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Analysis of about Economics Principles - Article Example

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"Analysis of Article about Economics Principles" seeks to describe how an article, Hildago, D & Gutierrez, L., BRT, and BHLS around the World: Explosive Growth, Large Positive Impacts, and Many Issues Outstanding: Research in Transportation Economics demonstrates the principles of economics…
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Analysis of Article about Economics Principles
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This article addresses major principles such as demand, Supply, and Congestion, Government Pricing and Policy, Regional Development Planning and Policy, interest rates, government fiscal, and monetary policy. The article asserts that macroeconomic indicators are statistics showing the current status of a country’s economy depends on a specific sector of the economy. According to the authors, macroeconomic indicators are published frequently at a certain time by either the private sector and government agency. When used properly, macroeconomic indicators can be invaluable resources for a company or forex trader. Generally, these statistics help companies to observe the economy’s pulse, thus it is not surprising that every company, whether local or international, follows with great interest these economic statistics. After the publications of the macroeconomic indicators, firms can observe the volatility in the market. The extent of the market volatility is determined by how important the indicator is. That is why understanding the macroeconomic indicator is vital for the growth of a company (Hildago & Gutierrez, 2013). The article demonstrates the interest rate in economics as one of the vital determinants in the foreign exchange market. As the institutions set the rates of interest, the central bank of a country is therefore the most prominent actor. The flows of investments are determined and influenced by interest rates. In view of the fact that currencies are the representations of the economy of a nation, differences in the rate of interest impact the relative worth of currencies with regards to another. A change in the interest rates by the central bank causes volatility and movement in the foreign exchange market. Low-interest rates encourage investments in the economy because the cost of borrowing will below. The article illustrates that to international firms, the movement in the forex market affects their financial result. Most of the operating materials are imported and at the same time, most of its products are exported across the globe. Therefore, interest rates existing in various countries exporting or importing products are important determinants of the operation results. High-interest rates will affect investment by companies because the cost of borrowing will be high (Hildago & Gutierrez, 2013). The article also addresses government policies on employment indicators. According to the authors, employment indicators show the general health of the country’s economy or business cycle. To understand the rate at which the economy of a nation is functioning, it is necessary to understand how many jobs are created, how many people are unemployed, and the percentage of the active workforce. In terms of inflation, it is also vital to observe the speed at which the country’s wages are growing. Companies that depend on human capital for output demand maximization demands that their management takes up a deep interest in the employment situation of the economy. As illustrated in the article, an increase in inflation will result in an increase in employment. Therefore, an economy has to maintain a certain level of inflation rate in order to achieve a given level of employment level. High unemployment in an economy is an indication of stagnant or an economy that is not growing. Therefore, these economies will realize low investments from within or foreign firms. Therefore, firms will opt to invest in an economy that has a high employment rate because high employment means low wages hence low labor costs (Hildago & Gutierrez, 2013). This article addresses the government fiscal and monetary policies that attempt to stabilize the economy through manipulation of the fiscal and monetary policies. Full employment, the equitable balance of payment, and controlled inflation define the stable economy. According to the authors, monetary policies relate to financial markets and the supply of money, credits, and other financial assets. On the other side, fiscal policies related to expenditures and taxes. Monetary policies such as increasing the money supply in the economy are mainly implemented by the Central bank of a country. The government of a nation is therefore most responsible for the implementation of fiscal policies. The truth is; application of either fiscal or monetary will definitely affect the business environment of an economy. International companies will definitely be affected by the application of monetary or fiscal policy. For example, a fiscal policy such as increased corporate taxes will reduce the profit of the firm considering taxes have a negative influence on the profit (Hildago & Gutierrez, 2013). The article summarizes the economics principles by asserting that interest rate is one of the vital determinants in the foreign exchange market. An increase in interest rates will increase the cost of borrowing. They cite firms that depend on the borrowing of cash to invest in its daily operation, that increasing interest rates will reduce the amount available for their investment. Read More
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