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Basically, the Irish Government and European Central Bank are fixing a problem that has struck worldwide. In the end, the Irish economy will bounce back.
As around the world, Ireland had a massive amount of bad bank debt. This bad bank debt has created a crisis within the Irish economy. This phenomenon has been worldwide. Banks have been making irresponsible loans, Irish banks were no exception. Kirby (2010: 4) reports “Government subsidies fuelled a frenzy of building around the country and banks lent recklessly to developers to buy land at grossly inflated prices and to customers to buy the houses and apartments built on this land at equally high prices.” When the economy was better, mortgage interest and collateral were seen as a win/win situation. However when the economy started taking a downward turn the banks began having too much collateral. Bankers do not want collateral, they want mortgage payments. Once these mortgage payments started to decrease, Irish banks started to fail.
The banks were not tightly regulated before the recessions. Loans could be given on inflated prices. McCormick (2009) explains, “Overreliance on construction, cheap credit and securitization of housing loans exposed Ireland to a sharp reversal of economic activity. Irish housing prices collapsed and the banking sector faced losses and liquidity pressures.” The more given, the more the banks expected to receive. If regulations had been in place on how much could be loaned, property assessed correctly, and other common sense rules, the Irish economy might not be in a recession. McDonald and Moya (2010) reports:
Hard-pressed Irish taxpayers are now rescuing the banks from the consequences of their greed and folly. In return, we must now insist that they go back to basic business, and that means keeping every fundamentally profitable company in business.
As a result of the failing banks, the Irish Government and
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For instance, Adam Smith’s theory of the invisible hand argues that when people engage in business and selling they are governed by the invisible hand of the market that helps regulate prices and ensures that businesses and people act in certain ways. Indeed, the nature of economics is like psychology in that it presents theories of human behavior.
As such, economic analysis relates to the study of economic systems in an industry to ascertain the effectiveness of the operations of a given industry with reference to its profitability1. With this, we are able to establish the optimum use of the limited resources to achieve a given economic objective.
Thus, short-run is the time period that quantity of an input or at least one of the many inputs is fixed while other inputs’ quantities can vary. Long-run on the other hand is that time period where inputs in entirety can be varied. Therefore, there is no specific time that can be taken as fixed or even marked on the dates of the calendar to distinguish short-run from the long-run.
If the quantity demanded of a certain product changes minimally or does not change at all, then that product is said to be a Price Inelastic Good. Consequently, if a product whose price increased and such a change brought forth an abrupt drop in quantity demanded of the same product, the good is said to be Price Elastic.
e that the people of a country would receive the best of every thing that could be education, housing, health services or the other various basic necessities.
Economics has been called and is known as a Social Science one that actually focuses on the subject matter that is
sought to apply a broader theoretical and conceptual tradition of economic thought by placing emphasis on neo-classical synthesis – a combination of neo-classical economics and Keynesian economics.
Conservative economics is based on Milton Friedman’s teachings and
s the above figure illustrates, if there is a supply shock in an economy (such as increase in the price of oil, labor or other costs that increase the cost of doing business), the short run AS curve shifts to the left. The real GDP decreases from Q to Q’ and the price level
These tools enable professional mainstream economists to address various economic issues facing the world. Mainstream economics is about modeling in a way that traditional or heterodox economics is not. It originated from the neoclassical synthesis of the neoclassical
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