Sunday, February 23, 2020

Major Sources of Inflation Research Paper Example | Topics and Well Written Essays - 750 words

Major Sources of Inflation - Research Paper Example However, it is the duration of recession that determines whether the recession is harmful or not. Ideally, cyclic recession should end in few months and should initiate the process of recovery. Although, USA is one of the safest economies of the world, even then its history is pervaded with periods of recession at frequent intervals. In this essay, we are going to look at the recession of 1973-1975 and compare it with the crisis that hit the world in the second quarter of 2007. (Amadeo, 2010). The recessionary period which started in the year 1973 lasted almost 16 months before finally ending in March 1975. There were several causes that contributed to the intensity of this recession. The major reason behind this troublesome period was that the USA had gone off of the gold standard and had started to print more currency. This was the fundamental reason that initiated the recession. In the first phase, this printing of money resulted in inflation. This can be explained by a simple phenomenon of two much money chasing too few goods. When the government prints more money, more money is accumulated in the people’s hands and they start spending more. However, if the increase in the production of goods and services is less than the speed at which the quantity of money is growing, it leads to recession as people then are prepared to pay high prices for goods which are less than the aggregate demand. Similarly at the same time, the government had started wage-control measu res which increased the cost of production and many firms made the expensive workers redundant and started producing at a capacity below the maximum capacity. This initiated a cycle where less production and high wages resulted in inflation and a never ending spiral was created. As a result of this recession hit the US economy. At the same time, USA’s GDP started falling and there were three consecutive period of negative growth. In 1974’s third

Friday, February 7, 2020

Barter and Monetized Systems of Exchange Essay Example | Topics and Well Written Essays - 1000 words

Barter and Monetized Systems of Exchange - Essay Example Barter and Monetized Systems of Exchange Different items have worked as money at different times. For instance, tobacco in America, chisels in China, gold until the gold standard was abandoned in the 1930s and paper currencies thereafter. Exchange of goods and services people produce and want is critical to satisfying the diverse wants of everyone. Such exchange is possible by using either the barter system or money as a medium of exchange. Barter was prevalent medium of exchange before the advent of money. It remains the principal form of exchange even today in tribal and traditional societies where political institutions are primitive, economies are not yet monetized and social systems are based on traditional practices and communal support. Even in advanced societies and economies like the United States, barter is still carried out to a limited extent in rural areas and public and charitable activities. On the other hand, modern societies and economies like that of the United States rely on money as the main medium of ex change. They have the highly developed political institutions to regulate money and prevent exploitation, manipulation and profiteering that money makes possible; they have monetized economies that help create and accumulate wealth; and they have social awareness that is necessary for people to trust an intrinsically worthless currency note, a mere piece of paper with the central bank’s assurance in small prints, as a medium of exchange. Barter and monetized systems of exchange have their own advantages and disadvantages (benefits and costs). ... Third, since commodities and services are exchanged directly, there are no foreign exchange fluctuation or balance of trade and payment crises. Fourthly, the division of labor is clear, as one produces what one has the means to do. Barter’s Disadvantages: The barter system has several serious disadvantages too. First, coincidence of wants might be difficult unless the net is cast widely, which makes trade cumbersome. Secondly, in barter, there is no common measure of value making it difficult to ascertain, say for instance, how many loaves of bread would be equivalent to a cow if one wants to sell bread and the other cows. Third, in many cases the commodity one wants to sell, as the cow here, might be indivisible to sell in parts to buy a few loaves of bread. Fourth, commodities and animals often deteriorate in value fast and cannot be stored for long, which makes accumulation and storing of wealth difficult. Fifth, barter makes deferred payment and contractual deal problemati c. Sixth, transporting bulky commodities from place to place becomes cumbersome in a barter system of exchange. Money’s Advantages: To avoid repletion of what has been already said, money takes care of all of the disadvantages of the barter system of exchange. Sexton describes the functions of money as a medium of exchange, a measure of value, as a store of value, and as a means of deferred payment (792-794). Briefly speaking, when money is used as a medium of exchange, there is no need for coincidence of wants. Money represents the common measure of value; it is divisible into small and large amounts; it can be stored almost forever if it is put away safely; it makes deferred payment easy; and