MAEC by https://padlet.com/s10179234/cio59dr4owko Wen Jie, Alvin, Samuel, Hao Ying, Ryan en-us 2017-11-01 05:41:33 UTC 2025-11-18 06:51:36 UTC hello@padlet.com https://padlet-assets.s3.amazonaws.com/icons/Balance.png Renegotiating NAFTA Preparing for the worst The Economist (Oct 21-27) s10179234 https://padlet.com/s10179234/cio59dr4owko/wish/205870013 This article is mainly about the negotiations of the NAFTA(North American Free Trade Agreement) and how it might not be ending well.

A free trade agreement is an agreement between at least two countries to reduce trade barriers such as quota and tariffs, also to increase trade between those countries.

NAFTA is a free trade agreement between Canada,USA and Mexico to encourage trade between these countries and to allow foreign goods to be more competitively priced so that consumers have choices to choose.
For example, in this article, Roberto Santana Flores, a Mexican maker of charro shirts, recounts that before NAFTA occurs, to export his shirts to USA would incur a 37.5% tariff. With NAFTA, the shirts are now duty-free and can be more competitively priced.

The existence of a free trade agreement have several benefits, a few being increase of GDP and decrease in unemployment rate.
With a free trade agreement, price of the goods can be lowered when selling to another country. When the price of the goods is lowered, demand for it will increase in the other country. When there is more demand for it, the manufacturers will produce more of it. When the manufacturers produce more of that goods, it is counted in the GDP. Hence, a free trade agreement will increase the GDP of a country.
Next, when the manufacturers have to produce more of the goods, they will have to seek more labour to produce it, hence they employ people to produce the goods. When an unemployed person is employed to work, the unemployment rate will decrease as a result.

The benefits of the NAFTA can be mainly seen in Mexico, which has seen exports and foreign direct investments tripled since the early 1990s.

However, a free trade agreement also have its shortcomings.
A free trade agreement can cause some countries to lose investment funding over another country that is also in the free trade agreement. This can be due to several reasons such as cheap labour and lax regulations,etc... When this happens, the GDP of the country which the investment funding is lost could decrease. A prominent example will be the decrease in the investment of the manufacturing sector for USA as the manufacturers turn to Mexico to set up their factories and plants as the labour there is cheaper and the regulations is more lax compared to USA.
When investment funding is lost, jobs that were originally in the country will be shifted overseas, causing the employees that were originally employed to be unemployed, raising the unemployment rate. An example will be the increase of unemployment rate at the rust belt states in USA after the investments in the sector decreases.

Hence to combat the shortcomings of the NAFTA, the countries have agreed to return to the negotiation table to revise the terms and conditions of the free trade agreement in a way that all the countries can benefit from NAFTA. However, in the article, it was stated that USA have made demands that are deemed extreme that the other 2 countries might suspect that USA is hoping that the NAFTA collapses.

Only time will tell as there are still rounds of talks to go on before the outcome of NAFTA will be finalised.

From the graph below, we can see that most of the rust belt states, with the notable execption of Indiana, have a higher unemployment rate than the average unemployment rate in USA. This shows the effect of the NAFTA agreement on the rustbelt states.]]> 2017-11-11 10:17:46 UTC https://padlet.com/s10179234/cio59dr4owko/wish/205870013 US job growth accelerates, jobless rate falls to 4.1%, lowest in 17 years ryantan https://padlet.com/s10179234/cio59dr4owko/wish/206657548 This article is mainly about the aftermath of hurricanes in the US.

A hurricane will cause the real GDP of the affected areas to fall as factories and stores would have to close down, unable to produce any goods and services.

"The unemployment rate has fallen to a 17 year low of 4.1%."

From this article, we also know that the labour force participation rate has fallen 0.4% from 63.1% to 62.7. This is because when a hurricane happens, many buildings will be destroyed, like marts and shopping centers, thus many will be jobless for some time, which causes the rate of unemployment to increase. When the rate of unemployment increases, the production of goods and services would decrease. Thus, GDP would decrease due to the lack of workers.

In this news article, it shows that the amount of jobs in the US has grown after last months hurricanes. The lost of jobs last month is due to cyclical unemployment as real GDP of affected areas fall, causing a recession.

Cyclical unemployment is caused by the lack of jobs during a recession. When real GDP falls, some companies close down, many jobs disappear, and the unemployed scramble for fewer available jobs.

The hurricane may also cause inflation to happen. When people are jobless, they would be trying their best to save money and thus spend less on luxuries, which causes demand of goods and services to decrease. When demand decreases, cost push inflation would occur as producers would have to increase their prices of the goods and services so as to compensate for the lower demand. Thus the hurricane would may cause inflation to occur.

"Growth has remained strong even as President Donald Trump and the Republican-led Congress have struggled to enact their economic programme."

The classical school of thinking states that the economy is always tending towards a full employment equilibrium, thus government would not have to interfere with the economy as it would naturally cure themselves. From the above excerpt above, it has seem that the US government's mentality is towards the classical school of thinking as it stated that the economic growth has remained strong though the President of United states and the republican congress has not interfered with the economy.

"unveiled a Bill that proposed slashing the corporate tax rate to 20 per cent from 35 per cent, cutting tax rates on individuals and families and ending certain tax breaks"

Though the government of the United States have not implemented any measures to help with the unemployment, they were planning to as can be seen from the text above. The text states that the government was planning to cut taxes from 35% to 20%, which is a significant decrease. This will significantly help individuals who are unemployed as they can focus more of their money towards survival and getting back up on their feet instead of giving significant amounts of money to the government.

The monthly job growth has averaged at 162000 over the last 3 months. From this article, they tell us that a healthy economy has to create 75000 per month.

The graph below depicts the employment rate of US the months in 2017. The 2 hurricanes that affected US were in September 2017. As you can see from the graph, it shows that the employment rate decreased by a substantial amount after the month of September. Thus, this shows that both hurricanes did have a part to play in the decrease of employment rate of the United States.

]]> 2017-11-14 11:42:53 UTC https://padlet.com/s10179234/cio59dr4owko/wish/206657548 U.S. economy grew at a 3 percent rate, a win for Trump s10179414 https://padlet.com/s10179234/cio59dr4owko/wish/206839794 article link: https://www.washingtonpost.com/news/wonk/wp/2017/10/27/u-s-economy-grew-3-percent-from-july-to-september-meeting-trumps-goal/?utm_term=.3de74cce715a
‘Trump and his allies in Congress are making the case that passing a tax overhaul — which aims to cut income and corporate taxes by $1.5 trillion over a decade — is critical to continuing the economic expansion.’

As trump is aiming to cut down income and corporate taxes, this would create an impact in the GDP, unemployment and inflation.

As income taxes are cut, employees would be able to get an increase in their overall disposable income as they would no longer have their income cut down by the income tax. As the disposable income is now increased while the consumption of the employees still remain the same, the amount of money that is earned but not yet spend would be increased. As such, savings of the employees have increased. Also, Unemployment is also reduced as the cut in the income tax will bring about more workers who are willing to work as there is a higher income. 

Also, the cut in income and corporate taxes helps to keep unemployment low so as to maintain a high labour force participation rate which will keep the production of goods and services at a high rate. Thus, GDP will be kept at a high rate due to many workers producing goods and services.

The cut in income and corporate taxes may cause inflation. When income and corporate taxes are cut, this will create a high labour force participation rate which may cause demand pull inflation. As there is close to a full employment rate, the economy is operating close to full capacity. This may cause general price level to be pulled up by the pressure from the buyer’s increase in their total expenditure. Thus, the cut in income and corporate taxes may cause inflation.

“ I would expect business fixed investment to go back to its disappointing past and markets to go down as well.”

When businesses lose investments, they no longer can pay their workers to produce their goods, this causes workers to ask for an increase in their wage. If these workers’ requests for higher income are not answered, workers would quit and there would be a reduction in the overall production of goods and services. As such, markets would go down, real GDP would fall, companies would close down and many jobs would disappear. This causes the effect of Cyclical Unemployment as there are a lack of jobs due to the recession in the economy due to the consequences of businesses losing their investment.

Also, when real investment of a business drops, this means that the interest rate could have been a reason for the drop in the real investment. However, the drop in real investment may also be due to the factors of expectations, technological change, capacity utilization and business taxes. Thus, in this case, the businesses are expecting corporate tax reforms that will cut down their corporate taxes, however, it is expected that the business fixed investment will go down if these tax reforms does not occur.

‘The Trump administration says tax cuts will cause a large uptick, so much so that the economy will grow more than 3 percent a year, which hasn't happened since 2005.’

Tax cuts helps to keep unemployment low which will lead to a high labour force participation rate which will keep the production of goods and services at a high rate. Thus, GDP will be kept at a high rate due to many workers producing goods and services.

‘After years of simulative low interest rates, the Fed is beginning to lift rates, which is akin to tapping the brakes on the economy.’

With the low interest rates and the high inflation rate, real interest rate will be less than the nominal interest rate. This means that the money lenders will be getting less money in real terms than the money they lend out and savers who are effectively lending money to the bank will be getting back less money. However, if the interest rate increased, the interest rate will be higher than the inflation rate. Thus, both the savers and the money lenders will be getting more money as they will get back more money then what they lend out. This will improve the economy as the people would be able to spend more money on goods and services.
]]> 2017-11-14 17:09:44 UTC https://padlet.com/s10179234/cio59dr4owko/wish/206839794 Tutor's comments nmk https://padlet.com/s10179234/cio59dr4owko/wish/207527382 (1) On the right track. But you would need to develop your analysis further to show more depth. 
(2) Incorporate a few relevant graphs, diagrams and pictures to enhance the visual impact of your Padlet wall. A relevant backdrop too.
(2) Need to have additional economic concepts. Topic on Inflation or The Keynesian Model?
(3) Should also do some additional research so that your final report is not just a summary of the main points on the articles.
(4) Please put the names of all group members in the header.
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