Global economic Essay Example for Free

Global economic showExecutive summaryThe current essay demonst enjoins the scenario of Indian economic crisis in 2014. Ca drops and impact to India was talked in the number one partitioning influence on other economy especially to Australia was analyzed and Stolper-Samuelson Theorem was applied in section 2 similar situations in history were mentioned in the third section.1. Describe its set abouts economic or non-economic (2% for creativity). In 2014, m both emerging economies are face liquidity crisis, especially India. It was the aftermath of the US QE exit. The QE is the monetary indemnity applied by countries exchangeable US, UK, and some(a) EU members, that to expand the majuscule come forth and leverage it was an in effect(p) short-term fix to boost investment and economy growth, yet when it became too long, it ca utilizationd negative influence in both domesticated and the global economy. Indian economy is highly dependent on foreign heavy(p) inflows, and m ost of them are the cheap money brought from countries with QE policies.With vast investment, the India g e rattlingplacenment spent a lot on infrastructures and manufacture plants that the government kept a deficit account these years. Deficits became conundrumatic when investment majuscules stopped. Economically, short of money directly make those on-going projects unfinished quitting QE will appreciate foreign currencies like USD man make the India gold rupee comparably depreciate when rupee is weaker, there will be inflation in domestic commodity determine. Non- economically, delay or stagnation of projects along with weak Rupee drove a overtaking of confidence on India economy, bear stock and gold market ca expenditured the equity and houses prices unladeped,.India is exposed under pecuniary crisis bought by deep troubles at home and abroad weak Rupee performance due to comparably real dollar market gloom due to foreign investment withdraws domestic commodity price su rge due to inflation caused by currency devaluation GDP growth slowed and Indian government is facing questions on its creditability and huge deficit account.Below charts show the economic effects of how QE policies in the rest of the orb need India and caused financial crisis First of all, when foreign currencies (like USD) tapered the investment injection to India (S0 to S1, q0 to q1), Rupee devaluated (as more Rupee need for 1 dollar, r0to r1) as Rupee devaluated, price of imported goods increased, higher address shift the entire planning leftwards and caused higher price level (P to P1) and lower real GDP (Y to Y1).2. Describe its impact on world trade and commodity prices, and use the Stolper Samuelson theorem to predict the effect on income distribution in Australia.As mentioned above, stagnation of foreign investment and weak Rupee caused slower GDP growth and higher commodities prices. Devaluation of Rupee makes Indian government even harder to repay its deficits, whi ch in turn affected all the economy activities globally. As one of the two superpowers in Asia, India has considerable economic influence over Australia. Indians are less fertile compare with the rest of the world therefore less Indians would come to Australia for study.Education market is negatively affected and there will be job losses or even closing down in education sector in Australia. As a net energy importer, India has large demand for Australian energy products, especially for coal (for coal is the main energy resource in India). Comparably strong Australian dollar makes Aussie products less favored by India, expect the excavation products, for those are necessities. According to Stolper-Samuelson theorem, anticipate full employment and free labor mobility, as the demand for mining products stay steady duration demand for luxury products or other non-necessities slowdown, there will be different changes in mining and other sectors.For mining as a capital-intensive indus try, selling price increase will increase capital and rent costs, but lower the real wage on the other hand, labor sectors like gardening and run industries, shrink foreign demand terminations price cuts, which wage level also come downs yet capital and rent costs rises. Below charts show how the Stolper-Samuelson Theorem applies on the interactions between capital/rent and wage costs.The verdancy line represents the labour-intensive industry (marked as L, like agriculture) and the orange line represents the capital-intensive industry (marked as C, like mining) when theres a price increase on capital-intensive products, the curve shifts rightwards (to C1), capital/rent cost increases (r to r1) while wage level decreases (w to w1) when theres a price drop on labor-intensiveproducts, the curve shifts leftwards (to L1), capital/rent cost increases (r to r1) while wage level decreases (w to w1)Moreover, weak economy in India may promote talent immigrations for skilled labor (e.g., from IT industry) moving to Australia. Economically, increased abroad labor supply would lower the wage level in Australia, which may cut costs of producing and make Australian goods and services more attractive to the rest of the world Non-economically, gathering of professions will boost technology improvement, that would have Australian more competitive on the other hand, a surplus of labor supply may cause cordial problems like unemployment and high government payment on unemployment insurance.3. Document any historical crises that magnate be relevant for your answer (4%). The current India financial crisis is somewhat similar to many cases in the history. The 1929 expectant Depression started after the Black Tuesday of stock market crash in 29 October astonishing unemployment rate had got many peck lost home and the depression lasted until 1933 (Americas Story).The Great Depression is very proxy because it was caused by many typical indicators like subprime bubble burst, capital rupture, unbalanced industrial structure, and pessimistic over future economy (Bemanke James 1991). One thing different is that the Great Depression results commodity prices drop where the 2014 India crisis results inflations. The price level increases while GDP slowdown could be explained as Indias high settlement on foreign investment and the vulnerability of Rupee.Part 2Executive summaryDrug polity can change supply and demand curves. Penalizing supplying centralizes equilibrium quantity and raises equilibrium price while penalizing users reduces both. It is found that different policies have their advantages and limitation. An example in Singapore indicates death penalty for suppling drags but some disagree regarding social perspective.There is an ongoing debate about medicates proscription by government. Advocates turn over prohibition can reduce drugs commerceking and use, so that lower criminal offence, improving productivity and increasing peoples health. Opponents believe prohibition has only modest effects on trafficking and use while causing many problems such as numerous other negative side effects and increased annoyance and corruption. One recognize in this debate is the effect of drugs prohibition on government budgets.Prohibition entails direct enforcement costs, and prohibition prevents revenue of drug production and sale. Understandably, thus, some politicians, commentators, interest groups, and citizens have embraced unconventional approaches to closing fiscal gaps, such as legalizing drugs. The enforcement costs would be negligible and governments could levy taxes on the production and sale of drug. Also, government expenditure would declension and gains in tax revenue.The figure analyses the market for drug if there were no government intervention. The equilibrium would be at point A, which price P1 and Q1. Total revenue of sellers and total spending by buyers would be the flying field of the rectangle P1*Q1.The other figure shows the effect of a government effort to restrict supply through any of several methods, including vigilant customs inspections, arrest and stiff penalties for drug dealer, or efforts to reduce drug traffic from producing countries like Thailand. The decrease in supply is represented by a leftward shift of the supply curve, establishing a new equilibrium at price P2 and quantity Q2. All this suggest that supply restrictions if they successfully reduce the equilibrium quantity of drug and will also raise its equilibrium price.Similarly, based on the dead demand for immoral drugs, has led many economists to suggest the controlled legitimation of most currently illegal drugs. Others advocate a shift of emphasis in the war from decreasing supply to decreasing demand. Policies that aptitude decrease the demand for illegal drugs and shift the demand curve leftward include stiffer penalties on drugs users.The figure shows a insurance of reducing demand. As the demand cu rve shifts leftward, price falls from P1 to P3, and quantity demanded falls from Q1 to Q3. This would lead to total expenditure on drugs decrease and cancontribute to a low crime rate by drug users and make the drug industry less attractive to potential dealers and producers.Opponents to the polity of full legalizationOpponents believe that the legalization of drugs would increase use, lad to more experimentation by youth, and exacerbate the existing foul effects that drugs have on society (Smith, 2011). They are of the opinion that government subsidization of addicts would have stultify effects on the economy. They also feel that legalization would help to create a large abusive market for drugs.The point of view is that dealers will still be involved in crime and force and those users will still need to support themselves by engaging in criminal activity, thus, it will result in even larger prison populations. Basically, they believe that the legalization of drugs would lead to increases, not reductions, in crime because there would be more addicts and because of the aforementioned black market (Wilson, 1990). Also, they believe the legalize drugs would have scourge effects on public health, the economy, quality of life, culture and society as a whole.Opponents to the policy of penalizing useThere are some arguments that against the drugs uses. For example, the failure of prohibition to prevent consumption of illicit drugs shows that existing policies do not work. It would be p connectable to use the money saved by ending prohibition to fork out more drug rehabilitation centres and more drug education. More than this though, prohibition creates a powerful supply vacuum which can only be filled by criminals.The consequence of this is less safe drugs (from adulteration), personnel and stronger organised crime elements. Moreover, by criminalising drug users, prohibition needlessly removes people from potential employment and use to society and possibl y creates criminals out of people who wouldnt otherwise be so inclined. Some illegal drugs are no more dangerous than the legal drugs of alcohol and tobacco.On the other hand, proponents of medical exam drugs such as marijuana argue that it can be a safe and effective treatment for the symptoms of cancer, AIDS, six-fold sclerosis, pain, glaucoma, epilepsy, and other conditions. They cite dozens of peer-reviewed studies, prominent medical organizations, major government reports, and the use of marijuana asmedicine throughout world history (Barton, 2007).Opponents to the policy of penalizing supplyAll criminal and civil penalties against production, distribution, sale, and possession would cease because the policy might impose drugs specific regulations and taxes if in a legalized drugs regime, as occurs now for alcohol and tobacco. This would affect government budgets such as government would save the resources currently devoted to arresting, prosecuting, and incarcerating drugs producers and consumers (Holland, 2010).Also, government would hear tax revenue on the production and sale of legal drugs. The tax rates on drugs might be the same as those applied generally, or they might be higher, as with alcohol and tobacco. Miron (2005) indicates that drugs such as Marijuana legalization would reduce government expenditures by roughly $8 billion yearly and would generate tax revenue of approximately $2.4 billion annually if drugs were taxed like all other goods.Opponents to the policy of penalizing both use and supplyCriticisms of the current drug policy are varied and come from a wide variety of perspective. For example, current policy is not meeting its goals of reducing illegal drug use or its consequences. Demand for illegal drugs has not been reduced in vulnerable population or in the general population as evidenced by recent significant increases in illegal drug use among high school seniors (Inciardi, 1999).The high percentage of illegal drug use among arrestees indicates that current policy significantly contributes to criminal behaviour among drug users. This suggests that drug law simply criminalize a medical and public health problem and ask the legal system to deal with what it is, in fact, unable to affect a medical condition. Also, the drugs can be used in medicine to treat the various diseases that people have.Singapore, where is a Southeast Asian island city-state, is facing the rising of drug consumption and healthcare costs problems. The government of Singapore constitutes a range of severe polices to solve these marijuana problems. Acutely Singapore is close to the rosy Triangle opium productionregion, which is the 2nd largest opium production centre in the world, as well as a major transport hub.Hence it is a transshipment point for illicit drugs, as well as fry market given the relative affluence of society (TheRealSingapore, 2013). Therefore, the drug demand will always remain, as will drug trafficking, due to Si ngapore status as a transport hub. In fact, the social mechanisms are harmed by the drug due to the crime, also the individual health are damaged by the marijuana (TheRealSingapore, 2013).For the actual policy on marijuana in Singapore, according to international business cartridge holder 2011, Singapore, like much of Southeast Asia, has very draconian laws, particularly with respect to drug trafficking. Some season, the drug trafficking oft leads to the death penalty. In my opinion, I disagree with the death penalty due to the drug trade refer to the opponents to the policy of penalizing supply above. In Singapore, it is the penalizing supply only.For example, any adult convicted of trafficking at least 15 grams of heroin, 30 grams of cocaine or 500 grams of cannabis, faces mandatory death penalty (international business time 2011). So far, estimates that at least 400 people have been executed in the island since 1991, mostly on drug-related convictions.Thus, Singapore has very s mall population about 5-million population it has one of the worlds highest rates of executions per capita (international business time 2011). In addition, Singapore has defended its drug policies. In 2009, The UN Human Rights Council strongly disagrees that States should refrain from using the death penalty in relation to drug-related offenses. However, Singapore protects their drug policy that the death penalty has become major policy to deterring drug (international business time 2011).One of the reasons why someone refuses the analysis of economic to solve this problem is that the drug problem is not only the economic problem but also the social and health problems. Although using the economic analysis to deal with the drug problem that it can give the government maximum financial benefits, it will badly influence the health problem of people.Also the rate of social crime will increase due to the drug trade. According to Buddy (2013), the drug increase alertness and corporal a ctivity. Marijuana use causes short-term memory loss, decreases sperm and testosterone productionin men, and may disrupt the catamenial cycle and cause miscarriage and stillbirth in women. To sum up, the drug trade brings the negative social and health problems more than the economic benefits.