2008 Economic Crisis

Labor resources - resources of available manpower.

Human effort used in production. That means technical expertise and marketing expertise, too. The payment for labor is a wage.

The effects of this economic meltdown are:

1. Banks have incurred huge losses. Their earnings came down.

2. Financial institutions have gone bust or have been taken over by bigger organizations

3. The housing prices have plummeted

4. The liquidity in the financial system has come down

5. High unemployment

etc.

what is global economic crisis?

The Sub prime Mortgage Crisis is an ongoing economic problem that has become more apparent in 2008 and has resulted in reduced liquidity in the global credit market and also the banking & financial systems. This crisis has exposed the weakness in the global financial system and also the regulatory framework that is overlooking them.

Some of the reasons for this crisis are:

1. The US Real estate market crash

2. High default rates on Sub prime loans &

3. Sub prime Mortgage backed securities

A Sub prime loan is a loan that is granted to a borrower who does not qualify for loans owing to a variety of risk factors like low income level, bad credit history etc.

In general, banks giving home loans to people who couldn't afford homes. That's what started it. Lots and lots of things happened afterward.

There are many factors that cause global economic crisis. If one believes in free markets then, it is said that institutional polices that attempt to exploit the market can cause serious fluctuations on the global scale. According to most "free market" theorists, the market is an exchange between two constituents, who agree on a price without of need of an "arbitrary agent". This creates a natural supply and demand defined by their agreed price. The situation that occurs is that this model is affected by economic events such as weather, availability of resources, institutional policies and technology, which all can be either positive or negative. For the case in point, let's say that there is an arbitrary agent who decides to charge a fee for conducting an exchange for six individuals (this example could be substituted for any of the mentioned economic events uniquely affecting the price). Each of the three pairs would have a supplier and consumer. Let us also suppose that 2 out of the 3 pairs can afford to do business but one of them cannot due to this fee. This would thus create an inefficient market. On a global context, if we were to have this model to represent the sum of all markets, the 2 pairs that can afford to do business would be all functioning markets and the one that cannot would be the market failures influenced by the arbitrary agent which can be viewed as all ineffective economic policies. In a sense, a global economic crisis is the occurrence of market inefficiencies due to economic events. I hope this answers your question.

There is no cause of the global crisis there's only a effect and that's your mom

The main reson is banks trying to make a buisness out of delling debts and loans.

When Banks who had been letting anyone borrow, find out that thesse people have no money the banks go bankrupt, and shareholders trying to sell their stock which has become practicly worthless.

While banks like nationwide don't have shareholders the people saving their money with them shan't make a loss, yet if the coumpony makes a gain then the people saving with them shall too.

Production Possibility curves

The production possibility curves is a hypothetical representation of the amount of two different goods that can be obtained by shifting resources from the production of one, to the production of the other. The curve is used to describe a society's choice between two different goods. Figure 1, shows the two goods as consumption and investment. Investment goods are goods that are involved in the production of further consumption goods. They include physical capital such as machines, buildings, roads etc. and human investments such as education and training. The sums of all investments make up the capital stock of a society. To show the point where all resources were used to produce consumption goods, one should move straight up the vertical axes to the curve. To show the point were all resources were used to produce investment goods, one should move straight on the horizontal axes to the curve. Both points are extreme and unrealistic. Both points A and B represented more realistic combinations, with point A showing more consumption and less investment, while point B shows more investment and less consumption.

Figure 1.

The production possibility curve of figure 1., shows the trade off in production between investments and consumption goods. Any two categories of different goods could be chosen. What they are is arbitrary. The curve is used to show during a specific period, what could be produced of the combination of the two goods, if all resources are fully employed, while technology and institutions do not change. Given those conditions, societies output potential is realized anywhere on the curve (which is called the production possibility curve's frontier). Unemployed resources (labor, capital, physical resources) of any kind would result in an inefficient production level, and would be shown as a point to the left, or inside the curve. By definition all point to the right or outside of the production possibility curve (frontier) are impossible, given the limits of resources and technology.

Opportunity Cost

This hypothetical curve shows how much of consumption must be given up to increase investments (the movement from A to B). This demonstrates the important economic concept of Opportunity Cost, which is the cost of anything (such as an investment in a new road), in terms of what has to be given up. This is the general concept of cost in economics. For the individual, these costs could be financial, but they could include a individual's time and other intangibles. For society the production possibility curve shows opportunity cost only on the curve itself. If society found itself inside the curve, for instance, during a recession (where all resources are not being utilized), then a movement out to the production possibility curve has no real opportunity cost. The unemployed resources are just being utilized (unemployed labor going back to work).

Opportunity cost is different than accounting cost, and unfortunately is not so easily calculated. Opportunity cost has a subjective element. For instance, to determine the opportunity cost of a new highway, includes the obvious cost of materials, of labor, of land, (these are the easily determined accounting cost), but there are also intangible cost, such as the cost to the community of the disruption involved with new construction, and the change in the communities effected by the highway. Also there may be costs connected to increase pollution (with health effects), increased noise, and an increase in general unattractiveness. These cost are real, but are difficult to both measure and evaluate. Putting a dollar value on these cost adds a subjective element to the evaluation. As a result sometimes they are ignored.

Economist are often asked to make cost/benefit studies of economic projects, to help determine their overall value. But because of the intangibles, and subjective nature of both benefits and opportunity costs, no definitive answer can be given. The studies should be viewed only as one input into the decision process, and not as definitive.

Law of increasing cost

The production possibility curve bows outward as a result of the law of increasing cost. The law of increasing costs takes place when society uses more resources (which takes those resources always from the production of the other good), to product any specific good. This causes increased opportunity cost with each additional unit produced of that specific good (increasing amounts of the other good have to be given up). The reason is simply that, as a nation, certain resources are better suited for producing some goods then they are for other goods. Some resources would be better adapted for use with investment goods, for instance, than consumption goods. Resources are generally not perfectly adaptable for producing both categories of goods (consumption vs. investment). Therefore, increasing the output of a particular good, must use less efficient resources than those already used. Hence the increasing opportunity cost of producing the additional units and the law of increasing cost. The more specialized the resources, the more bowed out the production possibility curve.

Figure 2.

Economic growth and the production possibility curve

In figure 2, economic growth is portrayed as a shift in the curve outward. During any particular time period, a society cannot be outside of its production possibility curve, but over time the curve can shift, as resources expand (as the labor force increases, for instance), and new technology is developed. The new curve further from the origin indicates that more goods and services can be produced, and thus consumed. By definition this shift in the curve represents increased economic growth.

In Figure 1, a country that selected point B (selected less consumption and more investments), would increase its resources (capital) faster than if it had selected point A. Therefore by selecting point B, a country would find its production possibility curve shifting outward faster than if it had choosen Point A. The tradeoff between consumption and investment suggest that consumption today is at the expense of faster economic growth in the future.

The simple tradeoff is not enough to explain why growth has occur historically. There are many countries, which consumed relatively little of their total output, but still manage not to grow economically. Other countries, most notably the United States has managed to grow, in spite of its high level of consumption. During the 1990s consumption in the United States had reached record levels (levels of aggregate personal savings, which is inversely related to consumption, were close to zero for a number of years), while economic growth continued, and actually reached record rates of growth during the latter years of the 1990s.

The actual reasons for the shift in the production possibility curve, and the increased growth (measured as the percentage change in the gross domestic product), therefore has many causes. Besides the increase in investments, improvements in technology and a change in institutions can be responsible for growth. It is hard practically to differentiate these different elements. There is no simple relationship, and causation can go in both directions. Economic growth could be responsible for the increased investment, which incorporates improve technology and requires changes in institutions.

Limitations/Production Possibility Curves

The production possibility curve can be viewed as a useful tool to demonstrate the concepts of opportunity cost, and the law of increasing cost. It also protrays the underlying condition of scarcity and unlimited wants, that are paramount for neoclassical economics. The underlying scarce resources determine the limits of the production output, and thus consumption. Movement of the curve outward is seen as an unambiguous good, which can fill those unlimited wants by increasing consumption. A society's rational choice, usually seen as a market solution, can be defined as a choice of one of the production possibility points on the curve. The production possibility curve is a useful tool to explain concepts in neoclassical economics.

The production possibility curve is strictly hypothetical and static in nature. There are no practical ways to actually apply and calculate such a curve. It's use is as the starting point for conceptualizing, and it provides an example of neoclassical economic's fondness for methodological deduction (starts from general premises).

Alternative schools of economics that question these simple assumption of neoclassical economics has less use for the production possibility curve. No tool or analytical device is truly neutral or objective, and this is true for the production possibility curve itself. The increased production possibility's that come with growth, for instance, do not question the environmental consequences of that growth. The downside effects of economic growth are ignored.

Also the humanistic paradigm have little use for of the curve as a tool of analysis. This paradigm, which in contrast to neoclassical economics, question the unlimited wants of consumers for goods and service. The humanistic paradigm argues that once basic physical needs are secured, now and into the future, the real needs becomes social and achievement needs. They would further argue that these needs are not met effectively in the process of buying and consuming of goods and services, even though this may be the attempt on the part of some. With the strong cultural value of work (work ethic), these needs are more effectively fulfilled in the process of doing and contributing by work to something outside of oneself. Whatever that is, it certainly will very within the context of one's culture and society. In the United States, work for many fulfilled these needs, or at least provides the hope for fulfilling these needs. Not any job, of course, but good jobs which besides securing one's physical well-being also allows one to belong, to have self-esteem and to feel a sense of achievement.

Various alternative schools of economic thought believe that human needs and wants are not absolute but can be manipulated. And such needs and wants are all relative to our particular culture and our status within that culture. Therefore the production possibility curve, and its simple assumptions misses the mark, and scarcity is misapplied. For humanistic economist opportunities to satisfy the higher social and achievement needs are what is really scarce.

AVERAGE STOCK LEVEL:the stock level indicates the average stock held by the concern.it is calculated with the help of following formula.

average stock level=minimumstocklevel+1/2(reorderingquantity)

1. United States - 11,711,830

2. Japan - 4,622,771

3. Germany - 2,740,551

4. China - 2,228,862

5. United Kingdom - 2,124,385

6. France - 2,046,646

7. Italy - 1,677,834

8. Spain - 1,039,927

9. Canada - 977,968

10. India - 691,163

11. Brazil - 603,973

12. South Korea - 679,674

13. Mexico - 676,497

14. Russian Federation -

15. Australia - 637,327

16. Netherlands - 578,979

17. Switzerland - 357,542

18. Belgium - 352,312

19. Turkey - 302,786

20. Sweden - 346,412

The idea that in 2008 or other years near that date consisted to be a "Great Depression" is false. As an example, the unemployment rate in the depression of the 1930's was 25% of the workplace. Also, a stock market crash was demonstrated on several occasions in the late twenties as an example. No such fall in prices to the extent of that economically recognized "crash" happened in 2008 or years near that year.

Some of the weaknesses in the United States economy in the midst of the fall in stock prices were low quarterly economic growth numbers, an unstable employment level, low housing values and unconventional asset purchases by the Federal Reserve Bank of NY.