Final Journal Submissions and Comments

12 06 2011

All the journal prompts are on the site.  You can find them all here.  Remember I am taking your top four marks out of a possible six.

Journal submission options:

Option 1:  You handed in all four journals on time and are happy with your marks.  No need to complete any more journals.  You are done!

Option 2:   You handed in all four journals on time and are not happy with your marks.  You have four choices:

#1: Write two new journals using any of the prompts

#2: Write one new journal using any of the the prompts

#3: Rewrite one of your existing journals

#4: Rewrite one of your existing journals and write one new journal

Option 3: You handed in one journal late but are happy with all four of your journal marks. No need to complete any more journals.  You are done!

Option 4: You handed in one journal late and are unhappy with your journal marks.  You have one option – write one new journal.

Option 5: You do not have 4 journal grades yet.  You absolutely must submit one more journal.

If you don’t fit any of the categories above, please talk to me in class on Monday or Tuesday.

Should you submit another journal?

It is up to you.  Consider the opportunity costs of writing another journal when you could be studying for exams.   If you have two low journal grades, I do recommend it.  If it is just one grade that is slightly lower than your other journals, it is likely not worth the time and effort.  A 10% change in your journal grade will change your final mark by 0.375%.

Final Submission Format

Your final post should follow the format below:

Title: Your Name – ISP

Content of Post

New and Revised Journals

Title and links to any new or revised journals you want to be marked.

Marked Journals

Title and links to your other journals.

Four Comments to be Marked

Links to the four comments you want me to evaluate

Ten Comments

Links to your ten comments

Category: ISP Summission

Tags: your name





Simulation Round 8 and Final Assignment

9 06 2011

Company standings after 7 cycles…

We have a close race for 1st and a close race for 3rd.

For the final round, the only decisions you need to make are purchasing, production and pricing decisions.  There are no reputation points available in this round.  All decisions can be entered here.

Decisions must be made by 11am so I can publish the final results by the end of class.

Final Assessment

There are three parts:

  1. The value of your company
  2. Your group response
  3. Your individual response
Group Response
Describe the best decision your company made, explain why this is the best decision and how it helped your company succeed.  Be sure to include economic concepts and terminology in your description.
Describe the worst mistake your company made, explain the effects it had on your results and what you would do differently if you could change your choices.

Criteria

Insufficient Evidence

Limited

Adequate

Proficient

Excellent

Exemplary

Best Decision – Evidence of Critical Thinking

  • Choice of best decision is accurate and reflects thinking into choice made during the game.
  • Description and explanation consider alternative outcomes and consequences of decision

0

2

3

3.5            4

4.5

5

Worst Decision – Evidence of Critical Thinking

  • Choice of best decision is accurate and reflects thinking into choice made during the game.
  • Description and explanation consider alternative outcomes and consequences of decision

0

2

3

3.5            4

4.5

5

Economics of Decisions – Evidence of Understanding

  • Choices and descriptions demonstrate an understanding of the economics of Will World

0

2

3

3.5            4

4.5

5

Total

/15

Individual Response
Each group member should make either a substantive suggestion for improving the game (playing more or less often does not count) or provide a piece of advice for next year’s economics students.
There should be no duplicates in either the suggestions or advice within your group. (ie talk to each other about what you will write about).

Criteria

Insufficient Evidence

Limited

Adequate

Proficient

Excellent

Exemplary

Evidence of Critical Thinking

  • Advice or suggestions are relevant, applicable, reasonable and not superficial.

0

2

3

3.5              4

4.5

5

All questions can be submitted either on google docs (share and email me the link) or emailed to me by 9am on Sunday.
Some more information to help you with your analysis (or for bragging rights 😉




Does Income Inequality Help Cause Financial Crises?

6 06 2011

Here is the article:

  1. Do you think that rising income inequalities is a primary cause of financial crises or a secondary cause?
  2.  Do you think it is possible that income inequalities are not a cause, but an effect of financial crises?




Trades, Outsourcing and Jobs Economics Challenge

3 06 2011

 

Key Concerns/Issues

Trade

– Strong Canadian dollar results in more expensive exports for other countries.

– China is becoming the centre of the international trade, and many countries are trying to take advantage of this

– Limited natural resources to export to other countries

– Not much diversity to whom we are exporting to (75% of exported goods is to US)

– Due to the financial crisis and other unforeseen natural disasters around the world, Canada’s ability to export have been hindered

Outsourcing

– Jobs from our country are being offshored to other nations due to the low wages that exist for workers in other counties (i.e. China, Mexico)

– Outsourcing of government services may increase cost to consumers

Jobs
– Unemployment rates is still very high

– The quality of the jobs being created now are inferior compared to the jobs we lost during the recession

 

Resulting Challenges to Canadians

– The strong Canadian dollar makes Canadian goods are not as attractive as they were before in the international market – this may bring huge losses to Canada’s GDP. Canada must find a way to remedy the detrimental effects of the strong dollar.

– As China is rapidly growing economically, it will become the centre of the international trade. If Canada does take action now, Canadian goods will not be competitive in the Chinese market

– Resources are becoming scarcer. If we run out of limited natural resources due to over exhaustion, we will have huge problems with trading with other countries

– If we continue to export most of our goods to US, and if the US suffers another serious recession, Canada will lose a lot of money in exports.

– Offshoring takes away many important manufacturing jobs from the Canadian economy. Therefore, Canada must seek to create different types of jobs in order to increase our economic welfare.

– There was a massive loss of jobs because of the recession. As a result, it has caused less revenue for the government, increasing their debts

– The types of jobs created should be redirected into manufacturing or some other sector instead than government that generates little or no wealth.

 

Statistics

Trade
Falling Pork Export Market -(Dropped from $125 mil to $100 mil)

Potential Oil Exports to China – (Net profits approximately $ 270 billion)

Decreasing Oil Exports -(Expected surplus $500 million, actual surplus $382 million)

USA as Top Canadian Export Market -(USA will have approximately 75% of Canadian export market until 2040)

Outsourcing

Consequences of Outsourcing Garbage Collection  – (Increased cost to consumers in the long run)

Offshoring and Inshoring of Jobs Balances Out -(1.9% of companies moved work out of Canada, while 1.8% moved work in)

Jobs

Future Unemployment Rates -(Down from 7.7% in 2010 to 7% in 2014)

TD Forecasted Future Job Creations -(Forecasts decreased job creation in 2011 before it can increases in 2012)

 

Possible Solutions

Trade

– Government can intervene and weaken Canadian dollar on purpose to make importing from Canada by other counties cheaper and thus making Canadian exports more popular

– Canada should realize China’s economical potential and should start exporting competitive goods to China

Outsourcing

– Currently, there is also a significant amount of inshoring to restore our number of jobs.

Jobs

– Unemployment can naturally recover to its natural state since the economy is recovering

– Lower the value of the dollar to attract other companies to Canada. This would encourage businesses to expand in Canada, creating more jobs for Canadians, stimulating the economy, and generating wealth for the government through sales tax.





The Possible Effects of Deregulation, Leverage and Systemic Risk on Canada’s Economy

3 06 2011

Key Concerns

Deregulation of the financial industry has caused more harm than good.
Deregulation within the financial industry has let banks and companies lower the interest rates and made it easier for companies to take out huge loans that they knew was almost impossible to pay off.
In terms of the deregulation of banks within the financial sector in Europe, the financial market has gone nowhere but downward. The deregulation has contributed to the extremely low interest rates for taking out loans. There are massive amounts of loans that industries and governments are taking out even though they know it is almost impossible for them to pay it back, such as Portugal, Ireland, Italy, Greece and Spain.

    More info on Deregulation in these articles:

The Problem with Deregulation
Does Financial Deregulation Work? A Critique of Free Market Approaches
Banking Deregulation in Europe

The governments were using leverage to finance themselves which accumulated a lot of debt over time and made it impossible to pay back the banks. Since all the banks in the European financial industry are very interconnected, if one bank goes down it causes uncertainty and panic it will reduce the inner bank lending which is at the heart of systemic risk.

Statistics and Evidence

1. Credit now represents 47% of RBC`s banking revenue, compared to the previous 30% five years ago. Click here for more.

2. The Canadian prime rate declined by more than 10% between 1990 and 2010, which decreased inflation. Click here for more.

3. Trading and market sensitive revenues grew by more than 15% for two decades. Click here for more.

4. Greece`s debt totals more than 150% of its GDP. Click here for more.

5. Following the European government’s lending Greece money, their unemployment rate increased to 15%. Click here for more.

Looking at the above statistics, it becomes apparent that many government banks are using the leverage strategy to try to come out of debt, but with this process comes very high systemic risk. This systemic risk was shown in the European governments, and can also transfer over to Canada.

Effects on Canada and Solutions

The situation in Europe will affect everyone in the world including Canada; however there is nothing Canada can do to solve this problem except make sure this doesn’t happen in our country. Furthermore, we should make sure that Canada is prepared when the impact of the European financial crisis reaches us. This potential recession should not affect Canada as much as the US recession because we export a lot more goods to the US than to Europe. However, we should expect our exports to decline if the European banks get bailed out.

We should also see an increase in imports because the Canadian dollar will go up and it will be cheaper to purchase foreign goods. Canadians should also expect a spike in interest rates if the European governments that borrowed from the banks default on their loans. The defaults will cause uncertainty in the financial markets causing the interest rates to go up. In the long run we should make sure that regulations on government borrowing don’t loosen up. If they do we could face similar problems to Greece where we have too much debt and can’t pay it off. In conclusion, the collapse of the euro will affect Canada and the rest of the world. That’s why the best thing Canada could do is prepare for another recession.





Government Spending and Taxation, Debts and Defecits Summary

3 06 2011

Key Concerns/Issues
The key concerns and issues surrounding government spending and taxation is clearly outlined in the latest Flaherty speech given at the Canada 2011 Budget.  The issues are how to create more jobs and growth and provide tax cuts to improve the financial security of Canadian families without going into a deficit. Especially with the global recession, Canada needs to tighten the government spending while at the same time reduce the deficit. However, how can this be accomplished without imposing higher taxes or cutting payment to crucial services like health care and education? Flaherty makes the argument that, by doing that you will stall the recovery, kill hundreds of thousands of jobs and set families back. 

Resulting Challenges to Canadians
With a large deficit every year, Canada will develop a huge debt that will be difficult to pay off. Greece right now is in a similar but more drastic situation, where it cannot pay off its debt. If the debt is too large, it is no longer an option to print currency to pay the debt, seeing as that would lead to high inflation. Inflation would directly affect Canadian citizens. Taxes would be raised without a doubt and people would be forced to pay very high tax rates and receive extremely lackluster government services for years until the debt is paid. Currently, the Canadian debt is growing at a rate of almost $1,000 per second. Clearly this is unreasonable and finding a way to balance our budget each year is a major concern.  

Supporting Statistics and Evidence

Deficit 2011: $30 Billion
Deficit 2011 to 2015: $128 Billion

Current Federal Debt: $565 Billion
Current Federal Debt per Capita: $16,475

Source: http://www.diigo.com/bookmark/http%3A%2F%2Fwww.thestar.com%2Fnews%2Fcanada%2Fpolitics%2Farticle%2F1000870–government-can-t-balance-books-by-2014-watchdog%3Fbn%3D1?gname=economic-challenges-research

Possible Solutions

One possible solution to the problem of Canada’s growing deficit would be to increase taxes on Canadian citizens. While this may not sit well with the already financially struggling Canadian economy, it will benefit us in the long run by diminishing our debt to other countries now, as opposed to letting it build up on interest. Another possible solution to our growing deficit would be to decrease government spending. While our infrastructure and growth would suffer, it would allow us to lower our debt and allow for greater economic growth in the future.





Income Inequality Summary Component

3 06 2011

Key Concerns/Issues

1. The gap between the rich and the poor is growing in Canada, since those earning the highest incomes are experiencing greater increases in their incomes than lower wage earners.
2. The economic recession has worsened income inequality in Canada. After the recession, high paying blue-collar manufacturing jobs have been replaced with low paying service sector jobs that offer fewer work hours, so although it appears that jobs have been recovered and unemployment has gone down, people are earning less money than before.
3. Businesses have been given a lot of wealth in order to create the trickle down effect, either through creating new jobs or expansion of the company. However, businesses are using the money instead in providing large bonuses and higher salaries for executives, keeping the money locked in at the top. Providing wealth to businesses has not benefited the poorer members of society as was expected.
4. Many Canadian jobs that require fewer skills are being outsourced to countries such as China, India and Bangladesh, where workers can be paid less to do the same job. This leaves the people who had the same jobs in Canada with no job or income.

Resulting Challenges to Canadians in the next 10 years

1. With income inequality exacerbated, the government has to dish out more tax dollars to spend on social welfare services. This reduces the amount of tax money available to fund activities that can stimulate real economic growth.
2. People with low incomes or reduced incomes have little money to spend. This reduces consumer spending, which can shift aggregate demand to the left and cause another recession.
3. Generally, extreme income inequality is connected to a lower quality of life. With income inequality becoming a bigger concern in Canada, it is likely that those with a lower-income will experience a lower quality of life e.g. shorter life expectancies, more health problems.

Supporting Statistics and Evidence

1. It costs more to provide emergency housing and hospital care for the homeless for a year than it does to provide supportive housing to the homeless for a year. Also, it costs more for a homeless person to stay at the hospital than for a non-homeless person:
http://www.theglobeandmail.com/news/national/how-paying-peoples-way-out-of-poverty-can-help-us-all/article2011940/
2. Income of the top wage earners in Canada, and a graph showing increasing income inequality in Canada. Also, more people marry others with similar incomes now than before:
http://www.theglobeandmail.com/news/national/the-rewards-of-the-rich/article1819892/?from=1819803
3. Gini coefficient increased in Canada, and number of hours worked by lower-income earners decreased:
http://economix.blogs.nytimes.com/2011/05/03/inequality-rising-across-the-developed-world/
4. Low income earners experienced less growth in income than high income earners, which worsens the income gap between the rich and the poor:
http://www.nationalpost.com/news/Economic+news+Inequality+complex/4782730/story.html

Possible Solutions

1. One solution to worsening income inequality is the Guaranteed Annual Income (GAI), which gives Canadian families with low incomes a guaranteed source of income so that they can provide for themselves sufficiently.
2. Increase income taxes for the rich, who have a large portion of Canada’s wealth. The tax revenue can be redistributed to increase income equality, for example by providing money to low-income families to boost consumer spending and increase aggregate demand. This can be done by increasing the tax rate in higher income tax brackets.
3. Increase corporate taxes. This would essentially have the same aim as increasing income taxes for the rich, as it will help redistribute Canada’s wealth more evenly. Also, corporate revenues may have been given to company executives, who would invest the money instead of spending it, which doesn’t increase GDP. If the government took this money, it would spend it, which would increase aggregate demand in the economy and cause economic growth.
4. Cut income taxes for the poor. This would increase their disposable income, which helps them live more sufficiently and increase their quality of life, as well as contribute to the economy through increased spending.