The financial market fails to provide access to poor. The high cost of small scale lending are constraint to poor to access to formal finance, this push them to informal financial sector or to the extreme financial exclusion. When the access to financial services is improved, this enables to build up productive assets (Kirk Patrick, 2006). Microfinance institutions may correct the market failure left by formal baking system and help small businesses to access fund and creates economic growth and lifting poor out of poverty.It is normally asserted that MFIs are not reaching the poorest in society. However, despite some commentators’ disbelief of the impact of microfinance on poverty, studies have shown that microfinance has been successful in many situations.
When interest rates on loans are high, this leaves people with less disposable income resulting in less consumer spending. Depending on where the economy stands, this can be good or bad, as it would lead toward recession. But that may be exactly what is intended in order to decrease spending if the economy is currently experiencing over-inflation. The government may intentionally send the market into a recession rather than potentially risking too high levels of inflation. On the other hand, if the economy were already in recession this would only make the recession worse.
Economies may decline as a result of a change of life style; it eventually reduces people’s happiness. In conclusion, giving can make our lives more meaningful; however, I think that just contributing resources to the third world is not effective in solving poverty problem as the structural root causes that create hunger and poverty are still remain. Thus, it is not always wrong to not donate.
Supporting this argument Giffins (1977) found that even if growth did benefit poor and poverty was reduced, not everyone in the poor sector reaped the gains (Fields, 1989). These arguments that growth did not necessarily lead to the alleviation of poverty were presumably based on the Kuznet Curve hypothesis. In short, the distribution of income gets worse and will not improve until a moderate level of income is reach. Subsequently, this could lead to years before poverty is reduced. However, some studies have found there to be no linear relationship between income inequality and economic growth (H & JR, 2004).
Even though the economy could benefit from the budget deficit such as economic growth, the economists do not want to take a chance on that. Also, some economists are also concerned that higher borrowing by the government may also openly result in reduced utilization spending. They argue households recognize that higher current government borrowing results in highe... ... middle of paper ... ...ful spending because it is taking a toll on our future, our children’s future, and our children’s children future. Works Cited 1. Case.
Reducing inflation however has costs in lost output and unemployment during the adjustment. Thus, an important question is wheth... ... middle of paper ... ... would not allow massive inflation. Americans' feeling of pride in national institutions depends in part on low inflation or "sound money" as a signal of healthy fiscal and monetary institutions. Finally, inflation can discourage saving and encourage consumption. It thus is perceived as an attack on certain moral virtues -- a strong work ethic, deferred gratification -- that support a healthy economy.
Foreclosures are the first sign of economic decline so, a decrease in the amount of foreclosure would demonstrate that a restoration is occurring within the economic turmoil. If inflation were to ... ... middle of paper ... ...hough a recession without a job. The inflation could be sued to help alleviate problems created by the recession, as stated before inflation can help keep houses from being foreclosed. In addition, new principles of economic co-operation will have to be devised to not only minimize consumption but also provide us with methods by which we may prevent or penalize any waste or extravagance. Finally, the new economists will have to develop static rather than dynamic economic models, that is, models for our economy which provide us with ways to limit an increase in our levels of consumption, matched by productive processes which increase rather than diminish the total resources available to us.
The bail outs given to the banks were a candid approach to preventing the banks from failing, but there were still thousands of Americans failing as well. I believe the banks failing is a projection of the state of the American people. I think that if anymore stimulus or “bail out” money is given that it should be given to the people. The money wouldn’t have to be given directly to the people, but rather the banks that they owe money to. There are programs presently that help, but I firmly believe more should be done for the citizens not the banks.
On the surface level, deflation may be seen as a positive considering the decreased price levels, but it will result in a depression of problems for those in debt. Prices and income may fall but the amount of debt accumulated does not. If there is less money coming in, there is less to put towards what is owed. Deflation also has great effect on interest rates, taking account the low inflation rate shows that savings reduce if the nominal interest rate falls below zero and may provoke people to withdraw their savings (https://www.economist.com/blogs/economist-explains/2015/01/economist-explains-4). This makes it more difficult for a bank to stimulate the economy.
Economists regard the possibility for free riding as a problem for the free market, which usually leads to government intervention. Government intervention is not generally needed in a free market society but in this case if there were no government intervention this problem would not find a solution. The free-rider issue is often seen as a serious problem because of the assumption that a free rider's best self-interest is that they interact with others by force and fraud. If they can get away with the fraud and begin to gain the benefits of others they have reached their first goal. Their next goal is to make some good money or get credit for someone else's hard work before they get caught.