Kabir's Econ Blog

September 27, 2009

Two benefits from International Trade

Filed under: Uncategorized — kabir1892 @ 7:52 am

BCO2113

The two basic benefits from international trade are specialization gains and an economical development.

Trades allow an economy to specialize in export so that they can earn revenue to pay for imports for other goods. It increases overall welfare since specialization and trade help countries gain a greater amount of consumption more than they would domestically. This leads to a better standard of living as well. When specialization and production outgrows domestically, there will be lower costs and prices. With prices falling, it will benefit consumers.

Also, people will have access to goods that can’t be produced in that specific country. In terms of political issues, international trade brings trust with countries, and this can help minimize the amount of wars that take place. Finally, an international trade can cause greater competition with firms. With greater competition, domestic productivity will be greater since companies will start producing more of those goods. This will lead to greater quantity and  better quality of products, which will then benefit consumption.

Example: Country A and Country B both produce cotton sweaters and wine. Country A produces 10 sweaters and six bottles of wine a year while Country B produces six sweaters and 10 bottles of wine a year. Both can produce a total of 16 units. However, Country A takes three hours to produce the 10 sweaters and two hours to produce the six bottles of wine, which is a total of five hours. On the other hand, Country B takes one hour to produce 10 sweaters and three hours to produce six bottles of wine which is a total of four hours. 
But these two countries realize that they could produce more by focusing on those products in which they have a comparative advantage. So then, Country A then begins to produce only wine and Country B produces only cotton sweaters. Each country can now create a specialized output of 20 units per year and trade equally for both products. Each country now has access to 20 units of both products. 

This shows an increase in efficiency of international trading.

September 22, 2009

Lehman Brothers Bankruptcy

Filed under: Uncategorized — kabir1892 @ 12:14 pm

lehman_brothers_holdings1

Lehman Brothers founded in 1850, is a global financial-services firm. The firm does business in investment banking, equity and fixed-income sales, research and trading, investment management, private equity, and private banking. It is a primary dealer in the U.S. Treasury securities market. The firm’s worldwide headquarters are in New York City, with regional headquarters in London and Tokyo, as well as offices located throughout the world.

Why it failed

These days there is mortgage crisis in United States due to decline in prices of real-estates. As a result, housing loans made by the bank to people with little support made these loans very risky, and when interest rates were raised by these banks, these borrowers could no more repay Lehman. This led to huge losses for Lehman. It caused $60 billion loss in bad real estate loans for Lehman Bros. One of the main reason for its downfall was its poor relations with top banks of United States. They refused to do business with Lehman due to over-confidence of its CEO over the Lehman financial assets. And after big debt of $639 billion, when Lehman asked Barclays and Bank of America for acquisition, they simply rejected the offer.

Effects:

– The governments feared that AIG was going to fall, so they were coming up with plans to save them.

– It caused the US dollar to fall, as well as stock markets since it reacted to the fall.

– It was expected to cause depreciation in the price of real estate. The prospect for Lehman’s $4.3 billion in mortgage securities getting liquidated sparked a selloff in the commercial mortgage-backed securities (CMBS) market.

September 9, 2009

Filed under: Uncategorized — kabir1892 @ 2:43 am

Laptops Are Distracting

1:1 Computer

Filed under: Uncategorized — kabir1892 @ 2:34 am

Initial thoughts on “How will you face the challenge of distraction (the threat of loss or damage?) “:

 One of the concerns of using laptops in class is that it will be distracting. I believe that this may be true, but with the amount of work given and the limited amount of time available, students will be doing work in class. Also, we are supervised by the teacher, and he is there to check on us. If we are distracted and don’t do our work, then our grades are affected.

Another concern is that laptops can be damaged since students have to carry it around. I feel that as seniors, we are already mature and responsible enough to take care of our laptops. Finally, I also feel that by carrying laptops to class, it can benefit us by preparing us for the future since colleges require the possession of laptops or maybe even for the job that we get.

Filed under: Uncategorized — kabir1892 @ 2:11 am

 

tax

tax

September 3, 2009

What surprises me about taxation?

Filed under: Uncategorized — kabir1892 @ 6:20 am

– Taxes can redistribute income. 

– Most tax revenues are redistributed in the form of college scholarships, food stamps, medical care etc. for lower families.

-The nominal tax does not equal the effective tax rate.

August 25, 2009

What taxation works the best?

Filed under: section 3 — kabir1892 @ 10:30 am

Definitions:

Progressive tax: As a persons income rises, a larger amount of their income is payed for tax.

Regressive tax: As a persons income rises, a smaller amount of their income is payed for tax.

Proportional tax: The percentage of the income that is payed for tax always remains the same. No matter how much income a person receives.

Pros:

Progressive tax: The poor are not badly affected by the tax since they have to pay a reasonable price or tax compared to the income they earn. Also, the rich wouldn’t lose that much if they earned a lot income.

Regressive tax: The rich have a huge advantage over the rest of the people in the economy because they wouldn’t have to pay  a lot of tax. The middle class will be satisfied with this since they would have to pay a decent amount of tax. The government will earn a lot in a country that is not so developed since there will be a wide variety of different people earning different incomes. So the government in that country will earn a lot from the poor and a good amount from the rich.

Proportional tax: This is the most simplest system of taxation. The government would not have to be too concerned with the tax that they earn since it is pretty much fixed. In a developed country governments will get a lot from the the tax. 

Cons:

Progressive tax: An obvious negative side in this tax system is that the rich have to pay more tax than the poor. Another negative aspect is that this tax system might not be successful in country’s that have a majority of poor people or undeveloped countries.

Regressive tax: The main negative side to this tax system is that the poor are badly hurt. The poor would have to pay more tax than the rich even though they earn less income. This can lead to bankruptcy and eventually lead to black marketing and corruption.

Proportional tax: The affect that this tax system has on the economy negatively depends on the amount of people that are poor. If there are a lot of poor people, this system would affect the country a lot. In addition, usually in a poor country, there are some that are very rich. This system will only benefit those people. From the governments point of view, this system would be bad in a poor country as well since they would have to set the tax system to be very low to match the average income that the overall population is earning.

Evaluation: After carefully thinking about and examining which tax system would work the best, I would say that the progressive tax system is the best tax system overall in either developed or undeveloped countries. This is because it is fair for  people that earn more to give more to the government, just as it is right to give charity. By giving tax, you are helping the economy and using it for a reason. Also, if you were to compare the amount of income a person earns in comparison to the tax they are paying, a poor person would be paying about the same amount from his income as would a rich person. The only difference would be the amount they give. This system is used in a lot of countries and those countries are successful today.

August 24, 2009

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Filed under: Uncategorized — kabir1892 @ 3:11 am

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