Comparative Advantage - Free Essay Example

Sample details Pages: 7 Words: 1998 Downloads: 10 Date added: 2017/09/12 Category Advertising Essay Did you like this example? Chapter 2 Labor Productivity and Comparative Advantage: The Ricardian Model Chapter Organization  §  §  §  §  §  §  §  §  § Introduction The Concept of Comparative Advantage A One-Factor Economy Trade in a One-Factor World Misconceptions About Comparative Advantage Comparative Advantage with Many Goods Adding Transport Costs and Nontraded Goods Empirical Evidence on the Ricardian Model Summary Slide 2- 2 Prepared by Iordanis Petsas To Accompany International Economics: Theory and Policy Sixth Edition Policy, by Paul R. Krugman and Maurice Obstfeld Copyright  © 2003 Pearson Education, Inc. Introduction  § Countries engage in international trade for two basic reasons: The Concept of Comparative Advantage  §  § On Valentine’s Day the U. S. demand for roses is about 10 million roses. Growing roses in the U. S. in the winter is difficult. †¢ They are different from each other in terms of climate, land, capital, labor, and technology. †¢ They try to achieve scale economies in production.  § The Ricardian model is based on technological differences across countries. †¢ Heated greenhouses should be used. †¢ The costs for energy, capital, and labor are substantial. †¢ These technological differences are reflected in ifferences in the productivity of labor.  § Slide 2- 3 Resources for the production of roses could be used to produce other goods, say computers. Slide 2- 4 Copyright  © 2003 Pearson Education, Inc. Copyright  © 2003 Pearson Education, Inc. The Concept of Comparative Advantage  § Opportunity Cost The Concept of Comparative Advantage  § The principle of comparative advantage: †¢ If each country exports the goods in which it has comparative advantage (lower opportunity costs), then all countries can in principle gain from trade. †¢ The opportunity cost of roses in terms of computers is he number of computers that could be produced with the same resources as a given number of roses.  § Comparative Advantage †¢ A country has a comparative advantage in producing a good if the opportunity cost of producing that good in terms of other goods is lower in that country than it is in other countries.  § What determines comparative advantage? †¢ Answering this question would help us understand how country differences determine the pattern of trade (which goods a country exports). Copyright  © 2003 Pearson Education, Inc. Slide 2- 5 Copyright  © 2003 Pearson Education, Inc. Slide 2- 6 1 Don’t waste time! Our writers will create an original "Comparative Advantage" essay for you Create order A One-Factor Economy  § Assume that we are dealing with an economy (which we call Home). In this economy: A One-Factor Economy  § The constant labor productivity is modeled with the specification of unit labor requirements: †¢ The unit labor requirement is the number of hours of labor required to produce one unit of output. – Denote with a L W the unit labor requirement for wine (e. g. if a LW = 2, then one needs 2 hours of labor to produce one gallon of wine). – Denote with a L C the unit labor requirement for cheese (e. g. if a LC = 1, then one needs 1 hour of labor to produce a pound of cheese). †¢ †¢ †¢ †¢ Labor is the only factor of production. Only two goods (say wine and cheese) are produced. The supply of labor is fixed in each country. The productivity of labor in each good is fixed. Perfect competition prevails in all markets.  § Copyright  © 2003 Pearson Education, Inc. Slide 2- 7 The economy’s total resources are defin ed as L, the total labor supply (e. g. if L = 120, then this economy is endowed with 120 hours of labor or 120 workers). Slide 2- 8 Copyright  © 2003 Pearson Education, Inc. A One-Factor Economy  § Production Possibilities A One-Factor Economy Figure 2-1: Home’s Production Possibility Frontier Home wine production, QW , in gallons †¢ The production possibility frontier (PPF) of an economy shows the maximum amount of a good (say wine) that can be produced for any given amount of another (say cheese), and vice versa. †¢ The PPF of our economy is given by the following equation: aLCQC + aLWQW = L (2-1) L/aLW P Absolute value of slope equals opportunity cost of cheese in terms of wine Copyright  © 2003 Pearson Education, Inc. Slide 2- 9 Copyright  © 2003 Pearson Education, Inc. F L/aLC Home cheese production, QC, in pounds Slide 2- 10 A One-Factor Economy Relative Prices and Supply †¢ The particular amounts of each good produced are determined by prices. †¢ The relative price of good X (cheese) in terms of good Y (wine) is the amount of good Y (wine) that can be exchanged for one unit of good X (cheese). †¢ Examples of relative prices: – If a price of a can of Coke is $0. 5, and the p rice of a chocolate bar is $1, then the relative price of Coke is the amount of chocolate bars that can be exchanged for one unit of Coke, which is 0. 5. – The relative price of a chocolate bar in terms of Coke is 2 cans of Coke per bar. Copyright  © 2003 Pearson Education, Inc. Slide 2- 11 A One-Factor Economy  § Denote with PC the dollar price of cheese and with PW the dollar price of wine. Denote with wW the dollar wage in the wine industry and with wC the dollar wage in the cheese industry. Then under perfect competition, the non-negative profit condition implies:  § †¢ If PW / aW wW, then there is no production of QW. †¢ If PW / aW = wW, then there is production of Q W. †¢ If PC / aC wC, then there is no production of Q C. †¢ If PC / aC = wC, then there is production of QC. Copyright  © 2003 Pearson Education, Inc. Slide 2- 12 2 A One-Factor Economy  § The above relations imply that if the relative price of cheese (PC / PW ) exceeds its opportunity cost (aLC / aLW ), then the economy will specialize in the production of cheese. Trade in a One-Factor World  § Assumptions of the model: †¢ There are two countries in the world (Home and Foreign). †¢ Each of the two countries produces two goods (say †¢ †¢ †¢ †¢ †¢ †¢ wine and cheese). Labor is the only factor of production. The supply of labor is fixed in each country. The productivity of labor in each good is fixed. Labor is not mobile across the two countries. Perfect competition prevails in all markets. All variables with an asterisk refer to the Foreign country. Slide 2- 14  § In the absence of trade, both goods are produced, and therefore PC / PW = aLC /a LW. Copyright  © 2003 Pearson Education, Inc. Slide 2- 13 Copyright  © 2003 Pearson Education, Inc. Trade in a One-Factor World  § Absolute Advantage Trade in a One-Factor World  § Comparative Advantage †¢ A country has an absolute advantage in a production of a good if it has a lower unit labor requirement than the foreign country in this good. †¢ Assume that aLC a*LC and aLW a* LW – This assumption implies that Home has an absolute advantage in the production of both goods. Another way to see this is to notice that Home is more productive in the production of both goods than Foreign. – Even if Home has an absolute advantage in both goods, beneficial trade is possible. †¢ Assume that aLC /aLW a*LC /a*LW (2-2) – This assumption implies that the opportunity cost of cheese in terms of wine is lower in Home than it is in Foreign. – In other words, in the absence of trade, the relative price of cheese at Home is lower than the relative price of cheese at Foreign.  §  § The pattern of trade will be determined by the concept of comparative advantage. Slide 2- 15 Home has a comparative advantage in cheese and will export it to Foreign in exchange for wine. Slide 2- 16 Copyright  © 2003 Pearson Education, Inc. Copyright  © 2003 Pearson Education, Inc. Trade in a One-Factor World Figure 2-2: Foreign’s Production Possibility Frontier Foreign wine production, Q*W, in gallons Trade in a One-Factor World  § Determining the Relative Price After Trade †¢ What determines the relative price (e. g. , P C / PW) after trade? – To answer this question we have to define the relative supply and relative demand for cheese in the world as a whole. The relative supply of cheese equals the total quantity of cheese supplied by both countries at each given relative price divided by the total quantity of wine supplied, ( QC + Q* C )/(Q W + Q *W). – The relative demand of cheese in the world is a similar concept. Slide 2- 17 Copyright  © 2003 Pearson Education, Inc. Slide 2- 18 L*/a*LW F* +1 P* L*/a*LC Foreign cheese pro duction, Q*C , in pounds Copyright  © 2003 Pearson Education, Inc. 3 Trade in a One-Factor World Figure 2-3: World Relative Supply and Demand Relative price of cheese, P C/PW a* * LC/a LW Trade in a One-Factor World  § The Gains from Trade If countries specialize according to their RS 1 aLC/aLW 2 RD Q L/aLC L*/a*LW RD comparative advantage, they all gain from this specialization and trade. †¢ We will demonstrate these gains from trade in two ways. †¢ First, we can think of trade as a new way of producing goods and services (that is, a new technology). Copyright  © 2003 Pearson Education, Inc. Relative quantity of cheese, Q C + Q *C QW + Q*W Slide 2- 19 Copyright  © 2003 Pearson Education, Inc. Slide 2- 20 Trade in a One-Factor World †¢ Another way to see the gains from trade is to consider how trade affects the consumption in each of the two countries. The consumption possibility frontier states the maximum amount of consumption of a good a country can obtain for any given amount of the other commodity. †¢ In the absence of trade, the consumption possibility curve is the same as the production possibility curve. †¢ Trade enlarges the consumption possibility for each of the two countries. Copyright  © 2003 Pearson Education, Inc. Slide 2- 21 Trade in a One-Factor World Figure 2-4: Trade Expands Consumption Possibilities Quantity of wine, Q W T Quantity of wine, Q*W F* P F Quantity of cheese, Q C T* P* Quantity of cheese, Q *C (a) Home Copyright  © 2003 Pearson Education, Inc. b) Foreign Slide 2- 22 Trade in a One-Factor World  § Relative Wages Misconceptions About Comparative Advantage  § Productivity and Competitiveness †¢ Because there are technological differences between the two countries, trade in goods does not make the wages equal across the two countries. †¢ A country with absolute advantage in both goods will enjoy a higher wage after trade. †¢ Myth 1: Free trade is beneficial only if a country is strong enough to withstand foreign competition. – This argument fails to recognize that trade is based on comparative not absolute advantage.  § The Pauper Labor Argument Myth 2: Foreign competition is unfair and hurts other countries when it is based on low wages. – Again in our example Foreign has lower wages but still benefits from trade. Copyright  © 2003 Pearson Education, Inc. Slide 2- 23 Copyright  © 2003 Pearson Education, Inc. Slide 2- 24 4 Misconceptions About Comparative Advantage  § Exploitation Comparative Advantage with Many Goods Figure 2-5: Determination of Relative Wages Relative wage Rate, w/w* Apples 10 8 Bananas RS †¢ Myth 3: Trade makes the workers worse off in countries with lower wages. – In the absence of trade these workers would be worse off. Denying the opportunity to export is to condemn poor people to continue to be poor. 4 3 2 0. 75 Caviar Dates Enchiladas RD Relative quantity of labor, L/L* Copyright  © 2003 Pearson Education, Inc. Slide 2- 25 Copyright  © 2003 Pearson Education, Inc. Slide 2- 26 Empirical Evidence on the Ricardian Model Figure 2-6: Productivity and Exports Summary  § We examined the Ricardian model, the simplest model that shows how differences between countries give rise to trade and gains from trade. In this model, labor is the only factor of production and countries differ only in the productivity of labor in different industries. In the Ricardian model, a country will export that commodity in which it has comparative (as opposed to absolute) labor productivity advantage. Slide 2- 28  §  § Copyright  © 2003 Pearson Education, Inc. Slide 2- 27 Copyright  © 2003 Pearson Education, Inc. Summary  § The fact that trade benefits a country can be shown in either of two ways: Summary  § Extending the one-factor, two-good model to a world of many commodities makes it possible to illustrate that transportation costs can give rise to the existence of nontraded goods. The basic prediction of the Ricardian model-that countries will tend to export goods in which they have relatively high productivity- has been confirmed by a number of studies. Slide 2- 30 †¢ We can think of trade as an indirect method of production. †¢ We can show that trade enlarges a country’s consumption possibilities.  §  § The distribution of the gains from trade depends on the relative prices of the goods countries produce. Slide 2- 29 Copyright  © 2003 Pearson Education, Inc. Copyright  © 2003 Pearson Education, Inc. 5

Human Trafficking Is Destroying America - 1057 Words

Slavery in the Twenty-First Century Human trafficking is the modern day form of slavery and its victims are, most commonly, the children of America (Kotria). The youth and millennials in this country are America’s future, the next generation’s guides into the world, and thousands of them every year are being taken and becoming victims to human trafficking within the U.S. These children are the backbone of America, within them could lie the greatest minds, most inspiring actors, and even a life changing president. But their abusers rip away this potential, they take away their right to a free life, where they control their own decisions. Human trafficking is destroying America’s future leaders and workers by exterminating these people’s†¦show more content†¦Ã¢â‚¬Å"Others have been forced to perform sexual acts in exchange for drugs or money by parents or relatives, a practice dubbed ‘familial prostitution(Kotria). Some of the most common trafficking recruitment sites are restau rants, traveling sales companies, online jobs, malls, bus stations, and general public places where lost youth are most likely to be found(â€Å"Statistics†). Human traffickers take advantage of the lost youth’s troubled circumstances. We need to be helping them, not letting them get cornered into a lifetime of unwilling servitude. The populace of America needs to be made aware of this growing issue that’s victimizing thousands each year, so that we can begin to fight it effectively. The Polaris Project is one such force fighting the war on trafficking. An organization who combats human trafficking by spreading awareness of this unspeakable crimes to prevent it from happening in the first place. They support victims who need help putting their lives back together after these atrocities, and move on with their lives. For example, because hotel industries are the number one culprit for human trafficking sites, The Polaris Project collaborates with hotel business executives and managers to teach them how to recognize the signs of workers or customers who might be involved in the human trafficking industry(Myles). They educate these powerhouses and their employees on how to spot and remove themselves or their

Quantitative Analysis of AGL Energy ltd. and Genesis Energy ltd

Question: Discuss about the Report for Quantitative Analysis of AGL Energy ltd. and Genesis Energy ltd. Answer: Introduction Genesis energy ltd. It is a energy company which varies the range of products that offers services to customers and provide them the energy solution in a very simple and smart way. This company was established in 1998 and started its operation on 1st April 1999.This company produce electricity with the help of number of generation assets, trade electricity and natural gas. The genesis energy ltd. is the largest retailer company of electricity and gas in the New Zealand and has the customer connection which is more than 636,676. This company belongs to the renewable energy and the operation is done in three hydro power schemes that are Tongariro, waikaremoana and Takeo. This company also belongs to the Hau Nui Wind Farm in the Wairarapa. This company also produces thermal energy and their Huntly power station has the largest capacity to produce electricity which is facilitating in New Zealand. This power station is established by the two modern gases that is fired and two coal gas and has the fired gener ating units also. They have their contribution in Kupe joint venture about 31% interest and the operation is done in Taranaki in the field of Kupe oil and gas. Kupe is the most important part of the business which generates sources for electricity and gas and provides it to the customers in a varied way. This company purchase electricity from the electricity market and sell it in that market only in New Zealand. The generators sell the electricity in the market and the retailers buy that and sell the electricity generation to the customers. The selling of the natural gas is done by the company in the North-island to the residential and commercial customers and it is also sold to the wholesale natural gas market to get the surplus. They also sale LPG which is acquired from Kupe to the customers in New Zealand. As per the customer needs and requirements they provide the smart energy for the electricity and gas. This company also offers the first class customer service as per the requi rements. This company also provides electricity to all type of business even to the rural enterprises also. They have the business team which supports the commercial customers. AGL energy ltd. This company was established in 1837 and is the oldest company of the Australia. This company adopts new things and believes in creation for the sustainable and reliable energy which is provided to the customer. They believe in change and do work for the community and for the environment. This company established the first gas street lamp in the Sydney in the year 1841 and now it has the largest solar plant in Australia which was established in 2015. It is the largest owner of the listed ASX and does operation for generating electricity in the country. This company also support and has the contribution in the organization. It is the integrated energy company which leads in Australia. This company takes the responsibility for the reduction of greenhouse gas emissions and offers the safe and secure energy to the customer which can be afford by the customer. This company has the experience of 175 years and with these experiences it offers the gas, electricity, solar PV and related product and services to the customer as per their needs and requirements in the Eastern Australia. It has the portfolio of power generation like base, peaking, intermediate generation plant which is spread among the thermal generation along with the renewable sources like hydro, wind, solar, landfill gas and biomass. Statement of profit and loss Of AGL Energy ltd for the year ended 30 June 2015 2015 2014 $m $m continuing operation Revenue 10678 10445 Expenses -9759 -9165 share of profit of associates and joint venture 27 25 profit before net financing costs, depreciation and amortization 946 1305 depreciation and amortization -379 -326 profit before net financing cost 567 979 finance income 20 24 finance cost -250 -243 net financing cost -230 -219 profit before tax 337 760 income tax expense -119 -190 profit for the year 218 570 profit attributable to: owners of AGL energy ltd. 218 570 non-controlling interest 218 570 earnings per share basic earnings per share 33.3cents 98.2cents diluted earnings per share 33.3cents 98.2cents Statement of financial position Of AGL Energy ltd. As at 30june 2015 2015 2014 $m $m current assets cash and cash equivalents 259 456 trade and other receivables 1894 1902 Inventories 396 191 other financial assets 156 114 other assets 262 318 2967 2981 assets classified as held for sale 492 430 total current assets 3459 3411 non-current assets trade and other receivables 44 46 Inventories 32 28 other financial assets 596 484 investment in associate and joint ventures 91 32 exploration and evaluation assets 130 372 oil and gas assets 544 170 property, plant and equipment 6958 5694 intangible assets 3266 3248 deferred tax assets 682 631 other assets 31 18 total non-current assets 12374 10723 total assets 15833 14134 current liabilities trade and other payable 1377 1417 Borrowings 443 45 Provisions 191 101 deferred tax liabilities 86 49 other financial liabilities 269 477 other liabilities 7 2373 2089 liabilities directly associated with assets classified as held for sale 77 total current liabilities 2373 2166 non-current liabilities borrowings 3439 3669 Provisions 456 106 deferred tax liabilities 50 other financial liabilities 387 280 other liabilities 363 275 total non-current liabilities 4645 4380 total liabilities 7081 6546 net assets 8815 7588 equity issued capital 6696 5437 reserves -65 -99 retained earnings 2175 2249 total equity attributable to owners of AGL Energy limited 8806 7587 non-controlling interests 9 1 total equity 8815 7588 Statements of Cash flow Of AGL Energy ltd. for the year ended 30june 2015 2015 2014 $m $m cash flow from operating activities receipts from customers 11587 11791 payments to suppliers and employees -10236 -10733 dividend received 32 26 finance income received 24 23 finance cost paid -216 -217 income taxes paid -147 -191 net cash provided by operating activities 1044 699 cash flow from investing activities payments for property, plant and equipments -744 -624 payments for exploration and evaluation assets -34 -28 payments for oil and gas assets -28 -46 payments for investments in associates and joint ventures -80 payments for intangible assets -25 payments for business and subsidiaries, net of cash acquired acquisition in current period -1348 -79 acquisition in prior periods -32 -33 government grant received 32 190 proceeds from sale of property, plant and equipment 6 2 loan advanced to related parties 3 -126 proceeds from repayment of related party loans 56 net cash used in investing activities 2175 -769 cash flow from financing activities proceeds from issue of shares, net of transaction costs 1210 1 proceeds from issue of shares to non-controlling interest 8 1 purchase of shares on- market for equity based remuneration -7 -6 proceeds from borrowings 2647 2075 repayments of borrowings -2580 -1547 payments for settlement of derivative financial instruments -10 dividend paid -344 -269 net cash provided by financing activities 924 255 net(decrease)/increase in cash and cash equivalents -207 185 cash and cash equivalents at the beginning of the financial year 466 281 cash and cash equivalents at the end of the financial year 259 466 Comprehensive income statement Of Genesis Energy ltd. for the year ended 30 June 2015 2015 2014 $m $m operating income electricity revenue 1730.4 1661.1 gas revenue 282.9 251.3 petroleum revenue 64.7 84.4 other revenue 19.6 8.2 2097.6 2005 operating expenses electricity purchase, transmission and distribution -953.7 -897.7 gas purchase and transmission -297.1 -249.8 petroleum production, marketing and distribution -26.1 -30.6 fuels consumed -187.4 -191.3 employee benefits -80.6 -89.2 other operating expenses -207.9 -238.6 -1752.8 -1697.2 earnings before net finance expense, income tax, depreciation, depletion, amortization, impairment, fair value changes and other gains and losses 344.8 307.8 depreciation, depletion and amortization -155.7 -156.7 impairment of non-current assets -14 -10.1 change in fair value of financial instruments 32.1 0.4 other gains(losses) -0.2 -1.6 -137.8 -168 profit before net finance expense and income tax 207 139.8 finance revenue 1.3 0.9 finance expense -68 -69.1 profit before income tax 140.3 71.6 income tax (expense) -35.5 -22.4 net profit for the year 104.8 49.2 other comprehensive income items that may be reclassified subsequently to profit or loss change in cash flow hedge reserve -20.1 5 income tax credit (expense) relating to items that may be reclassified 5.6 -1.4 total items that may be reclassified subsequently to profit or loss -14.5 3.6 total other comprehensive income (expense) for the year -14.5 3.6 total comprehensive income for the income 90.3 52.8 earnings per share from operations attributable to shareholders of the parent basic and diluted earnings per share(cents) 10.49 4.92 Balance sheet Of Genesis energy ltd. as at 30 June 2015 2015 2014 current assets $m $m cash and cash equivalents 21 23.3 receivables and prepayments 187.7 216.4 inventories 80 93.8 assets held for sale 3.1 intangible assets 4.3 3.9 tax receivables 16.2 derivatives 34.2 19.9 total current assets 346.5 357.3 non-current assets receivables and prepayments 0.9 0.9 inventories 24.4 34.1 property, plant and equipments 2682.5 2758.8 oil and gas assets 292.4 342.1 intangible assets 127.4 128.2 derivatives 53.9 8 total non-current assets 3181.5 3272.1 total assets 3528 3629.4 current liabilities payables and accruals 158.3 194.8 tax payable 3.4 borrowings 117.8 12.3 Provisions 12.3 13.6 Derivatives 21.5 22.5 total current liabilities 309.9 246.6 non-current liabilities payables and accruals 0.7 0.7 borrowings 840.4 977.1 Provisions 123.7 126.9 deferred tax liability 397.2 384.2 Derivatives 30.7 13.2 total non-current liabilities 1392.7 1502.1 total liabilities 1702.6 1748.7 shareholders equity share capital 539.7 539.7 Reserves 1285.7 1341 total equity 1825.4 1880.7 total equity and liabilities 3528 3629.4 Cash flow statement Of Genesis energy ltd. For the year ended 30 June 2015 2015 2014 $m $m cash flow from operating activities cash was provided from : receipts from customers 2122 2055.1 interest received 1.3 0.9 2123.3 2056 cash was applied to : payments to suppliers and related parties 1687.6 1649.7 payments to employees 81 89.1 tax paid 36.2 13.3 1804.8 1752.1 net cash inflows from operating activities 318.5 303.9 cash flow from investing activities cash was provided from: proceeds from disposal of property, plant and equipments 1.3 0.4 proceeds from disposal of oil and gas assets 0.1 1.3 0.5 cash was applied to: purchase of property, plant and equipment 35.5 66.5 purchase of oil and gas assets 4.1 1.2 purchase of intangible(excluding emission units ) 10.3 15.7 49.9 83.4 net cash (outflow) from investing activities -48.6 -82.9 cash flow from financing activities cash was provided from: proceeds from borrowings 193 167.1 193 167.1 cash was applied to : repayments of borrowings 256.1 195 interest paid and other finance charges 61.6 66.6 repayment of principal on finance lease liabilities 1.6 4 dividends 145.9 121 acquisition of treasury shares 0.9 465.2 387.5 net cash(outflow)from financing activities -272.2 -220.4 net increase(decrease) in cash and cash equivalents -2.3 0.6 cash and cash equivalents at 1 July 23.3 22.7 cash and cash equivalents at 30 June 21 23.3 Ratio analysis of both companies Genesis Energy ltd 2015 2014 ROA 5.87% 3.85% ROE 5.74% 0.02616047 N/P Margin 5.00% 1.36% G/P margin 9.87% 6.97% cash flow to sales revenue 15.18% 15.16% current ratio 1.118103 1.44890511 quick ratio 346.2419 356.919627 interest coverage ratio -2.06324 -1.0361795 debt to equity ratio 48.26% 48.18% equity ratio 51.74% 51.82% debt ratio 48.26% 48.18% EPS 10.49 4.92 assets T/O ratio 0.594558 0.55243291 days inventory 13.92067 17.0758105 days debtor 32.66137 39.3945137 times inventory T/O 26.22 21.3752665 times debtor T/O 11.17528 9.26524954 debt coverage ratio 4.372684 4.94274432. Return on assets is more in 2015 as compare to 2014 because income of the year and the total assets is high in 2015 as compared to 2014. Net profit ratio is also increased in 2015 as compared to 2014 because company earns a good profit and generates revenue. Current ratio has been decreased in 2015 to 2014. Quick ratio is low in 2015 as compared to 2014. Debt equity ratio is high in 2015 as compared to 2014. Equity ratio is low in 2015 as compared to 2014.Earnings per share is high in 2015 as compared to 2014. AGL Energy ltd. 2015 2014 ROA 2.13% 5.38% Net profit ratio 2.04% 5.46% quick ratio 3458.833 3410.912 current ratio 1.457649 1.574792 debt to equity ratio 80.33% 86.27% equity ratio 55.67% 53.69% EPS 33.3 98.2 ROE 2.48% 7.51% G/P Margin 5.31% 9.37% cash flow to sales ratio 9.78% 6.69% assets T/O ratio 0.674414 0.738998 days inventory ratio 1.093838 0.978459 days debtor ratio 64.74152 66.46529 times inventory T/O 26.96465 54.68586 times debtor T/O 5.637804 5.491588 debt ratio 44.72% 46.31% interest coverage ratio -1.46522 -3.47032 debt coverage ratio 4.449234 6.266094 The return on assets ratio, net profit ratio, current ratio, debt to equity ratio and earnings per share is low in 2015 as compared to 2014 and the quick ratio and the equity ratio is high in 2015 as compared to 2014. Conclusion The genesis energy ltd. is financially good as compared to AGL energy limited. As the ratio analysis has been done which shows the position of both the companies and according to that analysis, the conclusion has been made. Both the companies is performing well but after comparison Genesis energy limited is quite good against AGL energy limited. Recommendation The investor should invest in Genesis energy limited as this company earning more profit in 2015 as compared to 2014. The AGL Energy limited is also performing well, thus the investor can also invest in that also. Both the companies are financially good and have the good reputation in market and achieve many targets and the oldest company of the Australia. References Genesis energy (2015), Genesis energy annual report 2015, retrieved on 22 august 2016 from https://www.asx.com.au/asxpdf/20150904/pdf/4313hvljxkcz9m.pdf ASX Release (2015), AGL annual report 2015, retrieved on 22 august 2016 from https://www.asx.com.au/asxpdf/20150826/pdf/430t27pwhhbmr3.pdf Chand, S (2015), Ratio analysis: meaning, classification and limitation of ratio analysis AGL energy in action, our company, retrieved on 22 august 2016 from https://www.agl.com.au/about-agl/who-we-are/our-company Genesis energy (2016), about us-company information, retrieved on 22 august 2016 from https://www.genesisenergy.co.nz/company-information

Ratatouille de la Green Beans; America’s New Specialty free essay sample

It was October 9, 2007 in the city of Lehi, Utah. At home, Marianne Watson contemplated on the ever-nagging question; what’s for dinner? A sigh escaped from her mouth, as well as her heart, as she realized it would be green beans again for dinner. Her weary feet somehow found strength and she got up and slowly trudged to the kitchen. She heard a crash and one of children began to wail. She merely glanced towards where the cries were coming from, and continued to search for the can of beans. The squeaky hinges on the old cupboard cried as she opened it in search of a can. To her relief, there was one can left. The expiration date was still good, so she got out the can-opener and popped off the lid. In the other room where the old china vase had shattered, little Annie’s sobs ceased for one moment, enough time for her to draw in another breath. We will write a custom essay sample on Ratatouille de la Green Beans; America’s New Specialty or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Annie became surprised, for it wasn’t her scream that came next, but her mother’s! She wiped her tear stricken face and ran to the kitchen. There she found her mother looking horrified at a can of green beans. Inside the can, lay the head of none other than the pesky rodent we call, a rat. Though this story may seem ridiculous, it really did happen. Yes, the dinnertime and little girl part is fake, but the rest is true. Marianne Watson of Lehi, Utah indeed found a rat’s head in her can of green beans purchased from Wal-Mart. Is this what America has become? A country where we have to be on our toes making sure the food we eat is safe? It’s almost an undeniable fact that America’s food supply is not safe. People are finding animals and body parts in their food, diseases are popping up frequently in our food supply, and it appears that the FDA either won’t start believing that there is a problem or if they’re recognizing a problem they are unwilling to address it. America is not supposed to be this way; we should be one of the last countries plagued with a problem like this. Animals and unwanted body parts really should stay out of the food we eat. There are so many other stories, just like the one about the can green beans. The Deseret News Publishing Company had an interesting article on this topic. There was a snakehead in an Iowa family’s can of green beans, the same story for a Pennsylvania man named Earl Hartman. Brenda Eisenberg from Illinois found an â€Å"amphibian leg† in her can of green beans in November of 2005. Dave Pierce of Alpine, Utah found a ? inch long worm in his fruit cocktail a couple of years ago. Clarence Stowers from Wilmington, North Carolina found a severed first knuckle in her custard dessert from Kohl’s Frozen Custard. The shocking thing though is that the FDA allows rodent hairs and worm fragments to slip into processed food. The can company’s justificati on for the rat head incident is that it’s sterile. A spokesman for the company explains that they cook each can at 265 degrees and any germs would have been killed. Do they really expect us to eat the rat head because it’s sterile? Of course the can would be thrown out because who cares if it’s sterile, it’s a rat’s head for crying out loud! That would sure go down well with a tail and some whiskers! Who knows where the rest of the rodent body went. Maybe someone else had it in their can of green beans and just thought the beans were extra crunchy. Yes, it is true that the rat head was of no harm, but if a rat head can get into our food, then what other dirty things could? That definitely shows that America’s food isn’t safe if unwanted objects are popping up in our food supply. We shouldn’t have to deal with disgusting nonsense like this. On another equally serious note, horrible and even fatal diseases are being found in foo d regularly. A website held by the Food Safety Legislation says that â€Å"each year millions of people become ill and up to 5,000 people die from contaminated food.† The New York Times just ran an article on this. They’ve said that salmonella, a potentially fatal illness, is constantly running through America’s chicken and egg supply. E.-coli bacteria was found in California produce last year, specifically in spinach. Diseases and pesticides like these not only make the food supply unsafe, but deadly. Not to point fingers, but let’s face it, the FDA just hasn’t been doing so great of a job. In the 1970’s, the FDA wasn’t sure of how much aflatoxin should be used in food because there was a problem with our peanuts. The FDA now twenty years later still hasn’t made up their minds. People are getting sick and even dying because they won’t simply sit down and come up with better guidelines. Yes, it’s not as simple as just sitting down once and talking it over, but if it’s been twenty years and they still can’t make up their minds on certain pesticide levels, then they definitely are to blame. America’s food just isn’t safe anymore, especially if the people in charge of its safety aren’t doing a good job. Lack of time is no excuse any more for why we can’t fix the guidelines. Something needs to be done, not next week, month, year, or decade, but now! So what can we as people do while the FDA sorts out their issues? Watching the news for food poisoning recalls and warnings is a good start for staying safe. Cutting down on red meats and foods that are constantly having trouble with diseases is also good. In addition, watch what you eat. Make sure there isn’t a pair of beady little rat eyes watching, waiting to be digested. It is truly embarrassing that America has a problem like this. People are indeed finding rat heads and other unnecessary things in their food, diseases are killing, and the FDA isn’t helping. It may be a while until we fix this growing issue, but until then we will have to deal with our furry little rodent friends swimming laps in our green beans. Just think of it as the prize at the bottom of the cereal box. Works Cited Cspinet.org, Food Safety Legislation. November 28, 2007 Davidson, Adam. â€Å"How Safe is Supermarket Food?† NPR. November 21, 2007 http://www.npr.org/templates/story.php?stroyld=11833228 Herndon, Michael. â€Å"Spinach and E. Coli Outbreak† U.S. Food and Drug Administration. November 21, 2007 Robinson, Doug. Deseret News.com, Deseret Morning News. November 26, 2007 Spurlock, Morgan. Don’t Eat This Book: Fast Food and the Supersizing of America. New York: G.P. Putham’s Sons, 2005.

Hypnotism Essays - Hypnosis, James Braid, Hypnotherapy,

Hypnotism By:Rick Gambrino The Encarta Encyclopedia defines hypnosis as,"altered state of consciousness and heightened responsiveness to suggestion; it may be induced by normal persons by a variety of methods and has been used occasionally in medical and psychiatric treatment. Most frequently brought about through actions of an operator, or "hypnotist", who engages the attention of a subject and assigns certain tasks to him or her while uttering monotonous, repetitive verbal commands; such tasks may include muscle relaxation, eye fixation, and arm leviation. Hypnosis also may be self-induced, by trained relaxation, concentration on one's own breathing, or by a variety of monotonous practices and rituals that are found in many mystical, philosophical, and religious systems." Another generally reliable source Webster's New Universal Unabridged Dictionary defines it as,"a sleep like condition psychically induced, usually by another person, in which the subject loses consciousness but responds, with certain limitations, to the suggestions of the hypnotist." As I stated earlier, these two sources are very reputed and the general population believes that they are correct. Yet, however often they may be correct, in this case they are not, or at least not completely. Not according to the scientific community at least. My sources for this statement are The World Book Encyclopedia, The Wizard from Vienna: Franz Anton Mesmer, Applied Hypnosis: An Overview, American Medical Journal, and Hypnosis: Is It For You? Although they state it in different ways they all basically agree that nobody can give a very accurate definition or description of hypnosis, or hypnosis. Although some may get the definition partly correct, the chances of doing so completely are very, very low. So although I will probably not be able to give a totally accurate account of hypnosis and its workings, I will try. Although evidence suggests that hypnosis has been practiced in some form or another for several thousand years, such as in coal walking, the earliest recorded history of hypnosis begins in 1734. It begins with a man named Franz Anton Mesmer. Although he was eventually disavowed by the scientific community because of his unorthodox methods that made him seem more of a mysticist that a scientist, he is generally known as the father of hypnotism. Mesmer called his methods Mesmerism, thus the word mesmerize, but the name didn't stick, it later changed to hypnosis, its name being derived from Hypnos, the Greek god of sleep. He believed that hypnosis was reached by using a person's "animal magnetism". He used "mesmerism" to cure illness. In 1795 an English physician named James Braid, who was originally opposed to Mesmer's methods became interested. He believed that cures were not due to animal magnetism however, but the power of suggestion. This was the generally accepted opinion of the scientific community. Then in 1825 Jean Marie Charcot, a French neurologist, disagreed with "The Nancy School of Hypnotism", which followed the guidelines of James Braid's ideas. Charcot believed that hypnosis was simply a "manifestation of hysteria". He revived Mesmer's theory of animal magnetism and identified the three stages of the trance; lethargy, catalepsy, and somnambulism. Ivan Petrovich Pavlov (1849-1936) was not a scientist who worked with hypnosis. Although he had nothing to do with the hypnotic development itself, his Stimulus Response Theory is a cornerstone linking and anchoring behaviors, particularly NLP (Neuro-Linguistic Programming). Emily Coue (1857-1926) a physician, formulated the Laws of Suggestion which are greatly used in the hypnotic community. Her first law is The Law of Concentrated Attention: "Whenever attention is concentrated on an idea over and over again, it spontaneously tends to realize itself". The second law is- The Law of Reverse Action: "The harder one tries to do something, the less chance one has of success." Finally, the last law is The Law of Dominant Effect: "A stronger emotion tends to replace a weaker one." Milton Erickson (1932-1974), a psychologist and psychiatrist pioneered the art of indirect suggestion in hypnosis. He is considered the father of modern hypnosis. His methods bypassed the conscious mind through the use of both verbal and nonverbal pacing techniques including metaphor, confusion, and many others. He was definitely a major influence in contemporary hypnotherapy's acceptance by the American Medical Association. There are many misconceptions about hypnosis that

The Lady with the Pet Dog Study Guide

The Lady with the Pet Dog Study Guide Anton Chekhov’s short story The Lady with the Pet Dog begins in the resort town of Yalta, where a new visitor- a fair-haired young woman of medium height who owns a white Pomeranian- has caught the attention of the vacationers. In particular, this young woman piques the interest of Dmitri Dmitrich Gurov, a well-educated married man who has regularly been unfaithful to his wife. Chekhov wrote The Lady with the Pet Dog in 1899, and theres much about the story to suggest its semi-biographical.  At the time he wrote it, Chekhov was a regular resident of Yalta and was dealing with protracted periods of separation from his own lover, the actress Olga Knipper. As Chekhov wrote to her in October of 1899, I have grown accustomed to you. And I feel so alone without you that I cannot accept the idea that I shall not see you again until spring. Plot Summary of The Lady with the Pet Dog Gurov introduces himself to the woman with the pet dog one evening, while both of them are dining in a public garden. He learns that her she is married to an official in the Russian provinces and that her name is Anna Sergeyevna. The two become friends, and one evening Gurov and Anna walk out to the docks, where they find a festive crowd. The crowd eventually disperses, and Gurov suddenly embraces and kisses Anna. At Gurov’s suggestion, the two of them retire to Anna’s rooms. But the two lovers have very different reactions to their newly-consummated affair: Anna bursts into tears, and Gurov decides that he is bored with her. Nonetheless, Gurov continues the affair until Anna leaves Yalta. Gurov returns to his home in and his job at a city bank. Though he attempts to immerse himself in the life of the city, he is unable to shake off his memories of Anna. He sets out to visit her in her provincial hometown. He encounters Anna and her husband at a local theater, and Gurov approaches her during an intermission. She is disconcerted by Gurov’s surprise appearance and his unabashed displays of passion. She tells him to leave but promises to come see him in Moscow. The two continue their affair for several years, meeting at a hotel in Moscow. However, they’re both troubled by their secretive lives, and by the end of the story, their plight remains unresolved (but they are still together). Background and Context of The Lady with the Pet Dog Like a few of Chekhov’s other masterpieces â€Å"The Lady with the Pet Dog† may have been an effort to imagine how a personality like his would have fared under different, perhaps unfavorable circumstances. It is worth noting that Gurov is a man of art and culture. Chekhov himself began his professional life divided between his work as a traveling doctor and his pursuits in literature. He had more or less forsaken medicine for writing by 1899; Gurov may be his attempt to envision himself in the kind of staid lifestyle he had left behind. Themes in The Lady with the Pet Dog Like many of Chekhov’s stories, â€Å"The Lady with the Pet Dog†   centers on a protagonist whose personality remains static and staid, even when the conditions around him are sharply altered. The plot bears similarity to several of Chekhov’s plays, including â€Å"Uncle Vanya† and â€Å"Three Sisters,† which focus on characters who are incapable of forsaking their unwanted lifestyles, or of overcoming their personal failings. Despite its romantic subject matter and its focus on a small, private relationship, â€Å"The Lady with the Pet Dog† also levels harsh criticisms at society in general. And it is Gurov who delivers the bulk of these criticisms. Already jaded in romance and repelled by his own wife, Gurov eventually develops bitter feelings for Moscow society.   Life in Anna Sergeyevna’s tiny hometown, however, is not much better.  Society offers only easy and fleeting pleasures in The Lady with the Pet Dog.   In contrast, the romance between Gurov and Anna is more difficult, yet more durable. A cynic at heart, Gurov lives a life based on deception and duplicity. He is aware of his less appealing and less overt traits and is convinced that he has given Anna Sergeyevna a falsely positive impression of his personality. But as â€Å"The Lady with the Pet Dog† progresses, the dynamic of Gurov’s double-life undergoes a change. By the end of the story, it is the life he shows to other people that feels base and burdensome- and his secret life that seems noble and beautiful. Questions about The Lady with the Pet Dog for Study and Discussion Is it fair to draw comparisons between Chekhov and Gurov? Do you think that Chekhov consciously wanted to identify with the main character in this story? Or do the similarities between them ever seem unintentional, accidental, or simply unimportant?Return to the discussion of conversion experiences, and determine the extent of Gurov’s change or conversion. Is Gurov a very different person by the time Chekhov’s story draws to a close, or are there major elements of his personality that remain intact?How are we meant to react to the less pleasant aspects of The Lady with the Pet Dog, such as the dingy provincial scenes and the discussions of Gurov’s double life? What does Chekhov intend for us to feel while reading these passages? References: The Lady with the Pet Dog printed in The Portable Chekhov, edited by Avrahm Yarmolinsky. (Penguin Books, 1977).

Global Supply Chain Management Case Study Report Essay

Global Supply Chain Management Case Study Report - Essay Example e supply chain that allows the achievement of business objectives, before an attempt is made to determine whether a lean approach or agile approach to manufacturing and supply chain management is most appropriate for Wal-Dart. However, the analysis using Fisher’s (1997) model proves inconclusive, although Singh and Sharma’s (2009) definition of lean manufacturing appears to describe the outcome desired by Wal-Dart, and Bruce et al (2001) find that, in the fashion and textile industries, aspects of both lean and agile approaches, that they termed â€Å"leagility†, can be appropriate. A more radical approach to Wal-Dart’s problems is suggested by Lee (2010) who considers that the whole of the supply chain should be reviewed and revamped if necessary, which allows a holistic view to be taken and also provide an opportunity for Wal-Dart to introduce a more sustainable supply chain. A more detailed analysis is undertaken using Slack et al’s (2009) four stages of a fast fashion supply chain: design, manufacture, distribution and sales. Several issues are considered that fall across the different stages, including information supply from the retail outlets, the inability to change the manufacturing locations in the immediate short term, the possibility of setting up distribution service centres with their own transport service, and using enterprise resource planning to integrate the whole supply chain for more immediate, accurate provision and use of information. The overlaps of these areas across the four stages supports the idea of a holistic approach to resolve the problems. This idea is further supported by Lubowe (2009) who finds that senior management support, organisational structures and technology are key ingredients to a successful global integration strategy involving three key elements of repeatable processes, optimised assets and integrated op erations. Overall, there is no one best solution to the problems Wal-Dart is experiencing revealed by

Operational Management Essay Example | Topics and Well Written Essays - 250 words

Operational Management - Essay Example The company should also be focused on material flow and this increases the liquidity of assets and hence reduces the chance of obsolesce. This can also be dealt with by reducing defects and this ensures that fewer cars are taken back to the factories to rectify the defects. Aligning the metrics in any company has been seen to be crucial in ensuring efficient production. This was demonstrated well by Alfred Sloan where managing the cost of production is key. Having a lean organization where all the resources are used to the maximum is the driving force of success. Currently GM produces approximately 6.1 million unit products annually. If the company takes measure to improve the inventory turnover ratio, this can boost production making the company to increase productivity with 25%. It could thus be possible for GM to produce 7.625 million unit products with its current resources. This would result in increased sales turnovers as their automotives do not stay in stock for a long

Nutrition in the Prevention and Treatment of Disease Research Paper - 1

Nutrition in the Prevention and Treatment of Disease - Research Paper Example It is evidently clear from the discussion that food is not only important for the maintenance and development of an individual, but also in the performance and reproduction of life. It has been estimated that during a person’s entire lifetime, a person consumes approximately 30 tonnes of food on proportion in professedly endless dietary categories. However, as digestion takes place, the food is broken down into basic nutrients necessary for the well being of the individual. Therefore, it is safe to assume that food is chemistry. In the process of digestion, the mixture of chemicals present in the food is broken down into four basic categories: nutrients, non-nutritive naturally occurring components (which include antinutritive and natural toxins), man-made contaminants and additives. Taking that into consideration, it is safe to say that nutrients make up for more than 99.9% of the food contents. Nutrients can be classified into carbohydrates, proteins, vitamins, fats, and min erals. These constituents are referred to as macronutrients and micronutrients. Macronutrients can be described as primary sources of strength and building elements for humans, whereas micronutrients, on the other hand, are only required in comparative volumes. Micronutrients can be obtained in vitamins, minerals and trace elements, and are still essential in ample amounts to ensure proper performance of all body cells. Furthermore, micronutrients such as water do not necessarily provide individuals with energy. The majority of micronutrients are critical nutrients for life processes, often synthesized by the body. For that reason, these necessary nutrients can be received from the food that we eat. Most significantly, macronutrients are constituent and indispensable ingredients of our diets, often found in carbohydrates, water, fat, and protein.

Merger And Acquisitions Of The Apple Company Commerce Essay

Merger And Acquisitions Of The Apple Company Commerce Essay Apple is an American multinational organization that design and manufactures computer softwares, consumer electronics and commercial servers. The corporation is best known about hardware products. Established in April 1, 1976 and called Apple Computer, Inc. Apple Computer, Inc. located in Cupertino, California, designs, manufactures, and markets personal computers (PCs) and related software, peripherals, and personal computing and communicating solutions. Apple is a affiliate of the SP 500 and the NASDAQ 100. Its goods include the Macintosh procession of desktop and notebook computers, the Mac OS X working scheme, the iPod digital tune player, and a collection of software and marginal products for teaching, original, customer, and business clientele. Apple sells its products during its online supplies, direct sales power, intermediary wholesalers and resellers, and its possessing retail supplies. Since of September 24, 2005, Apple function 116 stores in the United States, and 8 additional supplies in Canada, Japan, and the UK. In adding to its personal hardware and software products, Apples retail supplies hold a diversity of intermediary hardware and software products. Revenues for the era ending September 2005 were $13.9 billion, up 69 percent from September 2004 and up 124 percent beginning September 2003. Apple Computer is dedicated to defensive the surroundings, strength and safety of our workforce, clients and the worldwide societies where we control. We know that by integrating resonance ecological, fitness and safety administration practices into all feature of our trade, we can suggest technologically inventive products and services while preserve and attractive resources for future inventions. Apple struggle for everlasting enhancement in our ecological, fitness and safety administration systems and in the environmental excellence of our products, procedure and services. Apple has established a unique reputation in the consumer electronics industry. 1. CIRCUMSTANCES IN WHICH MERGER ACQUISION ACTIVITY THE OPTIMAL ENTRY MODE INTO A NEW INTERNATIONAL MARKET. Cross-Border Merger Acquisitions implementation is an art, not a science. Each situation is unique and presents its own set of problems and potential solutions but it is in fact viable vehicles for international strategy. Source: http://www.investopedia.com/terms/m/mergerandacquisitions.asp The globalization of business over the past decade has spawned a search for competitive advantage that is worldwide in scale. Companies have followed their customers who are going global themselves as they respond to the pressures of obtaining scale in a rapidly consolidating global economy. In combination with other trends, such as increased deregulation, privatization, and corporate restructuring, globalization has spurred an unprecedented surge in cross-border amalgamation and acquisition activity. Cross-border mergers and acquisitions are an essential part of the speed up profitable globalization of our time. Cross-border business deal quantity now account for approximately one-third of worldwide MA activity and this figure will only augment as business world-wide continues to increase. The compound lawful matters to be handled in such business deal include the management of dissimilar impression of business authority and capital market system in the laws concerned, as reflect by the strong discuss on MA law creation within the European Union. Mergers and acquisitions  (MA) and company reform are a big division of the corporate finance world. Every day,  Wall Street savings bankers organize MA dealings,  which transport Divide corporations jointly  to form  bigger ones. When theyre not generating big corporations from smaller ones, corporate finance transactions do the overturn and smash up corporations during spin-offs, carve-outs  or tracking inventory. On standard, big MA transactions causes the domestic currency of the objective companies to value by 1% relation to the acquirers. For every one billion dollar transaction, the currency of the objective company augmented in worth by 0.5%. More particularly, the statement originate that in the era instantaneously after the deal is publicized, there is normally a strong growing association in the objective companies domestic currency (relation to the acquirers currency). This quick raise has taken many MA firms by revelation because the popular of them never had to believe acquiring the capabilities or skills necessary to efficiently handle this category of contract. In the past, the markets are deficient in of implication and a more severely nationwide approach prohibited the enormous preponderance of minute and mid-sized corporations from allowing for cross border intermediation as an alternative which left MA firms unproven in this ground. APPLE COMPUTERS INC. AND NEXT SOFTWARE INC. MERGER Sources: http://www.apple.com/, http://www.nextcomputers.org http://www.objectfarm.org/index.html On the 20.December 1996 the enthusiasm Brothers reunited and saw the light. Apple Computers Inc. and NeXT Software Inc. declare that they will merge their technologies and that Steve Jobs will return, as a advisor, to the corporation he established 20 years before. One of the coolest bands in processor record was receiving back jointly and at least some populace was secure that there would be plenty of really cool belongings occurrence in the close to future. The Plan Back in 1996 Apple was in bottomless difficulty because hardware sales were deprived and the unsellable stock was growing day by day. The crisis was connected to replica manufacturers, who participated with Apple in an already small promote, and Apples baffling and not very wonderful product line up. The Mac OS ongoing to show its age and with the opening of Windows 95 it became really hard to induce people of the reimbursement that the Mac stage would suggest. Numerous years and still more dollars have been invested in a current substitute, system named Copeland, but it was still not ready for major time when Apples faced the rising monetary problems. The company was not only desperately shopping for a new working system (even consider Windows NT at one point) but had to effort with a traditionally low stock price and the awaiting danger of a aggressive capture from some of the big rivals. NeXT had no easy era as well. The expansion of the OPENSTEP working system was almost halted because annoying to keep up with the speedily altering Intel world was like hostility a behind clash without hold up from the hardware manufactures. NeXT drifted into the place of a Windows NT expansion tool supplier with focus on enterprise computing and vibrant web page creation. WebObjects was the only invention left, which had an actual future. NeXT and Apple fortunately realizes that they were in the exclusive location to lastly evidence that sometimes: 1+1=3 Both corporations had significant and established technologies which the other was absent and a amalgamation would make an amazingly immense scheme. in addition that Apple had its possess, still well appreciated, hardware stage and a universal resale canal whereas NeXT had a streamlined, competent association, a good standing in the IT subdivisions of large companies and they had well Steve Jobs. Rhapsody A latest working scheme plan was poorly wanted and so a latest road map had to be haggard over the holidays which could be obtainable to the depress and Apples consumer and developer society at MacWorld, which was seized in January 1997. The new young were primarily policy named enthusiasm and someway the name did well like a glove. The system had the possible of flattering an classic poem which brings an outstanding OS to stylish and influential hardware. The Big Picture After the amalgamation the conventional Mac OS followed a very easy liberate outline: main release formerly a year, in addition slight updates semi a year later. This was piece of the NeXT pressure in the software expansion subdivision which was now headed by Avie Tevanian. The centers transferred to permanent liberate dates instead of fixed attribute sets. The discharge dates have been mostly ambitious by the require to maintain latest hardware which in most cases necessary updated drivers or maintain for special skin. Mac OS 8.0 was exclusion because knocking the edition number was essential for Apple in arrange to get relieve of the replica hardware construct. They would need a latest permit if they required remaining up with Apple and Apple (read Steve Jobs) would not funding them such a permit for a comparable negotiate like they did under the old concurrence. This essentially killed the sell of Apple duplicate. Agreed the complication of amalgamation two working scheme it was understandable that it would take at slightest two main amendment before a meeting could be achieved. Enlargement on Mac OS 8 ongoing before the amalgamation, so it would take a Mac OS 9 to arrange the changeover to a fundamentally dissimilar scheme. Apple become stronger, more positive and more well-liked once more. The supply was increasing and Apple was back in trade foremost the business again the Apple product was stronger than increasingly and the corporation was promotion hardware like passionate which in turn concerned more developers to the stage. CPM Competitive Profile Matrix Source: hhtp://www.prenhall.com/david Apple HP Dell Critical Success Factors Weight Rating Weighted Score Rating Weighted Score Rating Weighted Score Market Share Price Financial Position Product Quality Consumer Loyalty Advertising Management Global Expansion Innovation Web Development 0.10 0.10 0.15 0.15 0.15 0.04 0.06 0.06 0.14 0.05 2 2 3 4 4 4 4 2 4 3 0.20 0.20 0.45 0.60 0.60 0.16 0.24 0.12 0.56 0.15 3 3 4 3 2 2 3 2 2 2 0.30 0.30 0.60 0.45 0.30 0.08 0.18 0.12 0.28 0.10 4 4 3 3 3 3 3 3 2 3 0.40 0.40 0.45 0.45 0.45 0.12 0.18 0.18 0.28 0.15 Total 1.00 3.28 2.71 3.06 Apple computer Inc. standing before merger with Next as compare to their rivals in the above competitive profile matrix which show the outstanding position of Apple computer international against HP and Dell 2. REASONS WHY MANY MERGER AND ACQUISIONS ARE DEEMED TO HAVE FAILED OR UNDERPERFORMED Source: IPM survey on obstacles to cross-border mergers and acquisitions In recent years strategic mergers have gotten a bad name, to the extent that some pundits have defined strategic mergers as those where the acquiring company overpays. While the price paid for a company is a critical determinant of the success of the resulting Acquisition, there is no inherent reason, why mergers that are strategically well conceived, should go away. In fact, the evidence is quite opposite. These are difficult questions that require careful, objective pre-acquisition analysis. The tendency for companies in the heat of battle to overstate the real strategic benefits of a deal is a definite problem that must be guarded against pressures that arise from the desire to close a deal quickly before rival bidders appear, cultural and sometimes language barriers that create uncertainty, and the often emotionally charged atmosphere surrounding negotiations, work against this requirement of objectivity. The best solution in this case is to enter the MA mode with a carefully developed framework that addresses the key questions, and to stick to that framework in evaluating a potential acquisition candidate even when the seemingly inevitable strains arise. Our own research and experience indicates that the highest potential cross border MAs tend to be between firms that share similar or complementary operations in such key areas as production and marketing. When two companies share similar core businesses there are often opportunities for economies of scale at various stages of the value chain (e.g., RD, manufacturing, sales and marketing, distribution, etc.). Consider all that must go right in any (same-country) acquisition: The two companies must reach agreement on which goods and services will be obtainable, which facility or group will have primary responsibility for making this occur, who will be in allege of each of these amenities or groups, where will the predictable cost investments come from, what will the separation of labor seem resembling in the managerial group, what schedule to chase that will greatest make the latent synergies of the contract, and myriad other issues that are complex, detailed, and immediate. On top of all this the merging companies must continue to compete and serve their customers in a competitive marketplace. Now, take all these challenges, and add a completely new set of problems that arise from the fundamental differences that exist across countries. Consider, for example, for all the similarities that a global imperative places on companies, the very real differences in how business is conducted in, s ay, Europe, Japan, and the United States. These differences involve Corporate governance, the power of rank and file employees, worker job security, regulatory environments, customer expectations, and country culture all representing additional layers of complexity that executives engaged in cross-border MAs must manage. Is it any wonder that cross border mergers are potential minefields that require the utmost care? Fortunately, there are some basic principles that will make cross-border mergers work more smoothly. They can be divided into the imperatives of strategic logic and acquisition integration. Cultural Integration in the Process of Cross-Border Merger and Acquisition Cross-border amalgamation and acquirement (MA) play a significant component in foreign direct investment (FDI). In the course of cross-border MA, the venture occupied will stumble upon civilizing distinction and argument. How to add these cultural differences and abolish the conflicts becomes a significant issue for the venture. Civilizing combination abolishes conflicts happening from civilizing dissimilarity by classifying and merging the principles, psychosomatic states and performance modes of different communities. The cross-border MA cultural integration inherits and rectifies the emotional agreement of the intention corporation for minimizing the quantity of civilizing conflicts and forming the miscellany and agreement due to the civilizing dissimilarity in multi-national venture (Apple Next, 2009). Cross-border MA civilizing incorporation seek to reduce cultural differences as much as possible in the acquired company. Therefore, whether the cultural integration is successful or not is critical to the success or failure of a cross-border MA. In general, the following problems should be solved in cultural integration of cross-border MA. First, it should coordinate the cultural differences of peoples and states to promote understanding and communicating between the different communities in one enterprise and to avoid the negative influence arising from the different thinking models, behaviors, and values. Second, it should coordinate the different company cultures to eliminate the barriers in leadership styles, communication models, personnel system, performance appraisals, and social security benefits. Third, it should establish the companys core values by integrating diverse cultures to improve the companys creativity and competitiveness. Fourth, the effective integration of the companies cultures could provide conditions beneficial for the integration of operations. Therefore, cultural integration of cross-border MA plays an important role in helping the company maximize its capital, technique, sales, and other advantages. Method for Cultural Integration of Cross-Border MA Cultural integration of cross-border MA is a process to coordinate diverse cultures and make them mutually exist and develop within an enterprise. However, cultural integration is not as simple as merging all the different cultures into one, but a process to form a new multinational corporate model by selecting, absorbing, and integrating cultures. Cross cultural management is an effective method of realizing the cultural integration of cross-border MA successfully. Cross-cultural management refers to a system that an enterprise, in the course of MA, selects adaptive pattern of cross-culture management, overcomes conflicts and unfavorable influences, converts the negative factors into positive factors, and gains power of the cultural synergy. Cross-cultural management has its own principles and patterns, which shall be followed in the process of fulfilling cross-cultural management. Basic principles of cross-cultural management lie in respecting and understanding the cultures of othe rs, placing importance on communication, and making adaptive changes. People are the core of cross-cultural management. Culture is reflected in the thinking and behavior of people. Management is all about getting the best performance out of people. The buyer should respect the culture of the target company and try to understand the culture. The company should not use fixed values to judge the other companys culture, but should synthesize the companys strategic significance with its culture. Communicating with each other effectively and understanding each others culture is the most effective way to eliminate cultural conflicts. Establishing a new culture after MA is the amalgamation of different cultures and need not have the cultural imprint of a certain country or nationality. It will be a combination of different cultures. These four principles are interdependent and in the whole make up the basic principles of Cross-cultural management. There are four models of cross culture mana gement to resolve the cultural differences between the buyer and target companies. The first model is localization strategy, which refers to when each subsidiary of the company located in other regions or nations is regarded as an independent entity so that the strategy and decision of the subsidiary can be made according to the local conditions. The parent companys operating model is not imposed on the subsidiary. Rather, the management policy is made according to the local conditions. When the company is recruiting managers or other staff, there is little consideration given to their nationality or where they come from. The buyer respects the local culture and benefits from the localization strategy. The second model is transplanting the culture of the parent company. In this model, the buyer appoints its people to manage the target company in order to guarantee communication between the buyer and the target, and the buyer supervises and controls the target. As a result, the buyer can transplant its culture into the target company and gradually get the local staff to accept its culture. The third model is the cultural innovation by integration. In this model, the cultures of buyer and target companies coexist; a new culture and management pattern are formed through the integration of the two cultures. Cultural innovation can maximize the cross-cultural advantage. The fourth pattern uses evasion tactics. In this model, when there is a tremendous cultural gap between the buyer and the target, it is necessary for the manager appointed by the buyer to avoid the key cultural differences. Under this circumstance, the third party shall be asked to bridge the gap between cultures. This model does not address the problem and has considerable limitations. I n general, it only can be used as a transitional method. Buyers can select one or a combination of two or more of these four patterns, taking into consideration the cultural character of themselves and their targets, to culturally integrate.

Ecn 204 Final Exam Notes

Macro Final Exam Chapter 10: The Money Systems What assets are considered â€Å"Money†? What are the functions of money and the types of money? * W/o money, trade would require barter > Exchanging one good/service for another * unlikely occurrence that two people e/ have a good that other wants * 3 functions * Medium of exchange: an item buyers give to sellers when they want to purchase g/s * Unit of account: the yardstick ppl use to post prices & record debts * Store of value: an item ppl can use to transfer purchasing power from the present to the future * 2 kinds Commodity money: commodity with intrinsic value, i. e. gold coins * Fiat money: money w/o intrinsic value, used as money b/c of gov’t decree, i. e. dollar bills * Money in Can’n economy * Money supply (Money stock): the quantity of money available in the economy * Two assets should be considers: * Currency: the paper bills & coins in the hands of the general public * Demand deposits: balances in bank accounts that despositors can access on demand by writing a cheque/using debit card * Money Supply = currency + depositsWhat is the bank of Canada and its role? How do Banks create money? * Central Bank: an institution designed to regulate the money supply in the economy * Bank of Canada: the central bank of Canada * Established in 1935, nationalized in 1938, owned by Can’n gov’t * Managed by board of directors appointed by minister of Finance, composed of: governor, the senior deputy governor (7 yr terms), 12 directors (3 yr terms) * Four primary functions: * Issue currency, act as banker to commercial banks & Can’n gov’t, control money supply * Commercial Banks and Money Supply Although Bank of Canada alone is responsible for Canadian monetary policy, the central bank can control the supply of money only through its influence on the entire banking system * Commercial banks include credit unions, caisses populaires, and trust companies * Commercial banks can influence the quantity of demand deposits in economy and money supply * Reserves: cash that commercial banks hold * Fractional banking system > Keeps fraction of deposits as reserves, rest is loaned * Banks may hold more than this minimum amt if they choose * The reserve ratio, R Fraction of deposits that banks hold as reserves * Total reserves as % of total deposits * Bank T-account * T-account – simplified accounting statement that shows bank’s Assets & liabilities * Banks liabilities: deposits(what we put in the bank), Assets: Loans and reserves(What bank keeps) * R= Reserves/Deposits * Banks & money supply * $100 of currency is in circulation, determining impact on money supply: Calculate in 3 different cases * No banking system Public holds the $100 as currency; Money supply= $100 * 100% reserves banking system: banks hold 100% of deposits as reserves make no loans * MS = Currency (loans) + deposits = 0 +100 = 100 * Bank does not affect size of money supply * Fractional reserve banking system * R=10%: Reserves: 10, Loans: 90, Deposits: 100 * MS= $190 * When banks make loans > create money * Borrower gets: 90 in currency(asset), 90 in new debt/loan (liability) * Money Multiplier: The amt of money the banking system generates with each dollar of reserves * Money multiplier = 1/R R =10, 1/R = 10, 100 x 10 = 1000 * The Bank of Canada’s tools of Monetary Control * 1. Open-market operations * When it buys gov’t bonds from/ sells to the public * Foreign exchange market operations: when it buy/sells foreign currencies * MS increase when bank of Canada buys foreign currency with Canadian Currency; and decrease when BoC sells foreign currency * 2. Changing the overnight rate * Central banks act as bankers to commercial banks Bank rate : interest rate charged by bank of Canada on loans to the commercial banks * Since 1998 Bank of Canada as allowed commercial banks to borrow freely at the bank rate, paid commercial banks the bank rate , minus half percent, on their deposits at bank of Canada * Commercial banks never need to pay more than bank rate for short term loans, b/c they can always borrow from the Bank of Canada instead * Conversely, commercial banks never need to accept less than the bank rate, minus half a percent, when they make short-term loans, because they can always lend to the bank of Canada instead * Overnight rate: the interest rate on very short-term loans between commercial banks * Bank of Canada can alter the money supply by changing the bank rate, which in turn causes an equal change in overnight rate * A higher bank rate discourages commercial banks from borrowing from the Bank of Canada * A higher overnight rate discourages commercial banks from borrowing from other commercial banks * An increase in the overnight rate reduces the quantity of reserves in the banking system, which in turn reduces the money supply * Bank of Canada’s control of MS is not precise * Bank of Canada must wre stle w/ 2 problems that come from fractional-reserve banking * Does not control amt of money that: * Household choose to hold as deposits in banks * Commercial bankers choose to lend Chapter 11: Money Growth and Inflation How does the money supply affect the inflation & nominal interest rates? * Quantity theory of money: Price rises when gov’t prints too much money * Most economists believe the quantity theory is a good explanation of the long run behavior of inflation * Asserts that quantity of money determines value * 2 approaches: * Supply demand diagram MS determined by bank of Canada, banking system, consuers * In model, assume that BoC precisely controls MS & sets it at some fixed amt * MD (money demand) how much wealth ppl want to hold in liquid form * Depends on P: an increase in P reduces the value of money, so more money is required to buy goods & services * Thus: Quantity of money demanded is –vely related to the value of money +vely related to P, other thin gs equal (real income, interest rates, availability of ATMs) * * Results from Graph: Increasing MS causes P to rise * How does this work? Short version: * AT the initial P, an increase in MS causes excess supply of money * People get rid of their excess money by spending it on goods & services/ by loaning it to others who spent it * Result: increased demand of goods But supply of goods does not increase, so prices must rise * Other things happen in the short run, which we will study in later chapters) * Equation * Nominal Variables: are measured in monetary units * i. e. Nominal GDP, nominal interest rates (rate of return measured in $) nominal wage($ per/hour worked) * Real Variables: are measured in physical units * i. e. real GDP real interest rate (measured in output) real wage (measured in output) * Real vs. Nominal * Prices are normally measured in terms of money * Price of a compact disc: $15/cd * Price of a pepperoni pizza: $10/pizza A relative price: price of one good relat ive (divided by) another: * Relative price of CDs in terms of pizza: * Price of CD/Price of pizza = 15/10 = 1. 5 pizzas per cd * Relative prices are measured in physical units so they are real variables * Real vs. Nominal Wage * An important relative price is the real wage * W= nominal wage= price of labour $15/hr * P = price level = price of g&s $5/unit of output * Real wage is price of labour relative to price of output * W/P = 15/5 = 3 units output per hour * Classical theory of inflation: * Increase in overall level of prices * Over past 60 yrs, prices risen on avg of 4%/yr Deflation: people will wait for prices to drop on big ticketed items, dropped in the 20th century * In 1970s prices rose by 7%/yr * During 1990s, price rose at 2%/yr * Hyperinflation: extraordinary high rate * Quantity theory of money: explain long-run determinants of price lvl and inflation rate * Inflation is an economy-wide phenomenon that concerns the value of the economy’s medium of exchange * Whe n the overall price level rises, value of money falls * Inverse relationship b/w price & value of money * Value of money: * P = Price lvl (CPI/ GDP deflator) * P = price of basket of goods measured in money * 1/P is value of $1, measured in goods * Example: basket contains one candy bar, P = $2, Value of $1 is ? candy bar * The Classical Dichotomy Classical dichotomy: theoretical separation of nominal & real variables * Hume & the classical economists suggested that monetary developments affect nominal variables but not real variables * If the central bank doubles the MS, Hume & classical thinkers contend * All nom variables (including prices) will double * All real variables (Including relative prices) will remain unchanged * The neutrality of Money * Monetary neutrality: the proposition that changes in the MS do not affect real variables * Doubling money supply causes all nominal prices to double, what happens to relative prices? * Initially, relative price of cd in terms of pizza is * Price of cd/price of pizza = 15/10 = 1. pizzas per cd * After nominal prices double * 30/20 = 1. 5 pizza per cd * Relative price is unchanged * Monetary neutrality: proposition that changes in the MS do not affect real variables * Similarly, the real wage W/P remains unchanged, so†¦ * Quantity of labour supplied/demanded, total employment does not change * The same applies to employment of capital & other resources * Since employment of all resources in unchanged, total output is also unchanged by the MS * Most economists believe the classical dichotomy & neutrality of money describe the economy in the long run Does the money supply affect real variables like real GDP or the real interest rate? The velocity of Money: the rate at which money changes hands * Notation: * PxY = nominal GDP = price level x real GDP * M = money supply * V = velocity * Velocity formula: V = PXY/M * Pizza, Y = real GDP = 3000 pizzas, P= price of pizza = $10, P*Y = $30,0000, M = $10,000 * V=30,000 /10,000= 3, avg dollar was used in 3 transactions * Quantity Equation * M*V = P*Y * V = stable * So, a change in M causes nominal GDP (P*Y) to change by the same % * A change in M does not affect Y: money is neutral, Y is determined by tech & resources * So, P changes by the same % as P*Y and M * Rapid money supply growth causes rapid inflation How is inflation like a tax? Hyperinflation is generally defined as inflation exceeding 50%/month * Excessive growth in the MS always causes hyperinflation * Inflation tax: * When tax revenue is inadequate and ability to borrow is ltd, gov’t may print money to pay for its spending * Almost all hyperinflations start this way * The revenue from printing money is the inflation tax: printing money causes inflation, which is like a tax on everyone who holds money * The Fischer Effect * Rearrange definition of real interest rate: * Nominal interest rate = Inflation rate + real interest rate * Real interest rate is determined by saving & inve stment in the loanable funds market * MS growth determines inflation rate This equation shows how the nominal interest rate is determined * In long run, money is neutral, so a change in the money growth rate affects the inflation rate but not the real interest rate * So, nominal interest rate adjusts one-for-one with changes in the inflation rate * The inflation tax applies to people’s holdings of money, not their holdings of wreath * Fishcher effect: an increase in inflation causes an equal increase in the nominal interest rate, so the real interest rate is unchanged What are the costs of inflation? How serious are they? * The inflation fallacy: most ppl think inflation erodes real income * Inflation is a general increase in price of the things ppl buy & the things they sell (i. e. labour) * In long run, real incomes are determined by real variables, not inflation rate * Shoeleather costs: the resources wasted when inflation encourages ppl to reduce their money holdings * In cludes the time & transactions costs of more frequent bank withdrawals * Menu costs: the costs of changing prices Printing new menus, mailing new catalogs * Misallocation of resources from relative-price variability: Firms don’t all raise prices @ the same time, so relative prices can vary which distorts the allocation of resources * Confusion & inconvenience: inflation changes the yardstick we use to measure transactions, complicates long-range planning & the comparison of dollar amts over time * Tax distortions: inflation makes nominal income grow faster than real income, taxes are based on nominal income, & some are not adjusted for inflation, so†¦ inflation causes ppl to pay more taxes even when their real incomes don’t increase * Arbitrary redistributions of wealth Higher-than-expected inflation transfers purchasing power from creditors to debtors: debtors get to repay their debt w/ dollars that aren’t worth as much * Lower-than-expected inflation tran sfers purchasing power from debtors to creditors * High inflation is more variable & less predictable than low inflation * So, these arbitrary redistributions are frequent when inflation is high * Costs are high for economies experiencing hyperinflation * For economies w/ low inflation ( 0, â€Å"Capital outflow†, domestic purchases of foreign assets exceed foreign purchases of domestic assets * Capital is flowing out of country * When NCO < 0, â€Å"Capital inflow†, foreign purchases of domestic assets exceed domestic purchases of foreign assets * Capital is flowing into the country * Variables that Influence NCO * Real interest rates paid on foreign assets or domestic assets * Perceived risks of holding foreign assets * Gov’t policies affecting foreign ownership of domestic assets * The equality of NX & NCO * An accounting identity: NCO = NX * Arises b/c every transactions that affects NX also affects NCO by the same amt (And vice versa) * When a foreigner pur chases a good from Canada, * Can’n exports & NX increase The foreigner pay w/ currency or assets, so the Can’n acquires some foreign assets, causing NCO to rise * An accounting identity: NCO=NX * Arises b/c every transaction that affects NX also affects NCO the same amt ( & vice versa) * When a Can’n citizen buys foreign goods, * Can’n imports rise, NX falls * The Can’n buyer pays w/ Can’n dollars or assets, so the other country acquires Can’n assets, causing Can’n NCO to fall * Saving, Investment, & international Flows of Goods & Assets * Y = C + I + G + NX accounting identity * Y – C – G = I + NX rearranging terms * S = I + NX since S = Y – C – G * S = I + NCO since NX = NCO * When S > I, the excess loanable funds flow abroad in the form of positive net capital outflow, NCO >0 * When S e =P*/P implies that the nom exchange rate between 2 countries should equal the ratio of price lvls * If the 2 cou ntries have diff inflation rates, then e will change over time: * If inflation is higher in Mexico than in Canada, Then P* rises faster than P, so e rises – the dollar appreciates against the peso * If inflation is higher in Canada than in Japan, then P rises faster than P*, so e falls- the dollar depreciates against the yen * Limitations of PPP theory, why exchange rates do not always adjust to equalize prices across countries: * Many goods cannot easily be traded: * i. e. haircuts, going to movies * Price differences on such goods cannot be arbitraged away * Foreign, domestic goods not perfect substitutes: * i. e. some Can’n consumers prefer Toyatos over Chevys * Price differences reflect taste differences * Nonetheless, PPP works well in many cases, especially as an explanation of long-run trends * i. e.PPP implies: the greater a country’s inflation rate, the faster its currency should depreciate (relative to a low-inflation country like Canada) * Interest ra te determination in a small open economy w/ perfect Capital mobility * Why do interest rates in Canada & the U. S. tend to move up & down together? * Canada is a small open economy w/ perfect capital mobility * â€Å"small† = small part of the world economy * Canada is an economy w/ perfect capital mobility b/c * Can’ns have full access to world financial markets, * And the rest of the world has full access to the Can’n fin’l market * This means that the real interest rate in Canada should equal the real rate prevailing in the world U. S. r= r^w * Perfect Capital mobility: theory that real interest rate in Canada should equal that in the rest of the world is known as interest rate parity * Limitations: real interest rate in Canada is not always = to the real interest rate in the rest of the world b/c†¦ * Fin’l assets carry w/ them the possibility of default * Fin’l assets offered for sale in different Chapter 13: Macroeconomic theory of the open economy In an open economy, what determines the real interest rate? The real exchange rate? * Market of loanable Funds S=I + NCO * Supply of loanable funds = saving * A dollar of saving can be used to finance * The purchase of domestic capital * The purchase of foreign asset * So, demand for loanable funds=I + NCO * S depends +vely on the real interest rate, r * I depends –vely on r * Real interest rate, is the real return on domestic assets * A fall in r makes domestic assets less attractive relative to foreign assets * Can’ns purchase more foreign assets * Can’ns purchase fewer domestic assets * NCO rises * The supply & demand for loanable funds depend on the real interest rate * A higher real interest rate encourages ppl to save & raises the quantity of loanable funds supplied * The interest rate adjusts to bring the supply & demand for loanable funds into balance * At eq’m interest rate, the amt that ppl want to save exactly balances the des ired quantities of domestic investment & foreign investment * Loanable funds market diagram * R adjusts to balance supply & demand in the LF market * Both I & NCO depend –vely on r, so the D curve is downward-sloping * * In small open economy w/ perfect capital mobility, i. e. Canada, the domestic interest rate = world interst rate * As a result, the quantity of loanable funds made available by the savings of Can’ns does not have to equal the quantity of loanable funds demanded for domestic investment * The difference between these two amts is NCO * * How are the markets for loanable funds & foreign-currency exchange connected? The market for foreign-currency exchange exists b/c ppl want to trade w/ ppl in other countries, but they want to be paid in their own currency * 2 side of foreign-currency exchange market are represented by NCO & NX * NCO represents the imbalance between the purchases & sales of capital assets * NX represents the imbalance b/w exports & imports of goods & services * Another identity from preceding chapter: NCO = NX * In the market for foreign-currency exchange, * NX is the demand for dollars: foreigners need dollars to buy Can’n NX * NCO is the supply of dollars: Can’n residents provide/give dollars when they buy foreign assets * S=I + NCO > S – I =NX * What price balances the supply & demand in the market for foreign-currency exchange? * The real exchange rate (E) = e*P/P* The Can’n exchange rate(E) measures the quantity of foreign g/s that trade for one unit of Can’n g/s * E is the real value of a dollar in the market for foreign-currency exchange * The demand curve for dollars (NX) is downward sloping b/c a higher exchange rate makes domestic goods more expensive * The supply curve (NCO) is vertical b/c the quantity of dollars supplied for NCO is unrelated to the real exchange rate * Increase in E makes Can’n goods more expensive to foreigners, reduces foreign demand for Canâ⠂¬â„¢n goods & dollars, does not affect NCO/supply of dollars * The real E adjusts to balance the S & D for dollars * At Eq’m E, the demand for dollars to buy NX exactly balances the supply of dollars to be exchanged into foreign currency to buy assets abroad * Disentangling S&D When can’n resident buys imported goods does the transaction affect s/d in foreign exchange market? * The demand for dollars decrease * The increase in imports reduce NX which we think of as demand for dollars (NX= net demand for dollars) * When foreigner buys Can’n asset, does the transaction affect supply/ demand in the foreign exchange market * The supply of dollars falls * NCO = Net supply of dollars How do gov’t budget deficits affect exchange rate & trade balance? * The effects of a budget deficit * National saving falls * The real interest rate rises * Domestic investment & net capital outflow both fall * The real exchange rate appreciates * Net export fall (or the trade de ficit increases) * Eq’m in the Open Economy NCO is the variable that links these two markets: S = I + NCO, NCO =NX * In the market for loanable funds, supply comes from national saving & demand comes from domestic investment & NCO * In the market for foreign-currency exchange, suplly comes from NCO & demand comes from BX * * * Eq’m in the open economy * Prices in the loanable funds market & the foreign-currency exchange market adjust simultaneously to balance supply & demand in these two markets * As they, they determine the macroeconomic variables of national saving, domestic investment, NCO, and NX How do other policies or events affect the interest rate, exchange rate, and trade balance? The magnitude & variation in important macroeconomic variables depend on the following: * Increase in world interest rates * Gov’t budget deficits & surpluses * Trade policies * Political & economic stability * Three steps in using the model to analyze these events * Determin e which of the s/d curves e/ event effects * Determine which way the curves shift * Examine how these shifts alter the economy’s equilibrium * * * Increase in world interest rates * Events outside Canada that cause world interest rates to change can have important effects on the Can’n economy * In a small open economy w/ perfect mobility, an increase in the world interest rate†¦ * Crowds out domestic investment, * Cause NCO to increase & * Causes the dollar to depreciate * The effects of an increase in the gov’t budget deficit * * Gov’t budget deficits & surpluses * b/c a gov’t budget deficit represents negative public saving, it reduces national saving, and therefore reduces†¦ * the supply of loanable funds * NCO * The supply of Can’n dollars in the market for foreign-currency exchange * Trade Policy: is a gov’t policy that directly influences the quantity of goods @ services that a country imports/exports * Tariff: a tax o n imported goods * Imported quota: a limit on quantity of a good produces abroad and sold domestically * Initial impact is on imports – which affects NX NX are the sources of demand for dollars in the foreign-currency exchange market * Imports are reduced at any exchange rate, & NX will rise * This increases the demand for dollars in the foreign currency exchange market * * * There is no change in the market for loanable funds, and therefore, no change in NCO * B/c foreigners need dollars to buy Can’n NX, there is an increased demand for dollars in the market for foreign-currency * This leads to an appreciation of the real exchange rate * Effect of an import quota * An appreciation of the dollar in the foreign exchange market discourages exports * This offsets the initial increase in NX due to import quota * Trade policies do not affect the trade balance Political Instability & Capital Flight * Capital flight * Is large & sudden reduction in demand for assets located i n a country * Has its largest impact on the country from which the capital is fleeing, but it also affects other countries * If investors become concerned about the safety of their investments, capital can quickly leave an economy * Interest rates increase & the domestic currency depreciates * When investors around the world observed political problems in Mexico in 1994, they sold some of their Mexican assets and used the proceeds to by assets of the other countries * This increased Mexican NCO An increased demand for loanable funds in the loanable funds market leads the interest rate to increase * This increased the supply of pesos in the foreign-currency exchange market * * Chapter 14: Aggregate Demand & Supply What are economic fluctuations? What are their characteristics? * Over LR, Real GDP grows about 2%/yr on avg * In SR, GDP fluctuates around its trend * Recessions: falling real incomes & rising unemployment * Depressions: severe recessions (very rare) * SR economic fluctuat ions are often called business cycles * 3 facts about economic fluctuations * Are irregular & unpredictable * Most macro’c quantities fluctuate together * As output falls, unemployment rises Use mode of AD & AS to study fluctuations * Short run, changes in nominal variables (Ms or P) can affect real variables (Y/U-rate) How does the model aggregate demand & supply explain economic fluctuations? * Aggregate-demand curve – shows the quantity of goods & services that households, firms, & the gov’t want to buy @ each price level * Aggregate-supply curve- shows the quantity of goods & services that firms choose to produce and sell at each price level * Why does the aggregate-demand curve slope downward? What shifts the AD curve? * AD curve shows quantity of g/s demanded in the economy at any given P * Y=C+I+G+NX * Assume G fixed by gov’t policy Increase in P reduces the quantity of g/s demanded b/c: * The wealth effect (c falls) * The dollars ppl hold buy fewe r g/s so real wealth is lower * Ppl feel poorer * i. e. a stock market boom makes households feel wealthier, C rises, the AD curve shifts right; preferences: consumption, saving tradeoff; tax hikes/cuts * Interest rate effect (I falls) * Buying g/s requires more dollars * To get these dollars, ppl borrow more * Drives up interest rates * i. e. firms buy new computers; expectations, optimism/pessimism; Interest rates, monetary policy; investment tax credit/other tax incentives * The exchange rate effect (NX falls) * Real exchange rate= exP/P* Increase real exchange rate, Can’n exchange rate appreciates * Can’n exports more expensive to ppl abroad, imports cheaper to Can’n residents * i. e. booms/recessions in countries that buy our exports (recession in the U. S. ); appreciation/depreciation resulting from int’l speculation in foreign exchange market * Changes in G * Federal spending i. e defense; provincial & municipal spending i. e roads, schools What is the slope of the aggregate-supply curve in the short run? Long run? What shifts AS curve? * AS curve shows the total quantity of g/s firms produce & sell at any given P * Upward-sloping in short run * Vertical in long run Natural rate of output (Yn) us the amt of output the economy produces when unemployment is at its natural rate * Yn is also called potential output/full-employment output * Yn determined by the economy’s labour (L) capital (K), and natural resources(N), and on the lvl of tech(A) * Changes in L/Natural rate unemployment: immigration, Baby-boomers retire, gov’t policies reduce natural u-rate * Changes in K/H: Investment in factories, more ppl get college degrees, factories destroyed by a hurricane * Changes in natural resources(N): discovery of new mineral deposits, reduction in supply of imported oil, changing weather patterns that affect agricultural production * Changes in tech (A): productivity improvements from technological progress * An increase in P does not affect any of these, it does not affect Yn (Classical dichotomy) * Any even that changes any of the determinants of Yn will shift LRAS * i. e. immigration increases L, causing Yn to rise * Over the LR, tech progress shifts LRAS to the right & growth in the MS shifts AD to the right * Ongoing inflation & growth in output * The SRAs curves is upward sloping: * Over the period of 1-2 yrs, an increase in P causes an increase in quantity of g/s supplied * If AS is vertical, fluctuations in AD do ot cause fluctuations in output/employment * If AS slopes up, then shifts in AD do affect output & employment * Three theories: * Sticky wage theory, Imperfection- nominal wages are sticky in the short run, they adjust sluggishly, due to labour contracts; firms & workers set the nominal wage in advance based on Pe, the price lvl expected to prevail * If P>Pe, revenue is higher, but labour cost is not. Productions is more profitable, so firms increase output & employment * Hence, hi gh P causes higher Y, so the SRAS curve slopes upward * Sticky price theory, Imperfection- many prices are sticky in the short run: due to menu costs, the costs of adjusting prices, i. e. ost of printing new menus, the time required to change price tags * Firms set sticky prices in advance based on Pe * Suppose the BoC increases the MS unexpectedly, in LR P will rise * In SR, firms w/o menu costs can raise their P immediately * Firms w/ menu costs wait to raise prices, meantime , their prices are relatively low, which increase demand for their products, so they increase output & employment * Hence, higher P is associated w/ higher Y, so the SRAS curve slopes upward * Misperceptions- imperfection: firms may confuse changes in P with changes in the relative price of the products they sell, if P rises above Pe- a firm sees its price rise before realizing all prices are rising. The firms may believe its relative price is rising & may increase output & employment, * An increase in P can cause an increase in Y, making the SRAS curve upward-sloping * What 3 theories have in common: Y deviates from Yn, when P deviates from Pe * Y(Output) = Yn + a(P-Pe) * Yn-Natural rate of output (LR) * a>0, measures how much Y responds to unexpected changes in P * P, actually price lvl; Pe, expected price lvl * SRAS & LRAS The imperfections in these theories are temp, over time†¦ * Sticky wages & prices become flexible * Misperceptions are corrected * In LR†¦ * Pe = P, Y=Yn, AS is vertical * Unemployment is at its natural rate * Why the SRAS curve might shift * Everything that shifts LRAS shifts SRAS too * Also, Pe shifts SRAS: * If Pe rises, workers & firms set higher wages * At e/ P production is less profitable, Y falls, SRAS shifts left * * Economic fluctuations * Caused by events that shift the AD/AS curves * 4 steps to analyzing economic fluctuations: * Determine whether the event shifts AD & AS * Determine whether curve shifts left/right Use AD-AS diagram to see how the shift changes Y & P in the short run * Use AD-AS diagram to see how economy moves from new SR eq’m to new LR eq’m * I. e. Stock market crash : C falls, so AD shifts left; SR eq’m at B, P & Y lower, unemp higher; Over time Pe fals, SRAS shifts right, until LR eq’m at C, Y and unemp back at initial lvls * * i. e. oil prices rises: increases costs, shifts SRAS Left, SR eq’m at point B, P higher, Y lower, unemp higher; from A to B, stagflation: a period of falling output & rising prices; if policymakers do nothing: low employment causes wages to fall SRAS shifts right until LR eq’m at A, or policymakers could use fiscal/ monetary policy to increase Ad & accommodate AS shift: Y back to Yn, but P permanently higher