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.

Chapter 2: The Operation of a Market

Falling gas prices up SUV sales

http://abclocal.go.com/wabc/story?section=resources/traffic&id=7038986#bodyText

|Summary|
As gas prices are falling, more Americans are going back to buy bigger vehicles which are not new fuel-efficient hybrid rather, gas-guzzling SUV and trucks. As stated in the article, with the price of gasoline dropping, dealers report sales of SUVS and trucks are up at least 9 percent, according to one national study. The Cash for Clinkers program aimed at spurring sales of fuel-efficient cars while getting older models off the road had recently ended. Motorists say there’ll always be a market for sport utility vehicles. Dealers say expect more so-called crossover vehicles, which could help soften the blow if gas prices start to go back up.

|Connection|
Under most circumstances, consumers will buy more of a product if the price is low and less of it if the price is high. If the price of a product increases, less of the product can be purchased with the current level of income. In this article, the falling gas prices can relate to the interaction of the law of demand and the factors that affect the quantity demanded. Clearly, this article talks about gas prices dropping which caused more American’s to going back to buying gas-guzzling SUVS and trucks. This is to my knowledge the factor price that is affecting the demand, SUVS and trucks where price decreases in gasoline increases the quantity demanded for bigger vehicles.

|Reflection|
The fact that dealers report sales of SUVS and trucks are up at least 9 percent is remarkable in my opinion. It is difficult to predict the long-term effects of high gas prices as an average consumer so deciding on buying a bigger gas-guzzling vehicle in parallel to the decrease of gasoline price is not a bad choice. The market changes as it often does. Buying a SUV or a truck is not necessary affected by gas prices but for big family purposes or participating in outdoor activities that includes hauling loads or pulling a boat. Furthermore, when the gas prices remained at a higher price there is no doubt that the sales of bigger vehicles were lower however with the prices falling in gasoline, it would be apparent that the demand for bigger vehicles would increase. As a result, the sales of SUVS and trucks would increase.

Chapter 1: Introductory Concepts

Gasoline prices keep rising in California while falling nationwide


http://www.latimes.com/business/la-fi-gas15-2009sep15,0,509103.story

|Summary|
This article recognizes that the average price of a gallon of regular gasoline is higher in California than elsewhere in US, which according to experts, is the result of low production and tight supplies in California. It stated that over the last week, pump prices rose through out California, the average cost of a gallon of regular in California went up 5.4 cents, which set a high for the year for the second week straight while nationally, the average price dropped 1.1 cents. Analysts said that some of the reasons for the unusually large difference in price could be the fact that refineries in the state are running short of full production. As for the week that ended sept.4, California refineries produced 5.8 million barrels of gasoline but during the same week last year, the refineries pumped out more than 6.2 million barrels even though oil supplies were nearly 40% lower.

|Connection|
Scarcity by definition is being insufficient for the demand. This article presents itself as an example that relates to the concept of scarcity because it talks about the shortage of production in gasoline resulting in price increase. With the fundamental knowledge of the supply and demand concept, gasoline is regarded as a scarce resource because there is a limited supply, therefore affecting the price rapidly. The demand for gas is even greater now a day because of the economic recession as prices for automobiles have gone down significantly, which means more consumers are buying cars. As a result, the reason for price increase is set off by the demand for gasoline, a scarce resource.

|Reflection|
The market reflects on the price determined by the interaction of consumers, the concept of supply and demand. So there is no doubt gas prices will remain high. Until then, there are temporary solutions such as having hybrid vehicles and electric cars. I believe it’s a temporary solution because the world population is growing exponentially and scarce resources are depleting. Moreover, the more industrialized the country is requires a greater vast of refineries to produce raw materials so USA is lacking to sustain all the states with resources on limited supply of scarce resources.

First day of Economics class. >=]