Principles of Economics Essay Example | Topics and Well Written Essays - 750 words - 1

Principles of Economics - Essay Example The economic success of a country derives its roots from the works of individuals. As a result, when individual are well conversant with the principle of economics, overall success is achievable. This paper seek to give an in-depth analysis of how the realization that economic principles underlie the choices we make at a personal, business and societal level has sparked today’s growing interest in economics. Economic Principles Before a commodity reaches the hands of a consumer, it usually undergoes various stages of development. Some of these stages include production and distribution. The entire process is referred to as economics and its contribution to development cannot be neglected. The economics principles usually give an overview of how the economy works. In the achievement of success, a proper understanding of the basics methods and concepts used by economist is necessary. Some of the principles of economics include: (A). Scarcity It is evident that the human needs ar e more than the resources available. As a result, not all the human needs can be satisfied at the same time. In economics, there are two categories of goods namely, free goods and economic goods. Free goods are available free of charge in nature while economic goods are limited in their supply (Mankiv, 2011). As people have been enlightened about scarcity, they are able to make sound decisions on the available resources thus increasing their efficiency. This is favorable for economic development. (B). Rationality In life, not everything comes as expected. As a result, proper reasoning is very necessary in ensuring that one gets a proper understanding situation. Making a rational decision is necessary, as it is optimal in achieving a goal. It usually takes into account all the merits and demerits before coming into a conclusion but taking into account the possible alternatives (Smith, 2008). By the people making sound decision, they are able to make proper economic activities and thu s this has sparkled today’s growing interest in economics. (c). Preferences When a person is offered various items, he is likely to choose one out of the many. The decision to choose one is specifically dependent on an individual. This is mainly derived from the person’s attitude towards the subject. In essence, preference is not static but dynamic over time. This is mainly determined by the person’s knowledge on the item. Because people are equipped with different preferences, they allow them to explore the utilities of all the available options (Loewenstein, 2007). Since by making preferences one increases the net utility, it directly and indirectly influences economic development. (D). Restrictions If a person was to be asked on the items he would desire in life to achieve his set goals and objectives, it is evident that there are always restriction that would hinder him from achieving them. Some of restriction are clearly indicated in the budgets and input c ost. For example, if the input cost is very high beyond the capability of a person, then he is bound not to undertake the transaction. Under such conditions, maximization is challenged. Therefore having clearly understanding how to maximize when restriction are there is necessary in ensuring that economic development is achieved. (E). Opportunity Cost This derives its roots from scarcity. Due to scarcity, the resources available to a person

The Expectations of the Dollar Essay Example | Topics and Well Written Essays - 2000 words

The Expectations of the Dollar - Essay Example Interest-rate futures demonstrate that the traders are certain the Fed will increase its benchmark to 4.75 percent on March 28, and predict about a 65 percent chance of another increase to 5 percent at the May meeting. However the outlook was not the same say in October 2005 when Fed was expected to go in for graduated dosages of increase in interest rate in keeping with the trend began since June 2004. The dollar had then risen 2.3 percent against the yen since the end of June 2005. The dollar ran its third straight quarterly gain, reported in October 2005, against the yen, the longest winning streak since 2001, as the Federal Reserve stuck to its policy of ''measured" increases in interest rates. The markets had then expected the dollar to rally to about 115 yens. The yield advantage of 10-year US Treasury notes with Japan had averaged 2.87 percentage points in 2005 year and reached as much as 3.27 percentage points on March 28 2005. As a result of these Japanese investors were buy ing the dollar to purchase overseas assets, such as Treasuries strengthening interest in dollar. As compared to this The Bank of Japan had kept rates near zero since 2001.US Rate increases had helped notch an 11 percent gain in the dollar vs. the yen. However for the first time ,in this scenario Bank of Japan indicated that the yen may be supported by indicating a timetable for ending its policy of holding interest rates near zero.BOJ had also decided to stop pumping money into the economy and to recommence forecasting of inflation after a seven-year absence. The risks to the US dollar in 2006 are being widely debated. Last year too Bill Gates, Warren Buffett and George Soros had predicted a crash of the US dollar which, however, did not materialize. However sufficient arguments exist today on why the US dollarwill stopdefying gravity and fall this year. As stated abovein the last few weeks the dollar has kept on falling relative to the Euro and Yen, as expectations of relative short term interest rate differentials and growth rates are turning against the U.S. US slow down, which may or may not trigger global slow down, is quite a probability with risks of a disorderly adjustment triggered by the bursting of the US housing bubble and the stagflationary effect of another oil shock driven by supply tightness and a confrontation with Iran. Moreover a large trade deficit of 7% of GDP has led to an unsustainable accumulation of net foreign liabilities (Roubini, 2006). These combined with domestic slowdown leave out weak signals for dollar wi th slight corrections in or around the two expected step-ups. This outlook would run concurrently to the period required to smoothen out these imbalances. This is expected to last the entire of the remainder portion of 2006 at the least. Theoretical Setting Post Bretton Woods period was a period of fixed exchange rates and primary forex market analytics concerned the effects of discrete policy induced changes in the level of exchange rates-be it a devaluation or appreciation. National economies and the global economy as result