CH10: Industrial Organization in Canada

http://www.canada.com/Canada+cellphone+market+hyper+competitive/2260608/story.html

Canada's cellphone market is 'hyper-competitive'

|summary|
Roughly 22 million Canadians communicate everyday using mobile devices, most of whom are customers of “The Big Three” wireless carriers—Rogers, Telus and Bell. Cellular mobility is one of the biggest sources of consumer discontent in Canada and is said that the market for cell-phone is “hyper-competitive”. Dan McTeague said that there is a lack of competition in the cell-phone market, which is holding back wireless growth. However, change could be just around the corner: A handful of new carriers have pledged to launch low-cost cell-phone services in major cities across Canada by next year. The way he sees it, Canada is under the thumb of an established oligopoly of corporate giants who face little incentive to lower rates or introduce new choices.

|connection|
This article reflects on the concept of oligopoly, a competitive situation characterized by an industry that is comprised of only a few firms. Canada’s cell-phone market having only three major wireless providers, Rogers, Bell, and Telus. In this competitive market, price ranges for plans/contracts are expensive. A person introduced in this article felt that the service being provided to him wasn’t good enough, but since Canada only had three service providers, he was only given a limited choice of plans to choose from. With only so little firm, the providers can raise up the prices to a certain extent because other providers take away their market share when the plans are unreasonably priced.

|reflection|
In the wireless industry, customers such as Rob McLeod is not satisfied with the service being provided by the current providers. Wind, joining the wireless oligopoly puts pressure on Rogers, Bell, and Telus to be more considerate about their customers being that if they offered better deals, then the three dominate service providers will start to lose customers. The number of firms is small enough that each firm must consider the reaction of the others when it changes it’s price. Therefore, if newly wireless carriers are being introduced later on in this oligopoly competitive situation, the three major service providers will start to consider taking more actions for their price variations. I think the introduction of the wireless carrier Wind will strongly create a mutual interdependence to the three service carriers in which Canada has now causing them to take actions on their plans and prices considerately.

CH8: Stabilization Policy

http://www.reuters.com/article/idUSTRE5126LM20090203

U.S. fiscal policy to be "very aggressive": Geithner

|summary|
Geithner said that with new economic stimulus and financial stability plans, the Obama administration is "going to do our best" to apply lessons from Japan's decade-long quagmire after real estate and stock market bubbles burst, in an interview with the wall street journal. Geithner told the newspaper that monetary policy has been very aggressive, and fiscal policy is about to get aggressive. Geithner also said that the U.S. situation is dramatically worse than today because collectively policy makers were a little slow to escalate both on the fiscal side and on the financial side. Debates last year about whether inflation or the crisis were bigger risks, whether policy-makers should be “trying to teach people a lesson or save the country?”

|connection|
This article explains Obama’s economics plan to financial stability learning lessons from Japan’s decade long quagmire after real estate and stock markets revealed. The already aggressive, monetary policy, which is an economic stabilization tool that operates through chances in the money supply to influence consumers and business spending; economic conditions, in the U.S, to battle against recession. Moreover, the fiscal policy is about to get very aggressive. Fiscal policy is the changes to the level of government spending and taxation with the goal of influencing economic conditions. As a result that the U.S. policy-makers were slow to realize the depth of the nation’s credit crisis and slide into recession, fiscal and monetary policies were made more aggressive. In this situation, government would lower taxation to influence consumer spending so that more money can circulate in the economy to bring it back into stability. With the monetary policy in effect, banks would lower their interest rates in order to increase spending by consumers.

|reflection|
I think the Obama administration that is strictly making fiscal and monetary policies more aggressive is a good step to take to start brining the economy back to stability. Because both polices have a goal of influencing economic conditions, the use of these policies in a more aggressive manner will only change the consumer behaviours which in turn would affect the economy in general. For example, If unemployment was the major economic problem, government would endeavour to increase their spending or reduce level of taxation. The increased spending by government would create new jobs.

CH5: Economic Indicators

http://www.vancouversun.com/business/Canada+economy+expand+2010/2670796/story.html

Canada's economy to expand by 3.1% in 2010: RBC

|summary|
According to an Economics report released, signs are pointing that Canada’s economy is growing another 3.1% in 2010. Unemployment rates are expected to average 8.4% in 2010 before falling to 7.7% in 2011 while consumer spending is expected to expand by 2.8% in 2010 and 2011. Business investment is set to rise by more than 7%. The report states that “this should result in Canada’s GDP expanding by an even greater 3.9% in 2011”. The economic growth will be boosted by gains in Newfoundland and Labrador with 4.1%, Saskatchewan with 3.6%, B.C with 3.4%, and Ontario with 3.3%. Alberta will rise only 2.5% this year but strengthen to 4.4% in 2011. Lastly, the unexpected strong growth in the fourth quarter of 2009 reported has prompted traders to conclude that the Bank of Canada will soon raise interest rates to keep the economy from overheating, sending Canada’s dollar surging against the U.S. currency.

|connection|
This article connects to the economic indicators in chapter five. The growth in Canada’s economy relates to the concept of GDP, in the economic indicators. Gross domestic product (GDP) represents the value of all final goods and services produced in a country in a given year. The reason for the growth in GDP can be seen as an inflation in the economy because there is a lower interest rate therefore consumers are spending more. This means that there are more money circulating in the economy bringing it up which is known as the circular flow of money. An increase in the general level of retail prices is a result by definition of inflation.

|reflection|
With the Canadian economy on the rise again, the expanding GDP in Canada shows that people are spending more money which can be a positive thing. It means that the economy is having a good balance of the circular flow of money. Having a low interest rate makes consumers want to spend more therefore increases the GDP of Canada. However, as a result of having low interest rates, inflation happens increasing the general level of retail prices. To balance this out, Canada will increase interest rates as a solution to inflation to the Canadian economy.

CH7: Money and the Canadian Banking System

http://www.cbsnews.com/blogs/2010/02/17/politics/politicalhotsheet/entry6217403.shtml

|Summary|
The South Carolina Representative introduced legislation to replace federal currency as legal tender with gold and silver coins. Pitts, a republican in an interview believes that, "if the federal government continues to spend money at the rate it's spending money, and if it continues to print money at the rate it's printing money, our economic system is going to collapse." There is also a downside to it and it is because it violates a perfectly legal and Constitutional federal law. Also, since gold and silver regularly fluctuate in value, they could not easily function as stable currency. Pitts told Hotsheet (Political Hotsheet) that he anticipates a nationwide economic collapse "if our federal government continues the course it's been traveling under the previous administration and this administration."

|Connection|
The idea that using gold and silver coins to replace print money is being addressed in this article and states that the expense in producing paper currency will eventually cause the economic system to collapse. The South Carolina Representative wants to introduce gold and silver coins because it’s more durable than paper currency. If this idea is supported by legislation, paper currency will no longer become a legal tender. Now gold and silver coins would be acceptable for purchases and for repayment of debt. Moreover, we could apply Gresham’s Law, in which it states that bad money (gold and silver coins) forces good money (paper currency) out of circulation.

|Reflection|
If gold and silver coins were to be used as our modern currency then it would be very inconvenient for individuals to carry around. This idea brings us to the concept of portability, in which paper is more portable than coins. Also, the actual value of gold and silver coins is greater than their face value therefore, it will not circulate as money because people would rather keep it because of the value. I would rather keep the circulation of paper currency because it is much more recognized and readily accepted.

Chapter 3 & 4: The role of Government in a Market Economy / Government in Canada

Leaders in House Seek to Tax Rich for Health Plan

http://www.nytimes.com/2009/07/11/health/policy/11health.html

|Summary|
The US House of Representative is asking the wealthiest Americans to help pay for overhauling the health care system with a $550 billion income tax increase. The chairman, Representative Charles B. Rangel of New York said the proposal calls for a surtax on individuals earning at least $280,000 in adjusted gross income and couples earning more than $350,000. Aside of that, representative leaders are also supportive of the idea, which they conclude would be their main way to pay for Obama’s top policy priority: expanding health insurance coverage to virtually all Americans and to decrease the steep in the cost of medical care while improving patient outcomes. On the down side, the proposed tax increase would potentially hurt small-business owners. “In the middle of a serious recession, with unemployment nearing double digits, the last thing we need is a tax increase on small businesses, which will cost the American economy even more jobs,” said Michael Steel, a spokesman for the House Republican leader, Representative John A. Boehner of Ohio.

|Connection|
This following article relates to the ability-to-pay approach discussed in chapter four of the economics textbook because it suggests a proposal for wealthier people to help pay for the organization of the health care system in America by paying surtax based on their gross income. The ability-to-pay approach is defined as a taxation approach that proposes individuals be taxed based on their ability to pay taxes. Also, this article reflects on the concept of progressive tax because the United States operates on the progressive tax system (tax approach in which the percentage of income an individual pays in taxes increases as the individual’s level of income increases) and in this article, it summarizes that the wealthier people with a higher sustainable income pays more. In addition, this article also relates to third –party effects, the results of a transaction between two parties that may also have an impact on others, positive or negative, because although every American citizen is paying taxes, the wealthier ones exceeding a certain amount of income is asked to pay surtax to help the development of health care organizing in America. This means that the wealthier people are paying the huge bulk of it while the people with a lower ability-to-pay are paying the minimal.

|Reflection|
The tax system used in the United States is progressive, that is, proportionate to income. Therefore, the wealthier are paying a larger portion of tax based on their income than compared to average American household incomes. Personally there is a liberal side, supporting to pay more taxes, and a conservative side where conservatives would claim taxing the wealthier at a higher rate penalizes success and discourages the best and brightest from working even harder. Both sides have valid points that support their ideology as well whether the wealthier should have an increased tax to pay or not. My belief is that I’m more to the conservative side because if I were rich I wouldn’t think it is fair to be paying surtax.