some money for consumers to spend to get the economy to move again. I believe that many of the ideas presented by the authority will help, but only temporarily. What happens after the stimulus is taken away? The United States does need a stimulus, but a permanent one and they need something else to become the pillar of the economy instead of housing.
http://www.economist.com/world/na/displaystory.cfm?story_id=10534098
Monday, November 19, 2007
Chapter 2 Blog Entry
Shock Treatment
This article presents the idea that the increased price of oil does not bring upon as great as an impact as it did in 1973 and in 1979. After both of these instances, when the price of oil is increased, the economy is brought into a state of recession. This article explores the idea of the increased flexibility of the economy and the idea that countries do not rely on oil as intensively as before. Also, because this situation is an experience of Déjà vu within history, humans learn from the past and adapt to these situations. This article also explores the reasons why the ability to absorb price increases of oil will prevent the chain reaction which begins with companies increasing their prices to cover productivity costs and then leading to a recession as a result.
This article makes connections with many topics in Chapter 2. We learn in chapter two about elasticity, supply and demand. Well, oil is elastic. But, as we can see, time can help an elastic product make a transition into an inelastic product. One of the reasons why humans do not rely on oil as intensively is the discovery that other sources of energy can be used as a substitute or as a complementary source of energy which works along side of oil. Also, consumers learn to be more energy efficient resulting in less oil being used. Oil is still an elastic resource; therefore, the increase in price will also not have such a great impact on the demand. Finally, because the increase in oil prices is absorbed fairly well, it will result in lesser impact. When the article mentions the unavoidable consequences such as increase production costs, a company must respond by increasing the price to cover those costs. As this happens, the demand goes down for these products because workers are unable to pay for these high priced products. This results in the company laying workers, to decrease their expenditure and leads to a further decrease in demand. As you can see, this article makes many connections to supply, demand and elasticity.
In my opinion, even though oil is still an elastic resource, as time flows on towards the future, oil will be replaced with other forms of energy with greater stability within the economy. I also believe that because humans have learnt from the past and have learnt to adapt in such situations, it has prevented the expected recession. The ability for an elastic product to become inelastic is a good thing. As we have learnt in chapter 2, inelasticity means that there will be substitutes; substitutes mean that an economy will never run into a dead end. Studying economics will prevent future recessions. Predicting the reaction to an action and its result in the past will help the future by either using the solution again or by using a different one to prevent the same consequences from occurring once more.
http://www.economist.com/finance/economicsfocus/displaystory.cfm?story_id=10130655
This article presents the idea that the increased price of oil does not bring upon as great as an impact as it did in 1973 and in 1979. After both of these instances, when the price of oil is increased, the economy is brought into a state of recession. This article explores the idea of the increased flexibility of the economy and the idea that countries do not rely on oil as intensively as before. Also, because this situation is an experience of Déjà vu within history, humans learn from the past and adapt to these situations. This article also explores the reasons why the ability to absorb price increases of oil will prevent the chain reaction which begins with companies increasing their prices to cover productivity costs and then leading to a recession as a result.
This article makes connections with many topics in Chapter 2. We learn in chapter two about elasticity, supply and demand. Well, oil is elastic. But, as we can see, time can help an elastic product make a transition into an inelastic product. One of the reasons why humans do not rely on oil as intensively is the discovery that other sources of energy can be used as a substitute or as a complementary source of energy which works along side of oil. Also, consumers learn to be more energy efficient resulting in less oil being used. Oil is still an elastic resource; therefore, the increase in price will also not have such a great impact on the demand. Finally, because the increase in oil prices is absorbed fairly well, it will result in lesser impact. When the article mentions the unavoidable consequences such as increase production costs, a company must respond by increasing the price to cover those costs. As this happens, the demand goes down for these products because workers are unable to pay for these high priced products. This results in the company laying workers, to decrease their expenditure and leads to a further decrease in demand. As you can see, this article makes many connections to supply, demand and elasticity.
In my opinion, even though oil is still an elastic resource, as time flows on towards the future, oil will be replaced with other forms of energy with greater stability within the economy. I also believe that because humans have learnt from the past and have learnt to adapt in such situations, it has prevented the expected recession. The ability for an elastic product to become inelastic is a good thing. As we have learnt in chapter 2, inelasticity means that there will be substitutes; substitutes mean that an economy will never run into a dead end. Studying economics will prevent future recessions. Predicting the reaction to an action and its result in the past will help the future by either using the solution again or by using a different one to prevent the same consequences from occurring once more.
http://www.economist.com/finance/economicsfocus/displaystory.cfm?story_id=10130655
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