Globalization on Non Western Cultures
Effects of globalization on non western cultures can be seen in different spheres of human interactions. These include the political, economic, environmental, technological, and social spheres. Generally, globalization is sweeping different areas of the social life of the non western societies.
Non western cultures include the Chinese, Indian and African cultures which have been affected by globalization. Before globalization, Chinese, Indians and Africans had distinctive cultures. However, the globalized world presents difficult challenges and new opportunities for the non western cultures or societies.
Due to globalization, non western societies are feeling the forces of westernization, democratic ideologies and technology. For this reason, some of these societies see globalization as an invasion by the western countries.
Initially, some non western cultures marginalized some groups of the society. With globalization, such cultures are now facing a challenge with some of them being faced out of the contemporary society. Some of the belief systems and traditional cultures in the non western cultures are now seen as ancient and unfit for the contemporary society.
Cultural perceptions that some non western cultures perpetuated such as perceptions on domestic violence, psychological wellbeing and mental health have also changed dramatically with globalization. The ways of thinking and lives of the people who practice most non western cultures have also changed with globalization.
For instance, in the past the position of a woman in some non western cultures was in the kitchen. The woman was supposed to give birth, take care of the family and attend to domestic chores. This way of thinking and living has changed with globalization.
Today, women participate in economic and political activities alongside men. Women are also doing what such cultures reserved for men only. Thus, globalization has played a significant role in ensuring gender equality in some non western cultures.
Culture is not static and it is learned as one grows. Non western culture has been influenced by the western culture that is spread in different ways. For instance, the Chinese education system has been affected by globalization. New curriculums and courses have been introduced in the education system.
This implies that young people in China are no longer learning their indigenous culture. Instead, they are learning culture that has been influenced by the western culture. Other aspects of non western cultures that have been affected by globalization include language, symbols, religion, expressions, stories, songs and social celebrations.
Generally, the effects of globalization on non western culture are diverse and immense. Cultural behaviors of people have changed in different ways due to globalization. To fit in the contemporary world, globalization has forced people to change their ways of life in the non western cultures. Thus, new cultures have been shaped in non western societies by the forces of globalization.
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Globalization on Indian Culture
Effects of globalization on Indian culture are depicted in different cultural aspects. India has one of the richest cultures in the world. However the overwhelming effects of globalization are now visible in the Indian culture.
For instance, due to globalization Christianity has spread in India with some Hindu believers being converted to Christianity. Religion is an important aspect of the culture of any society and this is the case in India. However, despite religion playing a significant role in the lives of the Indians, Hinduism is gradually being replaced by Christianity in some places.
Apart from giving up their religion, the new converts are also adapting the new culture that comes with Christianity. This includes dressing like the Englishmen and even emulating them in other ways of life. Thus, globalization has enhanced the spread of Christianity and cultural changes in India.
Societal roles have also changed with globalization in India. The traditional culture in India defines a clear social hierarchy. Children are made to know their places and roles in the society from their early age. However, these roles are now changing with women performing roles that were initially performed by men only.
The family as a social unit also depicts the effects of globalization on the Indian culture. Having joint family systems is part of the Indian culture. The traditional practice of the Indian society has always been to have arranged marriages. However, this is changing with globalization. Some Indian men and women are defying this tradition and picking their marriage partners contrary to the Indian culture.
India has one of the best and most popular foods in the world. Indian herbs and spices are popular even in the western cultures. However, this cuisine is now facing threat from the foods of other cultures. Globalization has made Chinese foods, burgers, pizzas and other foreign foods popular in India.
Clothing is part of the Indian culture. Traditionally, Indian men dressed in Dhoti while women dressed in saris. Women could wear fancy blouses and men shirts while little girls dressed in pavada. However, globalization has affected this and there is the indo-western clothing in India. This is a fusion of the sub-continental and western fashion. The effects of globalization on the Indian culture can clearly be seen with some young people in India wearing min skirts, t-shirts and jeans.
Indian music and dances have also been affected by globalization. Indian music includes folk, religious, pop, classical and popular music. Among the popular dances in India include Odissi, kuchipudi, kathak and bharatanatyam among others. With globalization, western music is gaining popularity in India. Western dances such as hip hop, jazz, balley and salsa are gaining popularity among the young people in India.
Education which is vital in passing cultural practices has also been affected by globalization. Young people in the villages who never used to attend school before are now going to school. There are also new schools in the villages.
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Globalization on China
There are many effects of globalization on China. Globalization has affected many countries across the world and changed the way people live in the current era. In simple terms, globalization can be defined as the mixing of economic and cultural influences that have existed for many years in different parts of the world.
In China, globalization has brought challenges and opportunities. For this reason, China has to come up with strategies and policies that will enable it to overcome the challenges and to exploit the opportunities. Implementation of these strategies and policies has made China to experienced significant effects of globalization.
Globalization has forced China to adopt an opening-up policy. This can be seen from the way China is opening up to both the developing and the developed countries. It has done this in the economic field and other aspects of social development.
This opening up is not a blind one but a strategy that has enabled China to find a path for development. This path suits the national situation of China and it is aimed at enabling it to enhance its economic growth. Thus, China is not just following the whims of globalization but adopting strategies that will enable it to benefit from globalization.
Many countries across the world are coming together to enhance their risk-resistance ability. China has not been left behind. It is promoting regional cooperation to enhance its risk-resistance ability. For instance, it has signed a Framework Agreement with the ASEAN. This agreement is aimed at enhancing regional economic cooperation.
China is also more vigilant in observing global happenings and taking appropriate measures. This explains why China was able to withstand the Asian financial crisis of 1997. Thus, by adopting strategies that enables it to cope with globalization, China has been able to take control of its economy.
Additionally, China has also called for the establishment of a fresh international economic order. This order should provide globalized cooperation and regulation. It should also involve all countries whether rich or poor, small or big, weak or strong.
Effects of globalization on China can also be seen in cultural changes that have occurred in this country. Chinese culture is very rich in terms of music, dresses, foods and festivals among other cultural aspects. However, this culture has not been spared by globalization. By learning new things from other cultures Chinese have adopted new ways of doing things such as how they trade with other people.
Some people in China have also adopted western culture and abandoned their own culture. Education is part of the Chinese culture and it has also been affected by globalization with new curriculums and courses being introduced in the Chinese education system. There are people who also prefer t-shirts and jeans as a way of dressing yet these were not part of the traditional Chinese culture.
Chinese traditional food has also been affected by globalization with the introduction of western foods such as cheese.
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Effects of Globalization on America
The effects of globalization on America are both negative and positive. However, positive effects of globalization on America moderately outweigh the negative effects. Most Americans agree that globalization has positive impact on the economy, consumers and American businesses. However, some Americans are of the view that globalization has negative effects on the environment and American jobs.
According to Josh Bivens, the EPI Research and Policy Director, labor intensive companies are off-shoring some of their operations in the developing countries. This has decreased labor demand in the United States. Subsequently, wages paid to non-college educated people has reduced due to globalization.
Globalization has also increased the demand for skilled, professional labor in the United States and capital. This has increased the income earned by college-educated workers in America. The result of this is a widening gap between the poor and the rich.
Trade between America and other countries has grown due to globalization. American businesses are able to trade with poor countries of the world. However, this has negative impact on the American workers. This is because the overvalued dollar makes imports cheaper while making exports expensive.
Due to globalization, investors have established firms in America. Currently, there are many jobs in America that depend on international trade or corporations. The number of foreign direct investments in America has also increased due to globalization. This has greatly contributed towards the globalization of the American economy.
Globalization has also brought different countries together. For instance, European countries are establishing economic ties. China is also establishing regional economic ties. These developments brought about by globalization give these countries bargaining powers that are bound to affect the U.S and how it does business. If the economies of these blocs suffer, the economy of America will also be affected.
Effects of globalization can also be seen in the spread of cultural ideas of other people in America. America is also spreading its culture in other countries. This includes spreading of the popular American films, television shows and music to other countries.
Globalization has also made the American pop culture to become a global culture. Today, people in different parts of the world are practicing pop culture as they see it in movies, television shows, music, and satellite broadcasts.
Globalization has also led to the spread of other cultural aspects of the American culture such as clothing and foods. According to Kim Campbell, the former Prime Minister of Canada, globalization has led to the spread of the American culture to a level where it appears that America has moved to the world instead of the world moving to America. This has made many other people to admire the American culture.
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Winners and Losers of Globalization
Globalization has some clear winners and losers. It has greatly benefited the global middle group especially people in Brazil, Indonesia, and China as well as the top 1% in the world. While this is the case those at the bottom as well as the low middle class in rich countries have being left out. Globalization came with several complications for instance principles were lost as a result of fast economic growth such as human rights ecological sustainability, democracy and social justice.
Since the economic crisis that was witnessed recently, globalization effects have been felt on every scale and this includes international, local and national. Because of this fact, people, especially those in developed countries are forced to analyze their future because they are afraid of the new labor market state as well as the rapid economic growth of industrialized countries like South Korea and China. At the same time, developing countries are dealing with usual issues such as hunger and poverty.
Winners of globalization
Who are these so called “globalization winners”? They are the elite capitalist class most of who come from developed countries otherwise known as global players. This class has significant characteristics some of which include the following:
- Economic interests which are becoming global linked than exclusively national or local in origin.
- Their behavior is based on global competitiveness as well as consumerist practice and rhetoric
- They have similar lifestyles which mainly include high education patterns
Another group that is in the list of winners is consumers because prices tend to decrease because of the increasing competition. People who are skilled laborers are also winners as they adapt to new technology revolution and internationalization of distribution and production. What is more, they also specialize in competitive service and industries with high inputs of technology which makes it possible for them to boost productivity and relative wages.
Losers of globalization
Unqualified workers or those who are lowly qualified are the greatest losers and this is because they lack the skills, qualifications and knowledge that is required for them to keep up to date with technical developments. Also, in this group of losers are capitalists in developing nations because majority operates within markets where the competition is less and without any regulatory frameworks. This means they don’t have the ability to lobby governments in order to get high profit margins. Nonetheless, these profits will plummet or get reduced with introduction of foreign investment which can also produce locally through use of better technology guaranteeing high productivity.
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Sea Level and the Location of a Coast
Sea level is the average level of the earth’s oceans and it is used to measure heights in the same manner elevations are measured. The mean sea level is a geodetic point of reference which is where the sea rests when there are no tides, currents, atmospheric effects and variations of water density. If there was no movement of the oceans, there would be no wind or tides. Consequently, there would be no changes in the sea surface.
Due to wind driven and tide changes, sea levels are always constantly fluctuating. It is therefore essential for the mean sea level to be calculated at given locations over a couple of years. There are several factors that affect sea levels and they can have varied geographical time scales. Careful measurements in the variations of mean sea levels offers information regarding climate change and is interpreted as evidence to support the view that current sea level rise is an indication of global warming. Sea level changes that are as a result of wind driven and tidal changes are referred to as eustatic changes. Since the start of the 20th century, there has been sea level changes noted globally which average 2.0 millimetres per year. The Environmental Protection Agency carried out a study which indicates the sea level rise is still expected to rise another twenty centimeters by the year 2100.
Some of the known factors that affect rise of sea level include carbon levels, thermal expansion, melting ice sheets and earth tilt. In cases of earth tilt, large tilts result to more sun at poles. Rise in sea level affects low lying areas that are along coasts. This will include barrier islands as well as river deltas.
Eustatic variation causes
Such sea level rises are the result of external forces. A large majority of experts are in agreement the current sea level rise noted globally is as a result of global warming induced by humans. There are three major factors that cause sea level and coast location changes and they include:
- Nonpolar melting of glaciers
- Thermal ocean expansion
- Change in ice caps volume of Greenland and Antarctica
As the climate gets warmer globally, the ocean sea level is also gradually increasing since warm water occupies a large volume. Also, due to the warm climate, nonglaciers and mountains are also melting further adding to the oceans volume. Rise in sea levels has great impacts on coastal regions. While it might not necessarily affect storm intensity, the coastal regions become vulnerable to storms.
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Globalization on Developing Countries
Globalization is described as the process that aims at expansion of business operations at an international level and it is precipitated by global communications as a result of technological advancements as well as political, economic and socioeconomic developments. In developing countries, globalization has brought with it numerous new opportunities. Developing countries can now enjoy greater access to technology and markets thus improving productivity as well as the standard of living of the local people. While this is the case, it has also impacted developing countries in a negative manner.
The degree to which developing countries benefit from globalization varies greatly. This is because there are skeptics who argue about the benefits accrued from globalization hence resistance to globalization. One major way through which developing countries have benefited is through trade. This is principally achieved through imports especially when Asian economies performance is taken into consideration. Trade has broadened markets for producers in developing countries making it easy for them to real from the scale of economies. What is more, globalization has forced local producers to become competitive while at the same time offering the opportunity to develop some new technologies.
Other major effects of globalization on developing countries are as highlighted below:
- Improved living standards-Globalization at economic levels has given governments the opportunity to acquire foreign lending. Once the funds are acquired, they are used in improvement of infrastructure such as health care, social services and roads. What is more, it has also improve the general living standards of those living in developing countries.
- New markets access-Thanks to globalization, countries are now able to carry out free trade and this has proven to be one of the major benefits to developing countries. Homegrown industries for instance have witnessed a fall in trade barrier opening access to a wide international market. The growth generated from this makes it possible for companies to come up with new technologies and also produce new services and products.
- Widens income disparity-Though there is an influx of foreign capital and companies, globalization also leads to increased cases of unemployment as well as poverty. What is more, it also increases wage gap between educated individuals and those who aren’t educated. In the long term though, the level of education rises because the financial status of the country develops as well. however, in the short term, the poor people become even poorer and not everyone participates in improvement of the economy.
- Decreased employment opportunities-While there is an influx of companies in developing countries, there is also a decrease in employment opportunities especially in sectors for workers who are skilled. This is attributed to technology improvement which comes with the newly established businesses. Automation for instance in agricultural and manufacturing sectors eliminates the need for skilled laborers.
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People from different parts of the world have become more connected now than they were before. Now, it is easier for money and information to flow easily. Services and products produced in one part of the globe are becoming available in almost all parts of the globe. All this is because of globalization which has become a major tidal wave that cannot be stopped. The concept of globalization has some clear disadvantages and advantages.
- Employment opportunities-This is considered the major benefit of globalization. Companies are setting up shop in new countries creating opportunities for employment. What is more, people are able to migrate easily further creating opportunities for better jobs.
- Education-With educational institutions spread across the globe, it has become easier to move from home countries for better education opportunities. This has led to integration of cultures and people from different educational backgrounds. Countries that are labor intensive as well as developing nations have accrued the most benefits from this.
- Thanks to international trade, trade has become more competitive leading to production of high quality products. Products now have to be enhanced so they can capture the attention of consumers. Consumers today can make compromises when it comes to price but not quality.
- Price of commodities has also become cheaper especially because of the fierce competition noted in the market. There are different products for consumers to choose from making it a necessity for producers to price them competitively.
- Socially, people have become more tolerant and open towards one another. Additionally, globalization has also enhanced communication
Globalization is not all rosy. It also has some disadvantages pegged to it and these include the following:
- The most common complaint is that globalization has only served to make the rich even richer while making the poor poorer. It is the general feeling that for managers, it is a great benefit while for nature and workers, globalization is hell.
- Multinationals have been accused of unfair working conditions and social injustice. They have also been accused of not caring so much for the environment, ecological damage as well as natural resource mismanagement.
- Anti-globalists claim it has not worked in favor for a large section of the population. During 1968 through to 1998, they claim inequality has only gotten worse. The United Nations Development Program for instance reports 20% of the world’s rich population used 86% of the global resources while 80% of the poorest population only gets 14% of the global resources.
- Globalization has also led to incursion of diseases especially deadly ones like HIV/AIDS spread by travelers in some cases, to the most remote regions in the world.
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Demand and Supply of Real Estate
Real estate is an area that covers broad issues. It is any property consisting of land and the different buildings on it and with the exceptional natural resources available. The number of people investing on the buying, selling, building and renting land has been increasing tremendously due to increased demand. Real estate has always represented a part of many peoples prosperity. The real estate market is quite competitive and volatile, but there are a number of factors affecting demand and supply of the real estate market to think through always.
There is a vast history on the real estate market. Nearly one-third of America is into real estate investments. The size and measure of the real estate market has made the industry attractive and money-spinning for thousands of investors. Demand and supply are a few elements of the business sector that have impacted the business sector greatly. Fundamentally, there are numerous factors that affect demand and supply of real estate and they include;
Any changes in interest rates influence a person’s ability to purchase any residential property. Essentially, as interest rates decline, the cost to obtain a good house decreases and this pushes the demand for real estate higher regardless of the location or size of the houses or related property. On the other hand, if the interest rates increase, the cost to purchase a rental house will increase lowering demand and prices of the entire property.
Demand for rent estate relies upon income. With the ever growing economy and rising peoples’ income, many investors will spend huge amounts on houses and this will push prices up and increase demand. Rental houses for many years have been seen as luxury goods and rise in income has increased the number of people in need of houses. Rising income leads to bigger percentage of money spend on houses.
These are factors that describe the composition of a population such as income, migration, population growth and gender. Demographic shift can easily impact real estate market. With smaller income, it is not easy to acquire those huge and costly houses.
In the flourishing of years of 1996 to 2006, many banks and other money lenders were keen in providing mortgages to clients in need. Many people borrowed large amounts at lower deposits and this increased demand for real estates as more people were willing to buy. However, the disastrous recession and increased inflation years impacted the sector negatively and less real estate investments were made.
Confidence is a great trait to consider while taking risk to take out mortgage for real estate in the market. If people fear getting mortgages due to likely to decline prices of houses, many will defer while placing their orders.
The ratio of rental houses prices to income impacts their demand. Houses prices rise relatively to income. Hence, a few people will be able to invest in the real estate sector and fulfil their dreams. The size and quality of real estate market or sector make it attractive for many invests, however, it is wise to research and consult extensively in order to go for what satisfies your needs.
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Factors Affecting Demand and Supply of Labor
Demand and supply are substantial elements of economics. In fact, they are the backbone of the regional, national or global market. Without labor, it is not that easy to develop the economy has there will be no income or revenue that aids boost any nation’s economy. There is a great relationship between demand and supply of labor. Companies should always determine how much of each input even before making output or any pricing decision. To enjoy the labor market, it is great to also consider factors affecting demand and supply of labor.
The relation between demand and supply brings about the forces behind the allocation of resources. The demand and supply of labor is generally determined by the labor market and the mainstay participants are workers and companies. Workers are significant to any firm as they offer labor whereas firms guarantee wages. To make good profits, companies should invariably optimize the factors of production and labor.
Every company demands labor and hiring more workers guarantees productivity. Most of the markets in the world are competitive and also demands workers with the highest degree of mobility. All in all, there are a number of factors that are known to affect demand and supply of labor and they include;
- Economy- Loss of jobs during hard economic times mean less disposable income to much labor for involved companies. Majority of the firms experience less production and there is reduced supply of labor. Supply of labor will easily increase with an increase in wages. Hence, there will be more workers willing to work in a company of the pay is exceptionally good. Demand for labor will increase with a rapidly growing economy. On top of this, an increase in population will lead to an increase in supply of labor.
- Globalization- Many multinational companies have established new companies or branches in not only developing nations, but also in developed countries. This move has impacted the demand and supply for labor greatly. Many companies have invested in developing countries due to the high availability of labor in the nations. In addition, the demand and supply for labor has been high as majority of the citizens in these countries are in search for jobs and good pays.
- Better compensation- Compensation in any marketplace includes benefits and wages. In many countries, there has been an upward pressure on wages and descending pressure on benefits. Lowering working age has many times increased the supply of labor. Many governments have increased the retirement age and this has ascended the increase in the supply of labor hence increased productivity.
- Factors such as educational requirement, social factors, new technologies and unforeseen events have all impacted demand and supply for labor in one way or another.
Many times, individual’s supply of labor depends on his or her partialities. By working extra hard, an individual supplies more labor, but reduces his or her consumption of leisure time and increase productivity. With different markets that exist in the world, it is wise to be well-versed with all factors that affect demand and supply of labor.
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Expansionary Monetary Policy
Expansionary monetary policy is described as a policy that increases the supply of money in a country for purposes of encouraging economic growth or fighting inflation. A good example of this kind of policy is the fiscal policy which takes the structure of rebates, increase in regime spending and tax cuts.
Also, such policies originate from central banks known to focus on the increase of money supply within an economy. The policy injects capital into an economy directly and also manages low periods of growth in business cycles. Whenever the Federal Reserve of the US reduces its rate of federal discount rate or funds, it uses this policy. Additionally, it also uses the policy whenever it buys treasury bonds in an open market. Consequently, capital is injected directly.
There are several advantages associated with expansionary monetary policy. It is implemented for purposes of stimulating the economy whenever a cycle of business contraction is expected. It also addresses unemployment problems within the system. Some of the advantages associated with the policy are as highlighted below:
- It leads to bond prices increase and interest rates reduction
- It decreases exchange rates leading to increased exports as well as decreased imports and consequently leading to balance of trade.
- Domestic bonds are made unattractive by the low interest rates and this decreases their demand while raising the demand for foreign bonds.
- Low interest rates leads to a high capital investment level.
During recession, an expansionary monetary policy is known to spur economic growth. By injecting money into the economic system, the interest rates are lowered easing restrictions on credit that banks apply to application of loans. As such, consumers as well as businesses are able to borrow money easily and at the same time spend more.
As consumers spend more, businesses also benefit by enjoying increased profits and revenues. This makes it possible for companies to update equipment and plant updates, as well as hire some new employees. When this policy is applied, the rate of unemployment goes down as well since companies can borrow money easily to expand operations.
This policy can also lead to inflation in cases where the economy is robust therefore creating surplus money. Majority of people wrongly believe inflation is the result of high prices while in fact, it arises where there is much money chasing the available services and goods thereby making money lose value in relation to products purchased. As a result, the price rises because consumers are competing for the products available which are offered to those who state the highest prices.
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Expansionary Monetary Policy Vs Contractionary Monetary Policy
A monetary policy can either be contractionary or expansionary. The former accelerates economic growth while the latter restricts it. Conventionally, an expansionary policy is used to address issues of joblessness during depression by lowering the rate of interest with the hope easy credit will attract companies to expand. This is achieved by increasing money supply in an economy.
These policies are often used in accordance to the state of the economy at any given time and they both have some pros and cons. The contractionary policy is used to promote stable prices and reduce inflation. The process used to do this involves complex steps undertaken by the central bank which includes estimating the existing economic conditions and predicting what course the economy will take in the following years (preferably 2 years).
Once this is done, the central bank has to compare the results with its inflationary and economic growth goals. If the estimated inflation is more than the central banks goals, contractionary measures are employed. Some of the actions taken might include high short term interest rates and high reserve requirements which reduce the supply of money and slow down the pace at which an economy grows. The major disadvantage of this is the fact that companies and consumers find it difficult to get loans and what is more, it leads to increased cases of unemployment.
An expansionary monetary policy is the exact opposite and its effects are also different. The purpose of this policy is to expand the supply of money and at the same time, increase economic activity. This is achieved by keeping the interest rate low through addition of money into the system via open market. This is also carried out by the central bank and the goals of an expansionary monetary policy includes spurring economic growth, increasing employment opportunities and ensuring there is price stability.
A contractionary monetary policy has the exact opposite effects. Central banks have to be open and thorough when making a decision on which of these two policies to implement as they can have adverse effects on the economy. For instance, an expansionary policy has lagging effects which are noted between the time the policy is implemented and when the effects are felt. As such, it causes high cases of unemployment because businesses cannot expand.
Decisions on monetary policy take a long duration for them to be effect on the economy and especially in cases of a complex and large economy like that of the US. Therefore whether it is expansionary or contractionary policy, the effect exerted is not an immediate one.
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Effects of an Expansionary Monetary Policy
The role of an expansionary monetary policy is that of increasing economic growth and commonly lessening unemployment and the increase in prices. The policy can be implemented in varying ways some of which are as highlighted below.
- The central bank can implement this policy by buying government bonds in an open market.
- The policy can also be enacted by increasing discount window lending amount
- Finally, it can be enacted by decreasing reserve requirement
The effects of this policy are varied and while this is the case the most common ones include the following:
The money injected into an economy when conducting market operations is used by consumers or alternatively used by businesses for purposes of hiring new workers or creating growth. This policy comes with low interest rates which make it affordable for consumers to purchase houses, cars and other items. What is more, it also leads to expansion of businesses. Low reserve requirements also make it possible for banks to issue more loans and this increases credit supply and lowers interest rates charged by banks.
This policy has the tendency to increase the prices of real estate and stock as well. Apart from increasing stocks demand through creation of additional money, reduction of bond prices accompanying this policy increases the attractiveness of bonds. Because of the low interest rates, consumers find it easier to buy new houses increasing real estate value. Most households have their wealth either in stocks or real estate which means an increase in the value of these two creates more wealth for households.
Whenever the interest rate in one country falls compared to that of other countries, the country with the best monetary policy experienced a fall in currency. When a nation’s currency decreases its value, exports become cheaper while the imports price increases consequently, boosting the economy of that nation further.
Though this policy is great for an economy that is depressed, it can also cause inflation or rise in prices especially in an economy that is close or at full capacity. This is attributed to the fact the increased money outstrips productivity capacity of that economy. This happens because often, there is a lag during the process of implementing the policy hence the impact is not felt immediately. Therefore, the Central Bank is supposed to judge accurately, not the current performance of the economy but rather, how it will be at some point in the future.
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Contractionary Monetary Policy
Contractionary monetary policy is defined as macroeconomic tool that is used by the central bank of a country or its finance ministry for purposes of slowing down the economy. This kind of policy is enacted by a government with the aim of reducing the supply of money and ultimately, spending within a country. There are a couple of ways through which this is done and they include the following:
- Increased interest rates
- Increased reserve requirements
- Reduced money supply either indirectly or directly
The policy is used during growth periods of business cycle that are high but he effect is not immediate. Therefore, this means the purpose of the policy is emphasizing on reduction of money supply for less investment and spending thereafter slowing the economy down. The idea is making sure people spend less by making the prospect cost of holding cash high. The policy’s effectiveness varied in accordance to investment and spending patterns in the economy.
The major purpose of this policy is slowing down inflation which accompanies a flourishing economy. The government will apply different techniques to accomplish this and they include, slowing government spending. The interest rates can also be raised making it more costly to borrow money. Inflation is slowed by reigning economic growth and this aids cool the markets off and also decreases overall demand which means the prices also go down.
Inflation leads to ever rising prices and this eventually negatively impact the spending power of the consumer. The fluctuation of prices can leave the consumers erratic and nervous in regard to spending patterns. This policy aids stabilize prices as inflation slows increasing consumer confidence and keeping the economy even while encouraging spending patterns that are stable.
A contractionary monetary policy slows down production. This is a by-product of the country’s economic engine slowing down. The major culprits in this case include r3educed product and service demand as well as costly investment capital. Once production is geared down by companies, it often takes years before it is ramped again. If this policy exceeds the mark and tightens a country’s economy relentlessly than intended, companies slow down production and this in turn shutters plans for expansions. Consequently, this throws the economy into a recession loop.
Contractionary monetary policy can also cause increased rate of unemployment because as companies slow down their growth rate, they are forced to hire less employees. Increased cases of unemployment cost the government increased insurance admin costs as well as social service expenses. Therefore, governments are supposed to weigh the cost of this against economic benefits associated with inflation reduction. High rates of unemployment can reduce consumer confidence as well.
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Objectives of the World Trade Organization
The World Trade Organization was formed after GATT members signed an agreement in 1994. Unlike GATT, the World Trade Organization was formed after signing an international treaty that was approved by all participating countries. Thus, organization has an international status just like the World Bank and the IMF. However, the WTO is not a United Nations’ agency.
GATT was not an organization but a legal arrangement but the WTO is an international organization established as a permanent institution. It acts as the watchdog in the world of goods, services, foreign investment and intellectual property trade among others.
The main objectives of the World Trade Organization are as follows:
- To implement a new system of the world trade as envisioned by the treaty
- To promote global trade in a way that is beneficial to all member countries
- To enable developing countries to secure a balance in sharing the advantages of the expanded international trade that corresponds to their growth and developmental needs.
- To eliminate hurdles that hinder the establishment of an open global trading system while ushering in an international renaissance economically since global trade is a crucial instrument that can boost economic growth of the member countries
- To boost competitiveness among the trading partners in order to benefit consumers while fostering global integration.
- To increase productivity and production levels with an aim of boosting employment levels globally.
- To utilize and expand global resources to maximum levels
- To improve the living standards of the global population while boosting economic development in the member countries.
- To eliminate discriminative treatments in terms of the international trade
- To boost real income as well as trade in services and goods in the member nations.
- To enhance environmental protection while accepting concepts aimed at enhancing sustainable development in member nations.
Since its establishment, the World Trade Organization has provided a forum via which member countries negotiate their relations in multilateral trades on the basis of the treaty that was signed in 1994.
The organization has also administered the procedures and rules that govern the settlement of different trade disputes. It also administers the review mechanism of trade policy. The World Trade Organization cooperates with the International Monetary Fund when appropriate to enhance coherence in the process of making global economic policies. It also cooperates with the World Bank and other affiliated agencies in enhancing coherence in the global economic policies.
Additionally, the World Trade Organization has facilitated the implementation, operation and administration as well as furthering the objectives of the agreement signed in 1994 and multilateral trade treaties while providing a framework for the administration, operation and implementation of plurilateral trade treaties.
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