Contemporary Issues for Business - Statistics Project Example

Contemporary Issues for Business By The Output Gap The definition and concept of output gap In simple terms, the definition of output gap is the difference between the quantity of the actual output and the potential output. Actual output is always easy to determine and observe. As a result, the focus is on the potential output that can be defined in terms of the factors of production. From the view of central banking, the potential output is a steady output without macroeconomic pressures like inflation. Therefore, this theoretical framework the output gap is a review indicator of the relative demand and supply components of the economic operations. This shows that the output gap provides a measure of the rate of inflation pressure in the economy and it is a paramount connection between the actual side of the economy that deals with production of goods and services and the inflation (FT.com). When the output gap is positive over a given period so that the actual output is greater than the potential output then the inflation will start to go upwards in response to the demand pressures in the key markets. Measurement of the output gap There are three general approaches in use in the measurement of potential output and the output gap has been used to varying levels. The first and most used approach is to estimate a production function based on factor inputs such as labour, capital and intermediate inputs such as energy. The next move is the estimates time series techniques to analyse the definite yield into possible production and the output gap and in the current economic situation, this is the most common approach (FT.com). The concluding approach is the survey data that can be used to understand the point of surplus demand or supply in the market through direct contact by the economic agents. Over 2014 to 2015 to what extent was the output gap a cause for concern The United Kingdom initiated progress in the year 2013 led by the housing market and the consumer. There is an expectation of a quarterly growth rate to slow down fairly through the year 2014, as the economy will be facilitating the transition towards a more balanced growth though the forecast indicates growth approximate to 2.6 percent over the whole year. The consumer contribution is expected to decline given that there is a little scope for households to diminish their savings. There is currently a significant amount of spare capacity in the economy of the United Kingdom with the output gap being estimated to have averaged 5 percent of potential output in the year 2013 (FT.com). Substantial permanent damage to potential output is likely to have been caused by the financial crisis. The estimation for the level of this damage is least than those of factors such as office for budget responsibility. Such a large output gap will provide the situations for the recovery to trigger momentum over the medium term. At this state, the growth is expected to average 2.6 percent annually from the year 2014 to 2018. The consumers have also played an important role in the economy creating a 1.4 % accounted from the private consumption of the growth development product in 2013 (FT.com). The contributions to the United Kingdom GDP growth in 2013 Benefits and cost to an economy of price deflation Price deflation is the process through which the price of everything, that is, goods and services go down to affordable prices. At first people will tend to think that the cost of living has generally become cheap. This indicates that the benefits that are affordability of goods and services will be due only in the short run. The citizens of a state will enjoy this benefit in general. In the long run, the costs or rather disadvantages will tend to increase making the occupants of a state with such a policy to suffer (FT.com). The value of the currency will automatically decline making the country to be among the developing states that serious projects of investment cannot be initiated. Factors such as the gross domestic product will hardly show a positive movement because the resources to trigger such a movement will not be available. Liquidity trap Refers to a state in which the prevailing interest rates are least and the rates of savings are high creating a state of imbalance in the monetary policy. In the situation of a liquidity trap, the consumers will tend to avoid bonds and divert their funds in savings because of the trending belief that the interest rates will soon be favourable (FT.com). Because the bonds have a relationship that is not directly proportional to the interest rates, various consumers do not prefer holding an asset with a price that will probably decline. The liquidity trap is always an excessive effect in the monetary policy with a short term zero percent interest rate. When the interest rate is nothing the state would not desire to secure any bond that also pays no bonus rates. Therefore, if the interest rate is zero an increase of money cannot facilitate anybody to buy bonds and definitely reduce the interest bonds below zero point. Selection of the Federal Reserve The competent central bank to select in this case is the Bank of Japan. This is due to the recent performance and contribution to the international growth and development. The Bank of Japan has initiated various projects that are driving economic situations to levels that are favourable for operation of enterprises. They also lend loan to financial institutions such as the commercial banks and the investment banks that in turn divert these funds to operations that are constructive in terms of economic empowerment (FT.com). When the interest rates should be raised The interest rates should always be raised at the time that the performances of major enterprises are performing at the standard levels. The sector to draw focus on majorly includes the agricultural sector that is always the backbone of the gross domestic product. When agriculture in an economy perform well then the interest rates should be raised because the main and basic need of citizens in an economy will be affordable. At this point, even if the interests rise, individuals will hardly notice and raise concerns because they will be view life to be affordable (FT.com). This is the point where sharp economists through the central Bank of Japan will raise great amounts by incorporating high in interest rates on their loans. The other financial institutions such as the commercial banks and investment banks will also benefit in the long run. The Labour Market Types of unemployment and inflation Unemployment refers to the state in which individuals lack employment opportunities. The situation involves both who are willing and looking for opportunities for employment and those who are not bothered at all. This state will always hinder the economic performance of a country. The unemployment rate expresses the number of individuals without work as a percentage of the labour force (FT.com). Types of unemployment Frictional unemployment – this type of unemployment occurs due to the period needed to match qualified job seekers with the jobs available in the economy. Classical unemployment – this occurs when the wage price is too high making the prices of goods and services to also increase making occupants to purchase poorly. The firm will eventually move to another affordable country living people unemployed. Seasonal unemployment – this type of unemployment is caused by seasonal changes in that there are employment opportunities that arise when some products are on peak but during off peak the employment opportunities are lost (FT.com). Regional unemployment – this is always common in areas that exploit natural resources such as mining gold. When the gold extraction will be fully exploited, the people from that region that were operating in will lack employment opportunities creating poor standard of living due to no income source. Inflation Inflation refers to the increase in the average level of prices. This situation is always caused by the loss of value of a country’s currency (FT.com). Causes of inflation The two chief causes of inflation are demand-pull inflation and cost-push inflation. Demand-pull inflation occurs because of an increase in demand for goods and services by a sector of the economy. On the other hand, extreme increases in the cost of production are the main cause of cost-push inflation. Excessive monetary growth – this inflation occurs at the state when there is a high supply of money in an economy and this triggers the prices of goods and services to increase. Relationship between unemployment and inflation during 2014 - 2015 The relationship between the inflation rate and the unemployment rate is always inversely proportional (FT.com). This is because as the level of unemployment decreases the inflation rate increases. This is due to the mentality that an economy with a greater number of people working will always afford purchasing commodities whether their prices are high. This is always not the case because in such an economy people will always spend more than they save thus the economic growth and development will be least due to lack of investments. In the fiscal year of 2014 to 2015, Zimbabwe suffered from this problem because of the high levels of inflation (FT.com). Unemployment cases are not so high though the price of living is so high because the currency of the state is of low value. The economy therefore is least productive because the rate of investments is low and the growth development product is stagnant. Difference between employment rate and unemployment rate Employment rate is always the ratio of the working population with the standard age of working according to the rules and regulation of a particular state. The calculation of the employment rate will involve the categorization of the population into those who are working and those who are not working. Generally, the employment rate is measured through labour force surveys. The unemployment rate refers to the total labour force that is not employed but is seriously looking for employment opportunities and is willing to work. This indicates that those who are seeking for the employment opportunities have attained the required age to provide labour force (FT.com). The difference between these two concepts is that the employment rate is always high in areas where there are constant projects of investments that in turn provide employment opportunities and this happens only in the developed countries such as the United Kingdom and the United States. The unemployment rate happens in regions where the available labour force is higher than the employment opportunities. This situation is common in the developing countries especially in the sub-Saharan Africa such as Nigeria and Angola. The living standards in such areas are always extremely poor since the basic needs in life are hardly obtained. A graph of employment rate in the United States Graph of unemployment rate in Nigeria The regional unemployment and economic differences operations in Britain Regional unemployment is a situation that is also caused by the exploitation of sources of income in an economy. These activities are always associated with resources that if they are not properly extracted then they will leave the region in a state that is not favourable in terms of monetary value. Through the period of November 2014 to January 2015, the North East of Britain recorded the highest unemployment rate at 7.7 percent in relation to the population that is economically active. The region with the lowest employment rate was the South West, which recorded a rate of 4.5 percent. The general average rate of unemployment in the United Kingdom was approximately 5.7 percent (FT.com). Over the last quarter, approximately ten out of the twelve regions recorded a decrease in the level of unemployment. The highest rate was experienced in the Yorkshire where various individuals lost their jobs due to the economic constraints that struck the region (FT.com). This indicates that if occupants of a region do not utilize their resources efficiently and effectively then there are greater chances of them being non-productive in the process raising the levels of unemployment rates. This resulted into the extreme decline of the jobseekers allowance. Corporate social responsibility Corporate social responsibility is the responsibility of organisations or companies towards the environment in which they operate and the society welfare as a whole. It generally expressed the companies’ initiative of complying with rules laid out by regulators or groups that protect the environment. Companies may show this type of responsibility through reduction of their waste product and other ways, which cause pollution, they can express this by participating in social and academic programs, and lastly by ensuring that they earn enough returns on resources used. This type of company’s responsibility may involve short-term costs that may not give speedy financial payback to the company, but instead it may enhance positive environmental and social transformation. The corporate social responsibility has provided several benefits to many business sectors. These transparent activities have enabled them become successful particularly through the encouragement they offer on shared value and social licences. Besides, their continued management of factor that contribute to environmental risk and mitigation of social responsibilities have been increasingly important for the success of various businesses operating abroad. The companies that has shown these kind of responsibility has received many favours from the governments of the countries in which they operate. For instance, experience in some country that the government has facilitated the success of these commercial companies and improving their trading paters. This has contributed a lot to the country’s economic growth and shared values. The government has also provided these companies with corporate social responsibility guides. Besides, the government ensures that they work closely with interlocutors to support corporate social responsibilities. The government also promotes corporate social responsibility at both bilateral and multilateral knowledge and work in coordination to promote and strengthen international corporate social responsibility guidelines to benefit all the stakeholders. The effort of the governments is based on positive encouragement that in turn improves the relationship between companies and stakeholders. Proposition of Profit pursuit There has been perceived anxiety over profit pursuit interest and the society interest, which pervades the corporate social responsibility issues. This kind of idea is not addressed but seen as self-evident by the society. This clearly shows that the pursuit of profit is a self-interest issue that every individual fear to talk about, this is because it is the key element to growth of the society in economical perspective. The rationale for every existing business at law is to ensure that there is enough generation of returns for both investor and all stakeholders involved in business partnership and a significant contribution to the society, which they form part. This is because there has been general improvement of people’s lives as compared to the past, this show how much the businesses has contributed to growth of the society (Korten, 2009). Profit is evidently the essence of starting a business because without the perception of benefiting from the business no society would grow economically. Therefore, it is not the nature of business to make such contribution to the society if they do not receive support of the society. It shows an additional favour that business may choose to provide as they it fit to make this issue more clear, the leading international institutions such as united national and World Bank believes that profit serves as a special interest. Many people believe that profit pursuit is unhealthy for society’s development because they view it as personal interest for business people. However, this a times prove them wrong, because when these business are channelled by corporate social responsibility, they may work to ensure that there is sustainable development. This idea of sustainable development may also imply that when businesses are untamed in terms of profit seeking. They may destroy environment and exploit workers. Resource allocation within quasi market The resource allocation in health is viewed through variety of different prisms. Therefore, it is advisable to direct the subject as a set of decision within which scarce resources are located. From that perspective, most important issues are disregarded in diversion of resources from curative to preventive practices. Another approach may be to locate resources elsewhere within the economy as an exchange of favours within the society. Therefore, the resource allocation within health care has materialized from bargaining over economic distribution privileges among the society. Therefore, resource allocation in quasi market covers variety of public sectors such as health sector and educational sectors. Thus, the limitless of various need pose crucial importance of quasi market (Korten, 2009). Besides the resource, allocation in education in quasi market is based on performance of students. The resource allocation in public school has faced many challenges due to political and practical difficulties where less popular schools are closed down. This has made it difficult to allocate resources for their expansion even if there were services within quasi market. The benefits of quasi market always depend upon the market not able to reach the point where others providing same services. Therefore, it makes no sense having an internal market when there is no diversity and benefits. Reasons why hospitals perform poorly Performance of various hospitals has posed a lot of concern in the health sector. This has resulted increased death rates witnessed in most hospitals. Beside there have been instances where patients take longer time in such hospitals. The results show that the people who combine clinical and managerial skill are better managers of hospitals. This shows that many hospitals perform poorly because they lack managerial skills in managing the activities of the institution. Some hospital also performs poorly because of their smaller scale and this makes their fragmented services to be cheap. This is due to existence of trade-offs within the sectors. Thus, the services that may is offered to the patient might be of low quality. Besides many hospitals performs poorly because they have low occupancy rate, that is when hospital occupancy rate is realized to fall below the required percentage always lead to poor financial performance standards (Korten, 2009). Besides the poor performances in most hospitals is aggravated by lack of qualified personnel or few numbers of personnel in the sector. This makes it difficult for hospitals to respond to agent medically attention thereby resulting to death of patients. In addition, some hospitals that show poor performance lack enough medical equipment that would enhance the service they render to their patients (Korten, 2009). This makes the hospital to lose number of qualified doctor thereby resulting to poor performance of hospitals. It is inherent for hospitals that perform poorly to be punished. The institution should ensure that they improve on management practices and clinical outcomes. Therefore, policy makers for these institutions should consider the interventions required to improve and replace the general system of the institution. Reference Korten, D. (2009). The post-corporate world. San Francisco, Calif.: Berrett-Koehler. Read More