Article: http://www.vancouversun.com/business/fp/story.html?id=1369776
Summary:
Housing starts dropped last month as the Canadian real estate market continued to weaken amid a deepening economic downturn and high unemployment. "Increased listings and reduced sales in the existing home market continue to impact the new home market," said Bob Dugan, CMHC's chief economist. With increased listings and reduced sales, urban construction fell 14.9% to 107800 units in February, with multiple starts falling 17.5% to 63,300 and single-unit activity dropping 11% to 44500. The decline in urban construction was felt in all regions of Canada, except Atlantic Canada where starts rose by 10.8%, CMHC said. The biggest declines were in Quebec, down 19.6%, Ontario, off 14.4%, the Prairies, 19.4% lower, and British Columbia, down 12.8%.
Connections:
In Chapter 6, we learned the relationship between household savings and investment. With the current economic situation, households’ incomes are reduced. They are first reaction is to cut bake spending, which is logical but doesn’t help to solve any problems. As household reduce the flow of income going to the business sector, in turn, business cut back production and lay more workers off. With less money available, households are likely to cut back on their spending even more. Therefore, business spending decease, which means less investments and GDP, falls. As GDP falls, not only unemployment rate will increase, but also lead to other problems like security problem and consequence would repeat itself. According to Keynesian economic theory, if government take an active role in the economy by increasing government spending, it will support the demand for goods and services and, therefore, to preserve employment.
Reflection:
From looking at this article, I realize that the housing sector may remain a key source of drag to Canadian economic activity. With such low mortgage rate, I think consumers should consider buying houses. As mention in the article, with increased listings and reduced sales, business reaction is to reduce constructions. Therefore, the unemployment rate will increase even more. On the other hand, if the government funds the construction, consumers are getting their jobs. As a result they have more money to spend; this will eventually cause more money flowing into the circular flow of the business side. The extra money received by companies would spend on investments, in turn, increase their payments to households. SPENDING IS ESSENTIAL TO GET RID OF THIS SITUATION.
Sunday, March 8, 2009
Thursday, February 26, 2009
Chapter 4 - Government in Canada
N.B. legislature committee calls for income tax cuts, hike in HST
Summary:
This article for CBC introduces idea from the New Brunswick committee which is a flat personal income tax rate of 10 per cent. They also suggest reducing corporate taxes to five per cent and bringing in child tax benefits similar to the federal plan. "These initiatives should significantly benefit New Brunswickers and accomplish many of the goals for restructuring the tax system of the province," the committee report says. A 10 per cent single rate would tie the province with Alberta for the country’s lowest tax rate. Companies also support this idea because the low tax rate will attract skilled workers. They also believe that reduce in personal tax will encourage customers to buy products instead of saving their money.
Connections:
There are three types of taxation system discussed in this chapter, which include progressive, regressive and proportion tax. The flat tax discuss in this article is the same as proportional tax, which mean one’s income level will not affect the percentage of income paid. The flat tax in New Brunswick would save everyone many dollars in the Maritime province. It would also ensure live for those who are in financially-unfortunate situations. With the flat taxation system, they don’t need to concern every cent for live; however, it would not achieve perfect vertical equity as the rich people pay more taxes. The flat tax system will provide all citizens with a system that everyone benefits from.
Reflections:
I believe the flat taxation system will have a short term effect on New Brunswick’s economic because it favors all citizens. Even though it’s economic recession right now, citizens would not need to concern too much on paying extra for tax; however, I think this system will not work out nicely once we deal with the recession. I don't think it’s a suitable system for citizens. It’s not fair that low income group needs to pay the same amount of tax as the high income group, because they will make a greater sacrifice in paying their taxes due to the fact that the money they pay in taxes means more to them than the amount paid by higher income groups.
Sunday, February 22, 2009
Chapter 5 - Economic Indicators
http://www.vancouversun.com/business/fp/Deflation+concern+North+America/1310364/story.html
Summary:
Instead of inflation, deflation remains a concern in North America, especially for policy-makers on bother sides of the border. As a shrinking global economy undercuts commodity prices and inventories in Canada remain at excess levels. This excess supply will attract lower prices, which will further drive down inflation. Data released in both Canada and the United States on Friday show that inflation at lowest since 1995. Energy dropped to 1.9% from 2.4% and the housing index decline 7%, the biggest monthly drop since June, 1990. "The near-term risk has lightened a little bit, but if anything the medium-term risk may have been ramped up a notch or two by the clear evidence about how the global economy is sliding," Douglas Porter, deputy chief economist at BMO Capital Markets, said. "The deep dive in the global economy threatens to further undercut commodity prices, and more broadly, pricing power in other industrial goods." Many analysts agree that deflation is not a paramount risk right now, but it’s a risk when we look at the global contraction. The “excess” inventory will put a lot of downward pressure on price.
Connection to Chapter 5
Our textbook talks about two types of inflation. They are demand-pull inflation and cost-push inflation. Demand-pull inflation results from an increased demand, which is caused by increased incomes and changing expectations about future price. Our example is opposite of demand-pull inflation. Because of recession, people have less income and spend less money. Because of excess inventory, people expect the price will go down further and no buying produce right now. The decreased in demand pushes down today’s prices. With that being said, demand-pull and cost-push influences on prices are often interrelated. As the demand for products decreases, lower prices will result. Prices decrease lead to lower wages because companies are not selling out their items and likely to produce less. Less income means to spend less which eventually goes back to less demand. The sequence is repeating itself.
Reflection:
Relate back to the previous chapters, we know that decrease in price will lead to an increase in demand and decrease in supply. In our case, we have excess inventory. Therefore, companies are producing fewer items. This is likely lead to more unemployment (which is happing now). In my opinion, since we have already way beyond sustainable growth, we can start concentrating on making things better, rather than making more things. If companies keep lay off workers, they won’t have any income and won’t spend their money. The sequence will repeat itself and solution won’t be solved. In order to turn the situation around, it’s very important to ensure everyone had a job and has money to spend.
Summary:
Instead of inflation, deflation remains a concern in North America, especially for policy-makers on bother sides of the border. As a shrinking global economy undercuts commodity prices and inventories in Canada remain at excess levels. This excess supply will attract lower prices, which will further drive down inflation. Data released in both Canada and the United States on Friday show that inflation at lowest since 1995. Energy dropped to 1.9% from 2.4% and the housing index decline 7%, the biggest monthly drop since June, 1990. "The near-term risk has lightened a little bit, but if anything the medium-term risk may have been ramped up a notch or two by the clear evidence about how the global economy is sliding," Douglas Porter, deputy chief economist at BMO Capital Markets, said. "The deep dive in the global economy threatens to further undercut commodity prices, and more broadly, pricing power in other industrial goods." Many analysts agree that deflation is not a paramount risk right now, but it’s a risk when we look at the global contraction. The “excess” inventory will put a lot of downward pressure on price.
Connection to Chapter 5
Our textbook talks about two types of inflation. They are demand-pull inflation and cost-push inflation. Demand-pull inflation results from an increased demand, which is caused by increased incomes and changing expectations about future price. Our example is opposite of demand-pull inflation. Because of recession, people have less income and spend less money. Because of excess inventory, people expect the price will go down further and no buying produce right now. The decreased in demand pushes down today’s prices. With that being said, demand-pull and cost-push influences on prices are often interrelated. As the demand for products decreases, lower prices will result. Prices decrease lead to lower wages because companies are not selling out their items and likely to produce less. Less income means to spend less which eventually goes back to less demand. The sequence is repeating itself.
Reflection:
Relate back to the previous chapters, we know that decrease in price will lead to an increase in demand and decrease in supply. In our case, we have excess inventory. Therefore, companies are producing fewer items. This is likely lead to more unemployment (which is happing now). In my opinion, since we have already way beyond sustainable growth, we can start concentrating on making things better, rather than making more things. If companies keep lay off workers, they won’t have any income and won’t spend their money. The sequence will repeat itself and solution won’t be solved. In order to turn the situation around, it’s very important to ensure everyone had a job and has money to spend.
Monday, November 24, 2008
Government Involvement in Secondary Mortgage Market
The article:
http://www.multihousingnews.com/multihousing/content_display/industry-news/e3i140609747acf4889d8c4a8002c8cd808
Summary:
This article from Multi-Housing News states the National Association of Realtors (NAR) recommended that government should continue to involve in the secondary mortgage market in order to insure there is sufficient capital to support mortgage lending to qualified borrowers. As there are more and more housing issues, NAR developed the principles for consideration which “call on the government to ensure an active secondary mortgage market; support affordable mortgage rates for qualified borrowers; require that institutions pass on the advantages of lower borrowing costs by making lower rates on mortgages available for qualified borrowers,” and so on. With these being said, someone brings up that safe and affordable mortgage must be available throughout the nation to make a balance; which would lead to the requirement of higher loan limits passed in the economic stimulus bill earlier must be permanent. Government must keep in mind that sufficient capitals are needed to support mortgage lending in all types of markets.
Connections:
The connection to Chapter 3 of Economics is the role of government in a market economy. As mentioned in the article, government’s involvement in the secondary mortgage is necessary. It not only keeps the secondary mortgage market in active, but also gives more options to qualified borrowers. In this case, it’s like a positive mannered third party effect. Because in the market, there is not enough demand for housing, it results in a surplus of houses. As the government in between buyers and seller gives a hand, like support affordable mortgage rates and so on. It’s easier for borrowers to decide whether or not to buy a house in these days. Also, it’s easier for buyer and seller to reach a deal with lower mortgage rates and hopefully reduce the surplus of houses.
Reflection:
I agree with McMillan saying “The federal government must also insure that there is sufficient capital to support mortgage lending in all types of markets.” As this recession affects all aspects and all around the world, I believe not only housing needs government to fund, but also other types of markets. The federal government must have a better plan where their money should go and insure there is sufficient capital to support other potential problems. With this being said, I think housing in United State is really a big problem. It affects lumber industry in Canada. Because there is not enough demand for housing, numbers of new houses decrease. As a result, the demands for lumber decrease as well.
http://www.multihousingnews.com/multihousing/content_display/industry-news/e3i140609747acf4889d8c4a8002c8cd808
Summary:
This article from Multi-Housing News states the National Association of Realtors (NAR) recommended that government should continue to involve in the secondary mortgage market in order to insure there is sufficient capital to support mortgage lending to qualified borrowers. As there are more and more housing issues, NAR developed the principles for consideration which “call on the government to ensure an active secondary mortgage market; support affordable mortgage rates for qualified borrowers; require that institutions pass on the advantages of lower borrowing costs by making lower rates on mortgages available for qualified borrowers,” and so on. With these being said, someone brings up that safe and affordable mortgage must be available throughout the nation to make a balance; which would lead to the requirement of higher loan limits passed in the economic stimulus bill earlier must be permanent. Government must keep in mind that sufficient capitals are needed to support mortgage lending in all types of markets.
Connections:
The connection to Chapter 3 of Economics is the role of government in a market economy. As mentioned in the article, government’s involvement in the secondary mortgage is necessary. It not only keeps the secondary mortgage market in active, but also gives more options to qualified borrowers. In this case, it’s like a positive mannered third party effect. Because in the market, there is not enough demand for housing, it results in a surplus of houses. As the government in between buyers and seller gives a hand, like support affordable mortgage rates and so on. It’s easier for borrowers to decide whether or not to buy a house in these days. Also, it’s easier for buyer and seller to reach a deal with lower mortgage rates and hopefully reduce the surplus of houses.
Reflection:
I agree with McMillan saying “The federal government must also insure that there is sufficient capital to support mortgage lending in all types of markets.” As this recession affects all aspects and all around the world, I believe not only housing needs government to fund, but also other types of markets. The federal government must have a better plan where their money should go and insure there is sufficient capital to support other potential problems. With this being said, I think housing in United State is really a big problem. It affects lumber industry in Canada. Because there is not enough demand for housing, numbers of new houses decrease. As a result, the demands for lumber decrease as well.
Tuesday, October 28, 2008
Chapter Two - The operation of market
The article: http://www.canada.com/calgaryherald/news/story.html?id=d8974b03-5c22-4daf-bc08-e7a9af8badb6&p=1
Summary:
This article from Calgary Herald talks about how lower prices of oil effect our life in different area and how people react to these lower prices. The recent slide in prices has a positive effect on Alberta, because it catches in the age-old balancing act between consumers and industry giants in the province’s commodity-based economy, which will provide a healthy tonic for consumers; however, it’s bad for Calgary’s producers who need to push back all their plans. On the other hand, analysts say they don’t expect the price of oil to sink much lower before it bottoms out and they forecast the prices for crude oil could return to the $80 to $100 US a barrel range this spring. Consumers also say they are not too excited about these low prices, because it’s probably going to go back up anyway.
Connections:
The connection to Chapter 2 of Economics is the concept of supply and demand. As mentioned in the article, “Motorists are heading into a low-volume driving season, which reduces demand for fuel.” This proves that consumer’s preference, driving less, results in a decrease of oil demand. As a decrease in quantity demand, the prices of oil drop as well. Also, oil/gas is inelastic because it’s a necessity. Even though there is a big change in prices, there is small effect on demand. Compare to last summer, the oil prices are very low right now; however, we do not use oil much more than we did in summer.
Reflection:
Since I am a driver, I do pay attention to the oil prices. It’s true that oil prices have dropped to around $1.10 per liter these days in Vancouver, but I don’t think the oil price will return to the $80 to $100 US a barrel range this spring. I under consumer’s preferences affect demand of oil; however, it’s not the only factors. We should notice that the “hurricanes” has a global affect as well. Economy is going downward in general everywhere in the world. I don’t think economy will resuscitate until late summer next year. The reason is by that time (around summer), more and more people will drive, which will increase the demand for oil. As demand increase, the price will increase as well.
Summary:
This article from Calgary Herald talks about how lower prices of oil effect our life in different area and how people react to these lower prices. The recent slide in prices has a positive effect on Alberta, because it catches in the age-old balancing act between consumers and industry giants in the province’s commodity-based economy, which will provide a healthy tonic for consumers; however, it’s bad for Calgary’s producers who need to push back all their plans. On the other hand, analysts say they don’t expect the price of oil to sink much lower before it bottoms out and they forecast the prices for crude oil could return to the $80 to $100 US a barrel range this spring. Consumers also say they are not too excited about these low prices, because it’s probably going to go back up anyway.
Connections:
The connection to Chapter 2 of Economics is the concept of supply and demand. As mentioned in the article, “Motorists are heading into a low-volume driving season, which reduces demand for fuel.” This proves that consumer’s preference, driving less, results in a decrease of oil demand. As a decrease in quantity demand, the prices of oil drop as well. Also, oil/gas is inelastic because it’s a necessity. Even though there is a big change in prices, there is small effect on demand. Compare to last summer, the oil prices are very low right now; however, we do not use oil much more than we did in summer.
Reflection:
Since I am a driver, I do pay attention to the oil prices. It’s true that oil prices have dropped to around $1.10 per liter these days in Vancouver, but I don’t think the oil price will return to the $80 to $100 US a barrel range this spring. I under consumer’s preferences affect demand of oil; however, it’s not the only factors. We should notice that the “hurricanes” has a global affect as well. Economy is going downward in general everywhere in the world. I don’t think economy will resuscitate until late summer next year. The reason is by that time (around summer), more and more people will drive, which will increase the demand for oil. As demand increase, the price will increase as well.
Thursday, September 25, 2008
Chapter One----Introductory Concepts
The article: http://www.economicnews.ca/cepnews/wire/article/single/125403/
Summary:
The article I read, "Oil falls below $106 on weak US energy demand" is from Associated Press. The article analyses why oil prices ended a choppy session in different respects. In the beginning, it gives background information that crude prices have risen about $15 in the past week because investors funnel money back into commodities on worries of a proposed $700 billion bailout of financial firms will undercut the dollar and boost inflation. Some analysts say crude could be heading higher amid falling global supplies. About 66 percent of oil production and 61 percent of natural gas output in the Gulf of Mexico remains shut-in after the passage of Hurricanes Gustav and Ike, according to the U.S. Minerals Management Service. The Gulf area is home to a quarter of U.S. oil production and 40 percent of refining capacity.
Connections:
The obvious connection to concepts in our text is scarcity. As mention in the article, 66 percent of the oil and 61 percent of natural gas come from the Gulf of Mexico. Because of the passage of Hurricanes Gustav and Ike, Gulf of Mexico remains shut-in. This means less oil will be provided to the public. Oil becomes a more scare source with more demands. It's obvious that oil price will increase. Also, this article states that economic experiments are conducted under conditions that cannot be easily controlled. Unlike an experiment in chemistry or physics, there are lots of external factors could influence the economic experiment, such as Hurricanes and dollar values in this case.
Reflection:
With more and more demands for oil and natural gas with limited amount, I am sure the price will increase even more. I remembered 3 years ago, the gas in Vancouver was only around 90 cents per liter and it's $1.30 per liter these days. I am wondering what the price of oil will be if nothing else used instead of it. If this situation continue on, when the oil will be used up? Also, related to this article, I agree economics is a science. Economics is based on facts that are obtained from careful study of experiments as well as others. The only difference is that there are lots of uncontrollable external factors influence the economic.
Summary:
The article I read, "Oil falls below $106 on weak US energy demand" is from Associated Press. The article analyses why oil prices ended a choppy session in different respects. In the beginning, it gives background information that crude prices have risen about $15 in the past week because investors funnel money back into commodities on worries of a proposed $700 billion bailout of financial firms will undercut the dollar and boost inflation. Some analysts say crude could be heading higher amid falling global supplies. About 66 percent of oil production and 61 percent of natural gas output in the Gulf of Mexico remains shut-in after the passage of Hurricanes Gustav and Ike, according to the U.S. Minerals Management Service. The Gulf area is home to a quarter of U.S. oil production and 40 percent of refining capacity.
Connections:
The obvious connection to concepts in our text is scarcity. As mention in the article, 66 percent of the oil and 61 percent of natural gas come from the Gulf of Mexico. Because of the passage of Hurricanes Gustav and Ike, Gulf of Mexico remains shut-in. This means less oil will be provided to the public. Oil becomes a more scare source with more demands. It's obvious that oil price will increase. Also, this article states that economic experiments are conducted under conditions that cannot be easily controlled. Unlike an experiment in chemistry or physics, there are lots of external factors could influence the economic experiment, such as Hurricanes and dollar values in this case.
Reflection:
With more and more demands for oil and natural gas with limited amount, I am sure the price will increase even more. I remembered 3 years ago, the gas in Vancouver was only around 90 cents per liter and it's $1.30 per liter these days. I am wondering what the price of oil will be if nothing else used instead of it. If this situation continue on, when the oil will be used up? Also, related to this article, I agree economics is a science. Economics is based on facts that are obtained from careful study of experiments as well as others. The only difference is that there are lots of uncontrollable external factors influence the economic.
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