The Hungarian Economy…

The Hungarian economy is facing a recession, which indicated by the contracting industrial productions and the growing unemployment rate.

However, the GDP does not truly reflect this, and is a false indicator of the condition of the Hungarian economy. Because there was a good agricultural season in 2008, there was a 50% increase in growth of the agriculture sector, and without that increase, there would have been a 1% contraction, as opposed to a 2% growth.

According to the article, demand management is not implemented properly, or implemented at all, as the taxes and interest rates are high, which dis-incents a firm, which has the potential to grow, and stimulate the economy, from spending and investing.

There have been policies implemented to decrease the interest rate, however, it may not have been enough, as it still is at 10.5%.

The government perhaps should take more aggressive measures to decrease the impact of the recession, through aggressive demand management, such as decreasing taxes, increasing government spending, and making fiscal policies.

Because it is predicted that the recession will continue on for the next year, it is probably not too late to implement ways to stimulate the economy. Although this will increase the government deficit in the long run, there is probably no time to spend waiting for the market to work itself. As the unemployment rate is still rising, there needs to be measures taken to help the people affected by the recession, or at least shorten the recession, to decrease the severity of it.

Add a comment September 29, 2009

Two benefits that can arise from international trade.

Production Gains:

Trade is a voluntary exchange where two parties have to benefit. Specialization is when tasks are allocated according to what each country does best. Each country is gifted with certain factors of productions, which others are not. The endowments, such as land, labour and capital are different for each country. Because they are differently endowed, there will be different cost ratios in the use of the FOP’s. For example, the more labourers, the cheaper the labour costs. Countries will produce and export goods which they are well endowed with, because the good can be produced relatively cheaply using plentiful resources.

Because the countries can trade the goods, each country can gain and consume more than that which would be possible if the countries did not export and import. Trade benefits producers because they gain a larger market, and consumers, because they gain a larger range of goods to chose from. It would be impossible for a country to produce all the goods wanted in the country using only domestic resources.

An economy that focuses on a relatively narrow range of goods will most likely experience increased productivity because of experience, or improvement in technology.

Therefore the costs of production may decrease. This can be seen in Japan. Because Japan has concentrated so intensively on the automobile market, the cost of production per car has decreased through time.

Political Benefits:

“When you’re promoting business, You’re promoting peace. Because when I understand your aims and your culture, I don’t have any reason to declare war on you, and instead we work together. If we’re doing business together, we’re not going to fight each other because if I owe you money, you’re not going to shoot me. –Guy Tozzoli.

Trading with people of different cultures, norms and tradition may lead to understanding and acceptance, as well as interdependence between the two countries.

For example, one of the main reasons why the European Union was formed was so that trade creates an disincentive for conflict. Another example would be the improving relationship between China and the US, because the two countries had become interdependent increasingly over the past ten years.

1 comment September 27, 2009

Japan shifts from the Liberal Democratic Party to the Democratic Party

The political power in Japan shifted from the Liberal Democratic Party, which had ruled Japan for the majority of time since World War Two, to the Democratic Party.

The defeat of the Liberal Democratic Party of Japan was most likely triggered by the current economic crisis that Japan is suffering from. The recession had perhaps reminded the Japanese people of the hardships experienced in the previous economic collapse in the early 1990’s. The action the Japanese people are taking towards the current crisis is similar to what had happened in 1993, when the political power shifted to the Democratic Party for 11 months.

Additionally, the shift in political power is an indication of the Japanese people’s frustration towards current state, because they seem to blame it on the Liberal Party. They had felt no change or benefit from the policies that was implemented by the previous Prime Minister, Taro Aso, and therefore, demanded for more change, by voting for another party.

However, how long will the new government last? In 1993, the party was not able to maintain unity within the group, and therefore fell apart after a mere 11 months. The Democratic Party is know for having radically different opinions internally. Will the party last longer this time? Additionally, many Japanese analysts say that the Democratic Party was voted because people wanted to vote for something different, and not because they particularly liked the party. In this sense, once people again, begin to feel frustration towards the lack of improvement in the economy, they may not remain loyal towards the party, and switch quickly back to the Liberal Democratic Party.

Resources:

http://www.nytimes.com/2009/08/31/world/asia/31japan.html?pagewanted=1&_r=1

http://news.bbc.co.uk/2/hi/asia-pacific/8229744.stm

http://www.yomiuri.co.jp/dy/national/20090831dy02.htm

2 comments September 22, 2009

1:1 computing

1:1 Computing.

Personally, I was and I still am scared of one thing. I am worried that using computers will take us away from the actual economics. I spend so much time trying to figure out how the blog works, and how the computer works, and worrying about technology. I personally prefer using pen and paper and just doing my work. My concerns are different from others, in that I am not worried about distractions. If I get distracted, I know that it will hurt me in the long run, and therefore, I try not to get distracted. However, I am scared that the laptop will or might get damaged. No matter how careful I am, through bring it to school everyday and carrying it around everywhere, it naturally gets bumped around, which increases the risk of damage. I do not think that it will get lost, or stolen, as I will always keep it with me. I do not know how to minimize damage, but I will try to be careful, and I will get a case for my laptop.

Add a comment September 9, 2009