Question

You will select, read and analyze 4 articles from a variety of newspapers or magazines to provide some ‘real value’ to the theoretical contents that we deal with in the course. You may use web sites as sources of articles but attach a hard copy of the articles you are reviewing. Articles should relate to any 4 of the following macroeconomic topics and should not be earlier than October 1' 2020. Articles should be critiqued (as explained below). The critique should be typed, double- spaced, with correct grammar and spelling.

Topics

Current state of the economy

Inflation

Unemployment

Government budget

Exchange rate of the $

CRITIQUE OUTLINE

Title Page

Include your name, student number& course section

Table of Contents (1 Mark)

Author, source and topic of the articles

Basic Theme& Critical Review

This is the idea or the argument of the article (no more than a few sentences)

Analyze the headline with regards to its relevance.

Carefully analyze the article, using your critical thinking skills.(3-4paragraphs for each article). Relate the article to the macroeconomic concept covered in the course. Your opinion on the issue is important.

Terminology

You should include relevant economic terms used in the article and define them.

Your assignment is worth 10 Marks.Your gradeswill depend onyour correct choice of Macroeconomic articles, and the depth of your opinion.

Answer 1

Current state of the economy

The economy is growing again, with employers adding millions of workers to payrolls per month. The unemployment rate which briefly hit levels far higher than the worst of the Great Recession is now falling rapidly.Fears that economic collapse would spiral out of control after the spring shutdowns have not been realized. Even more strikingly, the fact that the United States has failed to meaningfully contain the Covid-19 pandemic is proving to be less of an impediment to economic growth than one might have thought.

Six months ago, public health experts were arguing that if the United States set up robust surveillance testing, contact tracing, case isolation, and rigorous mask usage, a version of economic normalcy could return without incurring grave risks to human life. Looking across the globe, this seems to be correct — many countries have achieved much better outcomes in terms of less loss of life without incurring any clear economic cost relative to the United States.At the same time, the view (once widespread among economists) that failing to control the outbreak would necessarily have dire economic consequences looks like it may have been overstated. While the US public health situation looks terrible in an international context, the economy is going okay.

“We’re witnessing the fastest labor market recovery from any economic crisis in history, by far,” President Donald Trump said at a Friday briefing room appearance to brag about the results. “This year, the United States has seen the smallest economic contraction of any major Western nation, and we are recovering at a much faster rate than any other nation.”

This is all a bit misleading, but the basic message that the economic news is good is correct. The country now faces a very uncertain fall, where the only clear thing in the data is that both the bond market and the Federal Reserve would welcome more stimulus.

Inflation

Inflation reduces the purchasing power of each unit of currency, which leads to increases in the prices of goods and services over time. It's an economics term that means you have to spend more to fill your gas tank, buy a gallon of milk, or get a haircut. In other words, it increases your cost of living.

U.S. inflation has reduced the value of the dollar. Compare the dollar's value today with that in the past. So as prices rise, your money buys less. For that reason, it can reduce your standard of living over time. That's why President Ronald Reagan said, "Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man."

Unemployment

Unemployment occurs when people who are available and looking for work are unable to find employment.

The Bureau of Labor Statistics (BLS) has a more specific definition: people who don't have a job, have actively looked for work in the past four weeks, and currently are available for work. The BLS also includes people who are temporarily laid off and are waiting to be called back to that job in unemployment statistics.

The BLS reports unemployment statistics in its U-3 report, a part of the monthly jobs report.It measures unemployment through monthly household surveys called the Current Population Survey, which has been conducted every month since 1940. Originally part of the government's response to the Great Depression, the survey has been modified several times since then, including a major redesign in 1994 that involved a revamping of the questionnaire, introducing computer-assisted interviewing, and revisions to some of the labor force concepts.

There are seven causes of unemployment. Four causes create frictional unemployment. This type of unemployment is when employees leave their job to find a better one. Two causes create structural unemployment. That is when workers' skills or income requirements no longer match the jobs available. The seventh cause leads to cyclical unemployment.

Frictional and structural unemployment occur even in a healthy economy. The natural rate of unemployment is between 3.5% and 4.5%, according to the Federal Reserve.2 The Bureau of Labor Statistics defines unemployed people as those who are jobless and have actively looked for work in the past four weeks as well as those who have been temporarily laid off from a job. If they don't keep looking, the BLS doesn't count them in the labor

Four Causes of Frictional unemployment:

One cause of unemployment is voluntarily leaving the workforce. Some of the unemployed have saved enough money so they can quit unfulfilling jobs. They have the luxury to search until they find just the right opportunity.

The second cause is when workers relocate. They are unemployed until they find a position in the new town.

The third cause is when new workers enter the workforce. This includes students who graduate from high school, college or any higher degree program. They look for a job that fits their new skills and qualifications. That is a primary cause of youth unemployment.

The fourth cause is when job seekers re-enter the workforce. These are people who went through a period in their lives when they stopped looking for work. They could have stopped working to raise children, get married or care for elderly relatives. These four causes are an unavoidable part of the job search process. The good news is that frictional unemployment is usually voluntary and short-term.

Two Causes of Structural Unemployment

Structural unemployment is neither voluntary nor short-term. These next two causes lead to long-term unemployment. The fifth cause is advances in technology. This is when computers or robots replace workers. Most of these workers need more training before they can find a new job in their field.

The sixth cause is job outsourcing. That is when a company moves its manufacturing or call centers to another country. Labor costs are cheaper in countries with a lower cost of living. This situation occurred in many states after NAFTA was signed in 1994. Many manufacturing jobs moved to Mexico. It also occurred once workers in China and India gained the skills needed by American companies.

What Causes Cyclical Unemployment

The seventh cause of unemployment is when there are fewer jobs than applicants. The technical term is demand-deficient unemployment. When it happens during the recession phase of the business cycle, it's called cyclical unemployment.

Low consumer demand creates cyclical unemployment. Companies lose too much profit when demand falls. If they don't expect sales to pick up anytime soon, they must lay off workers. The higher unemployment causes consumer demand to drop even more, which is why it’s cyclical. It results in large-scale unemployment. Examples include the financial crisis of 2008 and the Great Depression of 1929.

Raising the Minimum Wage and Demand-Deficit Unemployment

Demand-deficit unemployment sometimes occurs when wages are too high.7 That's one of the arguments against higher minimum wages. Critics argue that when businesses are forced to pay a higher salary per person, they must let other workers go.In some price-sensitive industries, that's true. But most companies can pass the cost onto their customers.

Government Budget

Government budget, forecast by a government of its expenditures and revenues for a specific period of time. In national finance, the period covered by a budget is usually a year, known as a financial or fiscal year, which may or may not correspond with the calendar year. The word budget is derived from the Old French bougette (“little bag”). When the British chancellor of the Exchequer makes his annual financial statement, he is said to “open” his budget, or receptacle of documents and accounts.

Role of the budget

Government budgetary institutions in the West grew up largely as a result of the struggle for power between the legislative and executive branches of government. With the decline of the feudal system, it became necessary for kings and princes to obtain resources for their ventures from taxation rather than dues. With the disappearance of the old feudal bonds, taxpayers demanded to be consulted before they were taxed. This related to taxes only, not expenditures. For centuries Parliament seemed content to restrict the amounts that the sovereign levied while letting him spend the money as he pleased. Only after the controversies of the 17th century culminated in the Glorious Revolution (1688–89) and the Bill of Rights did Parliament extend its concern from taxation to the question of expenditure control.

Exchange rate of the$

An exchange rate is the value of one nation's currency versus the currency of another nation or economic zone. As of July 31, 2020, the exchange rate is 1.18, meaning it takes $1.18 to buy €1.

Types of Exchange Rates

Free Floating

A free-floating exchange rate rises and falls due to changes in the foreign exchange market.

Restricted Currencies

Some countries have restricted currencies, limiting their exchange to within the countries' borders. Also, a restricted currency can have its value set by the government.

Currency Peg

Sometimes a country will peg its currency to that of another nation. For instance, the Hong Kong dollar is pegged to the U.S. dollar in a range of 7.75 to 7.85.2 This means the value of the Hong Kong dollar to the U.S. dollar will remain within this range.

Onshore Vs. Offshore

Exchange rates can also be different for the same country. In some cases, there is an onshore rate and an offshore rate. Generally, a more favorable exchange rate can often be found within a country’s border versus outside its borders. China is one major example of a country that has this rate structure. Additionally, China's yuan is a currency that is controlled by the government. Every day, the Chinese government sets a midpoint value for the currency, allowing the yuan to trade in a band of 2% from the midpoint.

FOREX & CURRENCIES TRADING  FOREX TRADING STRATEGY & EDUCATION

Exchange Rate Definition

By JAMES CHEN

Reviewed By GORDON SCOTT

Updated Jan 31, 2020

What is an Exchange Rate

An exchange rate is the value of one nation's currency versus the currency of another nation or economic zone. For example, how many U.S. dollars does it take to buy one euro? As of July 31, 2020, the exchange rate is 1.18, meaning it takes $1.18 to buy €1.1

KEY TAKEAWAYS

• An exchange rate is the value of a country's currency vs. that of another country or economic zone.
• Most exchange rates are free-floating and will rise or fall based on supply and demand in the market.
• Some currencies are not free-floating and have restrictions.

Types of Exchange Rates

Free Floating

A free-floating exchange rate rises and falls due to changes in the foreign exchange market.

Restricted Currencies

Some countries have restricted currencies, limiting their exchange to within the countries' borders. Also, a restricted currency can have its value set by the government.

Currency Peg

Sometimes a country will peg its currency to that of another nation. For instance, the Hong Kong dollar is pegged to the U.S. dollar in a range of 7.75 to 7.85.2 This means the value of the Hong Kong dollar to the U.S. dollar will remain within this range.

Onshore Vs. Offshore

Exchange rates can also be different for the same country. In some cases, there is an onshore rate and an offshore rate. Generally, a more favorable exchange rate can often be found within a country’s border versus outside its borders. China is one major example of a country that has this rate structure. Additionally, China's yuan is a currency that is controlled by the government. Every day, the Chinese government sets a midpoint value for the currency, allowing the yuan to trade in a band of 2% from the midpoint.3

Spot vs. Forward

Exchange rates can have what is called a spot rate, or cash value, which is the current market value. Alternatively, an exchange rate may have a forward value, which is based on expectations for the currency to rise or fall versus its spot price. Forward rate values may fluctuate due to changes in expectations for future interest rates in one country versus another. For example, let's say that traders have the view that the eurozone will ease monetary policy versus the U.S. In this case, traders could buy the dollar versus the euro, resulting in the value of the euro falling.

Quotation

Typically, an exchange rate is quoted using an acronym for the national currency it represents. For example, the acronym USD represents the U.S. dollar, while EUR represents the euro. To quote the currency pair for the dollar and the euro, it would be EUR/USD. In this case, the quotation is euro to dollar, and translates to 1 euro trading for the equivalent of $1.13 if the exchange rate is 1.13. In the case of the Japanese yen, it's USD/JPY, or dollar to yen. An exchange rate of 100 would mean that 1 dollar equals 100 yen.