Free Impact of Recession on Global GDP Essay Sample

I do not agree with the statement that “a recession in the united states is likely to raise the growth of real GDP in Europe”. When there is a recession in the local market, there are market factors that become destabilized consequently affecting the potential of trade and foreign exchange. The occurrence of a recession abroad will dramatically reduce the demand for imported goods, which implies that exports will decline in the home economy. When exports decline in the domestic economy, it implies that less foreign income will be earned, which will affect gains in the real GDP.

According to Lipsey and Chrystal, any event that affects the proportion of income that can be spent by local citizens on specific imports will result in significant changes in the slope of the net export function, which will affect the responsiveness of imports to changes occurring in the domestic income. Hence, when a recession occurs in the United States, the local citizens will spend less on imports. This will affect the potential of imports from Europe.

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When recession occurs, the real GDP of the United States will decline due to less spending. According to Lipsey and Chrystal “a fall in the foreign GDP leads to a parallel downward shift in the net export function”. Consequently, the export industry in Europe will be affected by this change. Additionally, there are also issues regarding the price factor. In this regard, changes that take place in the prices of goods produced in the local market relative to those goods produced in foreign markets will have a significant impact on imports and exports.

Circumstances that cause the relative changes in the international prices include differences in exchange and inflation rates. These are critical in determining the performance of international trade. In this regard, if the inflation rate experienced with the United States Dollar is higher than the inflation rate in the United Kingdom, the prices in the United Kingdom will fall significantly compared to those of its trading partner, the United States.  This means that United States citizens will spend more on the products that have been produced locally because of their lower price. Therefore, the real GDP of Europe will decrease because their products will be less consumed in the United States. In any business setting, there is a distinct relationship that takes place between the agents in charge of directing particular deliverables and the objects involved in the process. In this regard, assignment rules enable the administrator or agent to appropriately define and establish a model that will be used for acquiring leads depending on the conditions at the time. Thus, the assignment rule created for a particular objected related to a specific agent may either remain independent or dependent on the manner in which other agents have defined their rules. Once an assignment rule has been appropriately defined, it is possible to assign a certain number of objects to agents for a specific period of time. When the time period expires, the objects can be reassigned to accommodate the needs of new agents.

Assignment rules have numerous advantages. First, dependent assignment rules enable the creation of a seamless link between objects, which ensures continuity even after expiry of the allocated period for an agent. This occurs when permissions are extended to the next agent, which maintains the previous profile. This enhances performance and improves competition in achieving the desire output variables. Secondly, Secondly, it is possible to create lead assignment rules that are intended to guide the entire through multiple entries, which guarantees the administrator to amass a significant lead force. This can prove beneficial for sales teams in which there are specific targets that have been set to achieve the highest possible output.

Nevertheless, assignment rules also have their own drawbacks depending on the circumstance. Independent assignment rules can impair the continuity of the already established chain, especially when there is low performance. This is because of the administrative limitations that have been put in place, consequently discouraging association with agents in a similar field. As a result, it may not be possible to transfer specific rules even if they were beneficial, which leads to a loss. This may also seriously impair the achievement of certain economic targets.

The floating exchange rate implies that the currency is subjected to the market forces created by the supply and demand curve. This is a common phenomenon observed in small economies, where fiscal policies promise to perform better. An increase in government spending has the effect of increasing the supply of money in the market, which directly influences the real exchange rate. However, this also implies that the government will demand more money to support its increased spending, which will result in an increase of the interest rate in the domestic market. This has a double effect in that it may cause a dramatic increase in the exports level and increase in the economic output level. The stimulus created by the fiscal policy essentially prevents the eventual fall of the real and nominal exchange rate, which would have resulted in an upward shift of the export function.

In essence, the fiscal policy is essentially used to improve the potential of the GDP, especially when a recessionary gap had been created by the occurrence of a negative demand; however, the impact will be determined by the extent of the shock experienced in the market. An increase in government spending increases the equilibrium in the real income of the domestic market while a similar equilibrium is created with the nominal interest rate. The immediate impact is the depreciation of the local currency, which shifts the balance by decreasing the previous deficit that existed as a result of low capital mobility. However, when there is high capital mobility, the response will be slightly varied. The occurrence of high capital inflows will offset the level of expenditure experienced in the imports, which results in the appreciation of the local currency. Hence, this reveals how the response received depends entirely on the individual factors in the small market economy. Alternatively, the fiscal expansion may induce investment from foreign countries and other trading partners in the form of financial resources, which causes the domestic currency to increase in value.

First, Britain should stay out of the European Monetary Union because of the economic impact that will occur to the Sterling Pound. Despite being a lasting symbol of Britain’s national heritage, the Sterling Pound also represents the economic prowess of Britain. Joining the European Monetary Union could result in a possible devaluation of the Sterling Pound, which would undermine its economic significance to Britain. When the Sterling Pound undergoes devaluation from its current high value, this will change the economic potential of Britain. Consequently, this will create dynamic changes in the export and import potential while resulting in a possible devaluation of debts owed to Britain by its partners. Hence, in the event Britain chose to join the European Union, its partners would stand to gain more from the monetary association more that Britain. This will seriously undermine the global position of the Sterling Pound and its use as an international currency like the Dollar. Furthermore, the decision to join the monetary union will reduce the potential of domestic trade because of the decline in value of the Sterling Pound. This will significantly reduce its domestic earning power because few goods will be in circulation in the domestic market.

Secondly, joining the European Monetary Union will affect the current taxation regime belonging to Britain while shifting the economic centre to the union. This will impair certain governmental functions because the less money will be earned from the Euro. The Euro will also change the existing equilibrium in the global arena, in that existing consortiums that depended on the prowess of the Sterling Pound will be forced to either lose their value or undergo possible acquisition at a lower rate. In essence, under jurisdiction of the National Law Party, the United Kingdom had been given the chance to maintain its currency in such a manner that will allow the Sterling Pound to be used alongside the Euro. Additionally, in the event Britain was to lose its currency, weaker nations in the European Union may dictate stringent measures that may affect the growth of Britain. The fact that the Sterling Pound plays an important role in setting ceiling value for the exchange rates in the European market, the abandonment of the Sterling Pound will imply that Britain also loses this benefit. In this regard, Britain’s economic prospects would be severely impaired. Finally, losing critical control over its taxation system will also imply that the government of Britain will have limited resources to keep its economy afloat.


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