Microeconomics and macroeconomics Essay Example for Free

Microeconomics and macroeconomics Essay Microeconomics is the branch of economics which deals into a more ‘individual’ scope of the study, such as the choices made by people in terms of the utilization and allocation of resources as well as the pricing of goods and services. In addition, it includes taxes and the policies created by governments. This field of economics deals with supply and demand together with other factors that acts as determinants in identifying the price levels for particular companies in specific industries. This is exemplified by how microeconomics focus on a specific companys potential to maximize its production as well as its capability to lower its prices to better compete in the particular industry that it belong to (Investopedia, n. p. ). On the other hand, macroeconomics deals with the behavior of the economy as a whole. Unlike microeconomics, it does not focus on specific companies but rather takes into account entire industries and economies. This field of economics studies phenomena that take place in a wide scope of the economy like the effects of Gross National Product (GDP) with unemployment, national income, rate growth as well as price levels. A good example is how macroeconomics measures the effects of the rise and fall of net exports in a countrys capital account and also how the unemployment rate affects the status of the GDP (Investopedia, n. p. ). Nevertheless, even though these two fields of economic are different from each other, they are actually interdependent. This is due to the fact that most of the issues that fall under each field overlap and thus, they compliment each other. Basically, microeconomics has a bottoms-up approach while macroeconomics has a top-down approach. Nonetheless, they should be understood and analyzed in order to fully comprehend how the economy works (Investopedia, n. p. ). Distinguish between positive and normative economics. Positive economics is responsible in providing a system of generalizations, which could be used to make accurate predictions regarding the effects of any variation in circumstances. It is free of any ethical position or normative judgments. Keynes further elaborated on this idea by saying that it deals with â€Å"what is â€Å"and not with â€Å"what ought to be† (Economists View, n. p. ). Being the case, positive economics is or can be an objective science because it is judged according to precision, scope, and conformity as well as with empirical evidences. Positive economics deals with the interrelations of human beings with each other as well as with the economy (Economists View, n. p. ). Normative economics, on the other hand, is different from positive economics because it takes into account subjectivity in its analysis. It deals with â€Å"what ought to be† rather than what is really happening because it is heavily dependent in value judgments and theoretical scenarios. Normative economics tend to represent opinion instead of an objective perspective. Moreover, normative economics could be valuable in establishing goals and new ideas. However, it should not be the basis for policy decisions (Investopedia, n. p. ). References â€Å"Milton Friedman: The Methodology of Positive Economics. † 26 November 2006. Economists View. 19 July 2008. http://economistsview. typepad. com/economistsview/2006/11/milton_friedman_2. html. â€Å"Normative Economics. † 2008. Investopedia. 19 July 2008. http://www. investopedia. com/terms/n/normativeeconomics. asp. â€Å"Whats the difference between macroeconomics and microeconomics? † 2008. Investopedia. 19 July 2008. http://www. investopedia. com/ask/answers/110. asp.

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Income inequality continues to increase in today’s world, especially in the United States. Income inequality means the unequal distribution between individuals’ assets, wealth, or income. In the Twilight of the Elites, Christopher Hayes, a liberal journalist, states the inequality gap between the rich and the poor are increasing widening, and there need to have things done - tax the rich, provide better education - in order to shortening the inequality gap. America is a meritocratic country, which means that everybody has equal opportunity to be successful regardless of their class privileges or wealth. However, equality of opportunity does not equal equality of outcomes. People are having more opportunities to find a better job, but their incomes are a lot less compared to the top ten percent rich people. In this way, the poor people will never climb up the ladder to high status and become millionaires. Therefore, the government needs to increase all the tax rates on rich people in order to reduce income inequality. 1. Tax Cuts Caused Income Inequality Income inequality is a big problem in the United States because the top, wealthiest American saw huge increases in their incomes, which the rest had their incomes go down. Bottom people do not have the same amount of money and the opportunity to move up the social ladder as the rich people do. In order to reduce income inequality, the government needs to tax the rich people more, and give poor people more money and more social services - education, food subsidies, health care. Tax cuts are only benefiting the richest people, and will widen the inequality gap between the rich and the poor. A recent report from the Congressional Research Service states, â€Å"as the top tax rates a... ...ot let this inequality gap continues to rise; therefore, the government needs to tax heavily onto the rich people, and redistribute their money to the poor. If income inequality continues to grow, the economy will break down. For example, if the housing price continues to rise because of the rich people, poor people will not have a place to live since they cannot afford to buy these expensive houses. When this happens, it will create another housing bubble because the houses are not worth buying, which means the market value of the house exceeds the house’s value; therefore, nobody will buy the house including the riches since they already have houses to live. Moreover, poor people do not believe they can get access to wealth because they cannot afford anything, and they cannot afford the tuition fees for a good education, which is the traditional route to success.

Bob Crachit Essay

How does Dickens use imagery and language to present the character of Ebenezer Scrooge in Stave one of ‘A Christmas Carol? ‘ Charles Dickens started writing ‘A Christmas Carol’ in the 18th Century. Whilst writing the novel he was experiencing a world that had totally forgotten about Christmas and had no time for it. It was the industrial revolution, things were changing and with it the people were. They did not have time to enjoy Christmas they were more bothered about earning money. This is the kind of character Scrooge is which I will explain later on. Being in this kind of world affected Dickens novel; but it also influenced him to create a character called Scrooge. Who wouldn’t care about Christmas; and only caring for business and money. Dickens knew that if he could get people into the Christmas spirit by attracting their attention to his novel. But little did he know he was about to re-inject the Christmas spirit into Britain. Dickens kicks off his extravagant novel by introducing a dead character with the name of Marley who he chose to create as a Ghost. By starting off his novel like this Dickens is directly addressing the reader – by using the word ‘You’: ‘You will therefore permit me to repeat emphatically, that Marley was as dead as a door-nail’. By addressing the reader like this it automatically draws the reader into the story as though they are experiencing what Dickens is trying to make them experience – by making them apart of the story by being addressed directly. It also makes the reader want to know more for example they might want to know why Marley is dead and therefore this makes them read on. The main character of the novel is named Scrooge. He is present by dickens as a: ‘Squeezing, wrenching, grasping, scraping, clutching, covetous old sinner! ‘ By doing this it makes the reader think that Scrooge is an old, mean, miserable man. Of which has no friends in existence – excluding his past. Dickens mentions that Scrooge is: ‘Squeezing’ Meaning that he would ‘Squeeze’ every last drop out of anything he could, not only money but make people work over their limit. For example Bob Cratchit, his apprentice would work as hard as he could each day, and make Scrooge feel that Bob hasn’t got away with easy money. Scrooge is described by Dickens in many different ways; for example Dickens compares him with other things:’External heat and cold had little influence on Scrooge. No warmth could warm, nor wintry weather chill him. No wind that blew was bitterer than he. ‘ In this small paragraph dickens has used a good use of imagery – weather imagery. He compares Scrooge with the weather and shows that he a cold person who could never be warm hearted. Dickens shows that Scrooge has no feeling, nothing can chill him, and nothing can warm him. Scrooge is immensely described as worse than the weather: ‘No wind that blew was bitter than he’ This meaning nothing could be worse than Scrooge; Dickens insults his own character with no grief. Nothing could be worse than having Scrooge on your case – he is bitterer than the wind. Dickens goes on to downgrade Scrooge to nothing by saying rain, show, hail and sleet could: ‘Boast an advantage over him, they often came down handsomely and Scrooge never did’. This meaning that the weather could come down gently and calmly but Scrooge is an old man who is not gentle or calm instead fierce and very uptight. Myself as a reader I would feel that Scrooge is an old hag who is most likely very lonely and despises everyone but himself; and that he is very selfish and would never spare a penny to anyone but himself. I would also feel that Dickens is trying to get across a strong description of Scrooge. When Dickens was describing Scrooge a key line is: ‘The cold within him froze his old features’. The line above has no meaning, for example it adds to his description and as a reader it could feel as though the cold within him has frozen his good side like an ice age. It exists inside him but he can’t release it. Another example is: ‘Hard and sharp as a flint’ This is a simile; it shows two sides of Scrooge. Flint is a rock; which was used by humans in the Stone Age. It was used for two things, which shows two sides of Scrooge. They used it for warmth which shows that Scrooge could have a good side in him, and they also used it for weapons, to harm things i. e. a tool could cut you. This shows the bad side of Scrooge – he is two faced. Once the reader hears about Scrooge’s appearance, we think as if Scrooge was a ghost, or he was dead with his corpse still existing. Dickens uses adjectives like: ‘Blue lips’ ‘Red eyes’ These lines make us think as if Scrooge was dead because he has frozen lips and bloodshot eyes as if he doesn’t sleep. It makes the reader feel aware of how dangerously scary Scrooge looks to go with his attitude and lifestyle. The place in which Scrooge’s house is situated also shows his personality. His house is away from other houses and is in the middle of a business district. Also, inside his house it is dark and gloomy he double locks the doors as if to lock himself away form the world. His house sets the scene for later in the novel. His house reminds the reader of a haunted house; linking Scrooge with his description of being like a ghost. Scrooge doesn’t like Christmas. The word which he uses to sum up Christmas is: ‘Humbug’ Meaning nonsense. Scrooge makes a speech about Christmas to his nephew, part of it is: ‘Merry Christmas! Out upon merry Christmas! What’s Christmas time to you but a time for paying bills without money; a time for finding yourself a year older, and not an hour richer’ This sums up what he feels about Christmas. He doesn’t see the fun side of it, or the religious side of celebrating a special time in the Christian faith. He just looks at the gloomy side, and thinks it is a waste of time. Also Scrooge talks bout money, saying you find yourself a year older, and not an hour richer, and also saying it is just a time where you have to pay the bills showing again he is thinking bout his money and nothing else. Scrooge also says that the poor don’t have a right to be happy: ‘What right have you to be merry? What reason have you to be merry? You’re poor enough. ‘ He’s saying that the poor should be unhappy, that they are not rich enough to be happy, and that they should be gloomy and sad and not have the right to have a good time. This shocks the reader. Before, the reader just feels that Scrooge is gloomy and lonely, but now they feel as though Scrooge is a cold-hearted, nasty, mean old man who doesn’t care about anybody but himself. Later in the novel we find out more about why Scrooge may be like this. I think Scrooge thinks this way about Christmas because of how he was treated by his father when he was a child. His father used to leave him alone and not take him home from boarding school but leave him there in a dull little room reading books. Scrooge once fell in love with a woman called Bell. This brought the Christmas spirit into him but then they broke up and that made Scrooge go back to hating Christmas. When people saw Scrooge in the street nobody would stop him to talk, everyone would leave him alone and not dare speak to him. ‘Even the blind men’s dogs appeared to know him; and they saw him coming on, would tug their owners into doorways and up courts; and then would their tails as thought they said, ‘no eye at all is better than an evil eye’ This sentence shows what everyone thought of Scrooge.

The Weak Form Efficiency Finance Essay - Free Essay Example

Sample details Pages: 6 Words: 1814 Downloads: 4 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? Fama, after the publication of his world renowned article in May 1970 he is known as the godfather of the efficient market hypothesis (EMH). It all began when he submitted his Ph.D. thesis which entitled Efficient Capital Markets: A Review of Theory and Empirical Work. In that paper he defined the concept of accurate market efficiency. Don’t waste time! Our writers will create an original "The Weak Form Efficiency Finance Essay" essay for you Create order EMH allows that when there is new information available, some of the managers or the investors may overreact and some of them may underreact with the change in the new information. The main requirement of the EMH is to ensure that the managers (investors) reactions are random, which means the pattern of the results on net effect on market prices cannot be exploited by the managers (investors) for an abnormal profit for their company. So that it has random walk. Therefore if someone makes a profit from a share everybody can make a profit from it and if someone makes a loss then everybody makes a loss on that share. Fama came up with three forms of efficient market hypothesis. They are: weak form efficiency, semi-form efficiency and strong form efficiency. These three forms have different kinds of explanation how the markets run. 1- Weak Form efficiency- The price of the share cannot be predicted by the investors by analysing from the past results or by past series. It is quite i mpossible to gain abnormal profits by analysing the future price of the share, by any managers investment strategic or by historical results. The price of the share cannot have any series results, which means the results of the future price movement is predicted by the information which does not have any past results or past series. The price of the future result must have a random walk. Figure 1 show that it is quite impossible for the managers to predict the future price as the price the share is constantly moving. Fiqure-1 2- Semi Form Efficiency- It states that the price of the share cannot be manipulate by publicly available information in a very unbiased fashion, so that no extra profit can be made by the managers (investors) by studying all the public information. The adjustments of the information to the public must be reasonable size so that no one can manipulate the price of the share. If there is any such information then it will suggest that the information has been provided to manipulate the price of the share, which means the provider has acted in an inefficient manner. Figure 2 shows that the results after the public announcement. Fiqure-2 3-Srong Form Efficiency- It shares all the information with the public and with the investors but it makes sure no one can get any extra profit with the available information. There can only be a legal restriction on providing all the information to the public with the fear it may be manipulated by inside trading, or sharing the information. The market has to be fair so that the managers (investors) can earn extra profits for long period of time. In 1996 and in 2008 Dhaka Stock Exchange saw a massive blow in their Stock Exchange by not controlling the information, which resulted of inside trading. Figure -3 shows even though the results at the end are consistent but it is difficult for long term to predict for the managers (investors) all over the world. Figure- 3 PART -B Introduction The most important issue in finance research and interest is the efficiency of financial markets. When money is put in the market by the investors their aim is to generate the return on the capital invested as quickly as possible. Efficient market is where the market price is unbiased to estimate the true value of the investment. There are several key concepts: Market price and the true value do not have to be same every time. Examples Price of the outcome can be greater or less then the true value as long the deviation are random. Facts of the results of the deviation of the true value are random, which means there is a chance the value of the stock is undervalued or overvalued. No investors can be able to find the consecutive outcome of under or over value. Analysis Positive signs tend to proceed from good financial reports from a company. That is the reason why the technical patterns makes the move forward and anticipate the fundamental reports. Brock et al (1992), Technical analysis offers the investors with the opportunity of responding in real-time to a stocks behavior in which the investors do not have to wait for the next report from the company. Brock et al (1992), Fundamental analysis looks at the financial statement of the company .Therefore the investor can make a decision for the investment by the past financial statement. Efficient markets theory describe the price of an assets must show all the information that is available about the core value of the asset. Almost every form of the financial securities covers in efficient market theory (EMT) but except one kind of security which is being well discussed, shares of common stock in company. Theoretically, the investors get encouraged by the actuality of undervalued or overvalu ed stocks. That is the only reason there is a change in price of current value of future cash flow. Investment analysis looks at the mispriced stocks and that makes the market more effective which causes the price to yield the core value. The efficient market has to be random so the new information is random as well (favorable or unfavorable), which results in random walk in stock prices. This drives the investors not to invest heavily because there is no certainty of the returns as the price reflects the core value. In two ways the informational efficiency matters in stock prices. They are: investors care whether various trading strategies can earn returns and if stock prices reveal all the information accurately. To differentiate among the three forms of market efficiency it is easy to say that weak form stops technical analysis from being profitable, while semi-strong form stops the profitability of both technical and fundamental analysis, and strong form results, that even th ose with inside information of the company cannot expect to earn excess returns. Evidence for and against the Efficient Market Hypothesis Weak form efficiency A) The day of the week effect Cross (1973) and Gibbons and Hess (1981) elaborated that share prices fall on Mondays and rise on Fridays. However Dickinson and Muragu (1994) studied that the Nairobi Stock Exchange and found out that the day of the week effect does not affect the small stock exchange. Therefore it can be said the EMH is preferable in most of the stock exchanges in the world as it is not easy to predict by the outcome by the managers (investor) to invest in any stock exchange. B) The January small firms effect EMH face the challenge when January effects comes around, Keim (1983) sttes that US stock market studied that not only the return on stocks in January is high in relation to other months but the returns of small company stocks perform better in the month of January. Burton Malkiel, asserts Wall Street traders now joke that the January effect is more likely to occur on the previous Thanksgiving. Therefore it can be said even though the firms benefit from th e seasonal effect but there is no certainty with the actual result. The investors may think to invest more in December but they do not know the actual results. Semi strong Efficiency A) The price earnings effect Basu (1977) studied from 1957 71 the portfolio of different price earnings ratios ( P/E ) and the result was that the return on company stocks with low P/E ratios is much higher than the return on companies with relatively high P/E. In (1993) Fuller examined series of test but still got the same result but he found out that the result is not the same for the superiorly low company. Therefore it can be said though price earning effect can occur in stock market but it does not mean it will be for every low company. The investor will struggle to invest in that company because the low profile company results always different. B) The size effect Banz (1981) studied that the period of 1936 77 the excess return from holding stocks in the small company compared to the large company by 19.8 %. The firm size effect was as accurate as the firms betas in explaining the excess return which clearly contradict with the EMH. However some author urged that the r esults from the small firms are too low to evaluate their historical results. Strong Form Efficiency A) The Directors/Mangers share purchase Jaffe (1974) studied that the managers and the directors earn excess return from their trade, with all the information of inside which is contradictory with strong -form EMH. After the early 2000 scandal the US government and the NASDAQ implemented that the directors of the company has to be independent so that no information on inside trading. As the directors are independent there is no chance of getting any inside knowledge about the company by the investors. B) Information content of analysts forecast Elton (1986) studied that excess return can be earn once due allowance had been made for risk by buying upgraded stocks or stocks that were in a higher classification and selling downgraded stocks or stocks in a lower classification. However it needs a certain warranty before the trading on a brokers recommendation. Therefore the investors need to accelerate their trade because there is no certainty with the information. Conclusion- In fundamental way the prices may differ from long and slow movement but in two ways EMT is still useful. 1) For shorter period, examples as days, weeks and months. EMT can explain the movement of stock price changes with considerable evidence. That is the answer of stock prices to all new information reasonably the change in the core value of the assets.2) EMT serves as a scale for how prices should move if capital investment, funds, assets are to be allocated efficiently. All the outcomes depend on the transparency of information, the effectiveness of regulation and the prospect of rational arbitragers will drive out noisy investors. In fact the informational efficiency of stock prices moves across markets to markets and country to country. Whatever the outcomes of capital markets, there is no better alternatives of allocating investment capital. In fact most countries have recognized it for their future goal. Critics may say that an EMH passionate would not pick up a hundr ed dollar note from the road because according to the EMH, that note cannot be there, either the note is fake or somebody must already have picked it up. EMH can make investors miss some investment opportunities on their investment, but it will also protect the investors from hidden and unknown risks.