ECONOMIC ANALYSIS

Economic Analysis



Economic Analysis

Question 1: Hyperinflation and its devastated impact on economy

Hyperinflation is defined as increase in the prices of commodities. When a country's government starts spending a lot of money which is taken out from the tax income, it has to face a huge deficiency in the funds. Because of this deficit, the government has to print more money in order to overcome that shortage. It is highly visible when an uncalculated demand occurs in the supply of the money. Hyperinflation becomes very tough to handle for the countries. It leads in closing down of businesses, people start losing their jobs and extreme increase in the price level. This rise will create hunger situation for the people who belong to the lower classes. If people start to lose their jobs and the money has become less worthy, people will spend less. Due to this, hyperinflation will get worse with the demand of the commodities and products constantly decreasing which will result in a decreased production of the commodities. Hyperinflation will result in reduction of worth of the money. How to stop hyperinflation? we can avoid hyperinflation by increasing the purchasing power. The states should come out with more jobs in the market; it should create a proper infrastructure instead of releasing money to big companies. We should come up with new technology containing proper information for developing short-term plans so that economy can increase. Outsourcing and resourcing of products should be done at a higher scale. If we have a look at the current position of US we see that the government is trying to overcome the hyperinflation in different ways. The changes that the government is making would help a lot in rebalancing the instability of the economy of America. The US government should cut down the wages of state employees nationwide in order to control or prevent the hyperinflation to occur. During the first quartile of the year 2010, both the Euro and US dollar have experienced a huge decrease in their contribution to the world's foreign exchange reserves. In the meantime, the report from central banks shows an increase of 19% in the category of some other currencies which include Australian and Canadian dollars. To bring an end to this hyperinflation we need monetary reform as well as fiscal reforms. The governments will have to try resisting the hasty growth in the supply of money. And they should bring the balance in the budget as soon as possible. This commitment will at least make people believe that the value of the money will not rise in future. (Christina, 1994)

Question 2: US tariff on French and German

Trade in services and goods receive most of the consideration when we talk about the ties of US-France commercially. The French companies in US employed around 578,600 people in the year 2001. Similarly, the US companies who have invested in France employed around 540,500 workers which make a huge population of France. GSP has become far more important for our capability ...