Depression in terms of economics. The main differences between depression and recession

Is a long period of decline in the business cycle, characterized by reduced industrial production, widespread unemployment. International trade tends to fall.

Severe depressions were usually worldwide in scope.

Recession – a downward trend in the business cycle: decline in production, unemployment. Expectations about the future becomes less certain. Incomes of households tends to fall, they delay investments.

Differences: a depression is a recession much more severe and long lasting. “A recession is when your neighbor loses his job; a depression is when you lose yours.”

The main steps in globalization

Globalization isn’t new: for thousands of years people have been trading goods and travelling across the distances. For ex., the Silk Road connected Europe and Asia.

1) First steps of globalization was from the end of the World War the II till the ends of 60s. The main part was world trade. Marshall McLuhan said there was a global village effect

2) Second step were during 70s; the main part was foreign investments.

3) Third – developing by the influence of technology. For the company, the ability to innovate, to use new technologies is the key element of industrial competitiveness.

4) Nowadays people around the world can watch the same videos, listening to the same music and wear the same clothes.

The aim of economic globalization

Globalization is a process involving the integration of economies, cultures, internalization of ideas.

The main aim is to change the world into one dynamic market and to remove the barriers for the global movements of capital in industrial developed country (for ex. NAFTA (US, Canada, Mexico)

Advantages: 1) integration of economies;

2) great changes in trade;

3) low taxes for producers domestic and foreigners;

4) many large companies organize production on a worldwide scale.

Factors of production. Labour market compared to the product market

The labour market is different from other markets: demand for labor is derived from the demand for the product that labour is used to produce.

Differences between service and product markets:

1) when you’re marketing a service you’re really marketing relationship and value. This relationship and values need to be marketed differently than if you’re marketing actual products.

2) When a buyer purchases a service, the buyer is purchasing smth that is intangible, instead of a tangible product (like a computer).

3) Consumers’ concept of a service is often time based in just the reputation of only one single person. Instead of building a reputation based on the quality of a number of different products, a service is built on how well a particular person deliver on a service, such as how well a stock advisor does with your stock

4) It’s easier to compare the quality of different products. It’s easy for you to see if one computer works more quickly than another.

5) Products are returnable. Services are not.

6) Traditional Keynesian model: increased labor demand, the law of supply and demand

Date: 2015-12-17; view: 807