Saturday, February 22, 2020

Ecnmic Essay Example | Topics and Well Written Essays - 1500 words

Ecnmic - Essay Example Again the prices fell during 2008, which reported a massive drop since the start of the year. These changes are due to the factors of recession that emerged during the last few years. The reasons for such change can be attributed to the demand and supply theory which states the relationship between demand and change in prices. The lower prices during 2008 are due to credit crunch that resulted in scarcity in availabilities of mortgages. The buyers could not purchase because they could not borrow money, thus, a fall in demand was seen in the housing sector. In order to boost the market, prices were lowered down to increase demand. According to certain forecasters, they will continue to remain slow because of rising inflation, unemployment and slow pace of growth. The interest rates during 2007 affected consumer spending. As in the theories of demand and supply, interest rates play a major part. Thus, the impact of interest rates on the house price will have to be established. As the interest rates rose, the number of mortgage approval also fell due to its effect on the consumer’s capacity to spend. When this ability decreases, the demand also decreases accordingly. It was also seen that with an increase in interest rates during 2007, a rise in sales of houses was recorded. Due to the rise in inflation, first time buyers of house felt the necessity of fund as they found themselves incapable to afford prices. Thus, with a thrust in the rate hike, the prices of house were also increased to maintain break-even as people were forced to take loan, despite the fact that interest rates were still high. Growth of real incomes: As there is a rise in an average standard of living, the demand for housing as well as for luxurious properties increased. As people in UK showed a trend to move to exclusive houses, the demand for housing increases with high prices which increased the growth of incomes

Wednesday, February 5, 2020

Discuss the stock market exchange crash of 1929 and its legacy in th Essay

Discuss the stock market exchange crash of 1929 and its legacy in th United States - Essay Example Economists however believe that this time round "a deep economic downturn is unlikely" (Bollag 2008). Since the Great Depression of 1929 there has been many researches to find out the real reason behind the sudden economic down turn (Calomiris 1993, 67). One fact that has come to the forefront very clearly is that rather than being just a single factor behind the whole crisis, there were a number of factors that had come together and induced the Great Depression. During the phase when the of the Great Depression, the President of United States of America was Herbert Hoover, who had accumulated great fame because of the reputation he had gained from the Versailles Treaty. Just before the Stock Markets crashed, which marked the initiation point of the Great Depression in October 1929, President Hoover had visited the Golden Anniversary of the Festival of Light that was organized by Henry Ford and in this celebration Hoover mentioned that the efforts of the scientists had made it possible for the common man to have a comfortable life (Foner, 690). At that point of time the President and the common men wee totally unaware of the crisis that was about to befall them. Within a span of three days the Americans were face to face with one of the most modern economic crisis, something which they had never encountered before. Black Thursday refers to the day when the American stock markets crashed to the nadir. Within a span of just five hours almost $10 billion vanished into thin air from the market. The main reason being the panic selling that had been induced by the drastic fall in the stock markets. However, it must be mentioned here that the crash in the stock market was not the only reason behind the Great Depression. There are economists who feel that the people did have the premonition of something going wrong but they could not prepare themselves to face the situation. Moreover, "the seriousness of the problem in the Great Depression was due not only to the extent of the deflation, but also to the large and broad-based expansion of inside debt in the 1920s" (Bernanke 2000, 47). The other factor that played a crucial role in the development of the crisis was the failure of the banks. According to statistics more than 9,000 banks had failed in the 1930s phase. Since most of the banks did not provide any insurance to the depositors so when the banks failed the depositors lost their savings along with it. Slowly the vicious circle was created as the banks that were unsure of their future refused to give loans and the common men have lesser money to spend. This in turn affected the number of goods produced and a drastic cut in the work force. As people lost their jobs they were unable to make payments even for their most basic requirements. Though there were times when the stock markets recovered for some time in the 1930s yet very soon it again began its bearish trend. In between the period of 1929 and 1932, the cost of Steel in America fell from $262 to $22 and those of the General Motors fell from $73 to $8 (Foner, 691). Even more astounding was the drastic fall in the gross national product, which fell by one third of its earlier value. The Great Depression also led to the sharp drop in the market for European imports. The situation became even more tense when the government insisted upon raising the tariffs and introducing a high tariff law (Saint-tienne 1984, 32). Though the