Factors Affecting International Business Practices

International Business: International business basically involves all business transactions like the transfer of goods, services, capital, technology and managerial knowledge throughout the world. Similar to other businesses or trade, international business also incorporates the export and import of business items. There are various options for conducting business include starting a joint venture with an existing firm in the host nation, exporting goods and services, offering managerial services to firms in the host country, providing licenses to offer goods in the host country, and opening a branch in the host nation. Currently, most of the social and economic changes across the world have originated from globalization. Liberalization of Cross-border Transfer of Goods, Services, and Resources: One of the major factors that have acted as the driving force for the modern global economy is trade liberalization or the movements of goods, services, and resources. In the past few years, international business has been characterized by trade liberalization agreements that promote the movements of goods and services past international borders and with few limitations. The commencement of trade liberalization in international business was also stimulated by the increased interest by countries in the relationship between trade and sustainable development. Many governments in the modern world are liberalizing cross-border movements of goods, services, and resources because ofShow MoreRelatedFactors Affecting Recruitment and Training in International Business1225 Words   |  5 PagesExplain some of the factors which may affect recruitment and training in an international business. Recruitment and training are two essential and unavoidable aspects of multinational firms. 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The Things People Forget in the Heat of the Moment Free Essays

The task of instructing adolescents about sex has been seen as the responsibility of the parents for many years. But, parent-child communication in sexual matters may be hindered by parental inhibitions or by various intergenerational tensions. Children often times do not receive information on sexual matters from their parents, at least initially. We will write a custom essay sample on The Things People Forget in the Heat of the Moment or any similar topic only for you Order Now Due to sex related information available to children through mass media, the education board has deemed it necessary to evaluate and change sexual education. The course work has evolved drastically from the idea of teaching merely about sexual reproduction and focusing on abstinence. Rather, now it is important to deal with sex-related topics in the media through more sophisticated and comprehensive programs, deemed necessary to institute in the public school system. This of course has brought about several conflicting views about the course work within the program, raising social and ethical questions here and there. Although the idea of educating such young people about sex is viewed as strange, or as wrong, or even as immoral entirely, it is necessary for the well being of young people to be educated about these matters. Failing to teach young people about sex is like playing a ‘friendly† game of Russian Roulette; the risks are vast, danger is unknown, and death may stare one in the face. Often times failing to teach properly the risks of something causes a lack of knowledge, almost like ignorance, especially regarding the subject of sex. Disastrous consequences can come about because of insignificant information about sex and sex relations. For example, thoughts of pregnancy surface with the lack of protection, but additionally, risks include the possibility of venereal disease spread, such as Gonorrhea, Syphilis, or HIV, in the absence of contraceptives. These serious circumstances are often taken lightly when in ‘the mood† and one must be educated fairly well to understand the extreme importance of safety. This safety may include birth control or forms of contraceptives like male or female condoms, to ensure that one’s health is never undermined at any cost. Lack of monogamy and smart sexual relations has made it imperative to take ‘safety precautions†, as comical as it may sound, to ensure that one†s health is not jeopardized. In similarity, Russian Roulette is a game of risks, much like sex. Although the stakes are rather different, sex of late and Russian Roulette alike are merely gambling with one†s life. It seems it might be wiser to choose the latter as a means of destruction. After all, a life stricken with some disease associated with sex can have disastrous effects on one’s physical body. For instance, John, an eighteen-year-old freshman at the University of Pennsylvania illustrates this perfectly. He was diagnosed two years ago with a virus he can never be rid of. Diagnosed at the age of sixteen with herpes simplex one, he lives a stressful life, often ridiculed because of constant outbreaks of sores, not only on his genitals, but also in and around his mouth. He dreads the next outbreak everyday, and wishes with every frequent recurrence he had taken the extra ten seconds to put on a condom, for if he had done so, life would be more pleasant (â€Å"FAQ About Genital Herpes†). In addition, take for example Maria. Maria is a junior at Lake Springs High School. She too had a sexual encounter she wishes she could take back. One evening at a party, she drank a few drinks, and before she knew it, she was having intercourse with a man she hardly knew; she couldn†t even recall his name. Now, Maria endures extensive treatment weekly of AZT to hinder the debilitating effects HIV has on her body. She will grow weaker until the day she dies, all because of an unprotected sex act (â€Å"Education†). This information heightens the need for education regarding the proper care and safety precautions one must take when sexually active with another person. With the game of Russian Roulette, though, just one pull of the trigger and there are 1 in 6 chances, one swift blow. In addition, cases exist of Russian Roulette players who are uneventful in killing themselves, yet do serious damage to their brain, causing them to be quadriplegic. Teaching the dangers about sex is not an easy task. No easier is learning to accept consequences, but these must be taught during adolescence for it to be better embedded within one†s thoughts. In addition, danger regarding sex coincides with the risks one takes when the decision to consummate a relationship is made. Teaching youth about the risk of pregnancy and the likelihood of contracting one of a vast array of diseases that range from completely curable with little discomfort, to long, drawn out, and debilitating incurable diseases one must endure the entirety of their life. One could say that a person walking down the street each day puts himself or herself in danger; that there are risks everywhere, and this need not be taught at school, for it is common knowledge. This may be true, but the idea that one can protect themselves from potential danger just by being informed should be basis enough to incorporate a more advanced sexual education course curriculum in the public schooling system. For instance, instead of focusing on abstinence, which is purely opinion, focus on the fact that by the age of 15, more than 18% of U. S. teens have experienced sexual encounters and that by the age of 20, 40% of Caucasian women have conceived at least one child (â€Å"Causes, Incidence, and Risk Factors†). Focus also on the likelihood of contracting a sexually transmitted disease; focus on the facts, focus on the statistics. Take Russian Roulette for comparison to these dangers associated with sex. Potential dangers are obvious; holding a gun to one†s head and pulling the trigger, the danger seems quite substantial. This means of suicide can be compared to that of unprotected sex. One can illuminate the idea of unprotected sex as a way to commit suicide. A person not knowing the dangers of sex, and a person holding a gun up to one†s head, not thinking that there could be a bullet within the pistol display the same ignorance. The lack of information or education about these two instances could be devastating. Knowing the dangers, but still taking the risk, sex seems a lot like the game of Russian Roulette. Proposals need to be made to fulfill both parents and adolescent concerns in addition to societal needs to incorporate a more advanced form of sexual education. Perhaps issuing more of a homework-based class via an Internet website could fulfill these concerns. The idea in mind would be to lessen a student†s awkwardness of a classroom setting, yet still understanding the necessary material presented. This being beneficial because students are still learning about the subject matter and it would increase a parent†s morale about this course matter, for their children are learning about sex within their home rather than in a classroom, where sexual tensions may be embarrassing. Another proposal is to include the curriculum within already established courses. Academics such as English and History can hold intimate classroom conversation about this subject matter relevant to course curriculum. This means of incorporating the sexual education material within required classes would guarantee that sexual education be at least introduced to these younger individuals. It is not necessarily automatic that one will contract a venereal or sexually transmitted disease, neither is it definite that when the trigger is pulled, the bullet will come raging through for a short journey through the skull. The risks are there though; the danger is there. Without an education to outline these risks and dangers, the results a lack of education would be devastating to society. How to cite The Things People Forget in the Heat of the Moment, Papers

Positive Leadership A Case Of Mc Donalds

Question: Describe about the Positive Leadership for A Case Of Mc Donalds? Answer: Introduction Leaders in an organisation are known for applying strategies aimed at leading the entire organisation to higher level of success. Strategic management and leadership are closely integrated terms as they imply the attainment of organisational goals through the leaders applying their leadership abilities in strategically managing organisational resources. The leaders are required to apply different important leadership styles aimed at achieving the strategic organisational goals in a positive manner. However, a combination of both the management and leadership approaches need to be considered by the leaders so that they can ensure the positive accomplishment of organisational goals. It is not only the consideration of appropriate leadership styles, but their appropriate application is also quite crucial from the point of view of accomplishing organisational goals in a highly efficient manner (Northouse, 2012). This report is aimed at analysing different important aspects related to leadership and management at McDonald so that the strategic organisational goals are positively accomplished. In accomplishing the analysis, the focus will initially be towards understanding the relationship that exist between strategic management and leadership at McDonald and this is followed by an application of management and leadership theories in supporting organisational decisions. The analysis will also include an assessment of the leadership requirements at McDonald, and finally, there will be a critical analysis in relation to planning and developing leadership skills within organisation. Relationship between Strategic Management and Leadership at McDonald Link between strategic management and leadership and impact of leadership styles on McDonald Martin (2006) stated that strategic management is the process of identifying the major organisational objectives, policies and plans that will help the organisation in attainment of the long-term profit levels. Strategic leadership is necessary for the attainment of the strategic objectives because the strategic leadership tactics involves the use of proper vision and motivational skills to ensure timely attainment of the strategic objectives. DuBrin (2008) stated that strategic leadership is the process of taking responsibility for the future and the present strategic objectives of the organisation. Thus, the primary goal of a strategic leader is to evaluate the business conditions, analyse the external and internal business environments and lead the employees as per the changing global trends. As per Forbes, the market share of Mc Donald in USA, has decreased to 22.1% due to the high saturation of the market and the presence of the large number of competitors like KFC, Burger King etc. Thus in order to increase the market share Mc Donald has adopted the following strategies: Internalisation and focus on sale of products in emerging markets (Cameron, 2012) Offering a wider variety of food for attracting of more customer segments Innovating the interiors of the stores and making the stores more visually attractive Introduction of the niche products like Chicken McBites in the global market Sperry (2013) stated that the leadership style determines the way in which the strategies of the organisation are to be achieved. For the strategic development of Mc Donald, the retail food chain needs to adopt different leadership styles suiting the different strategic situations within the company. The major focus of the leaders within Mc Donald should be on the adoption of the situational, persuasive and participative leadership style. In the present context, Mc Donald operates based on democratic leadership style. The open culture within Mc Donald has helped the food chain to maintain work flexibility and reduce the communication gap between the employers and the employees. However, Schein (2010) argued that in order to fulfil the strategic objectives concerning the global expansion and the innovation with the product line, Mc Donald will required in corporation of innovative leadership, adaptability skills and persuasive leadership style. Evaluation of adoption of leadership styles in different situations Cameron (2012) stated that apart from the democratic leadership style, the leaders within Mc Donald should adopt different situational leadership style to solve the strategic goals. For focus on internalisation and emerging markets, the management of Mc Donald should adopt the global and charismatic leadership style. For attainment of success in the emerging markets, the management at Mc Donald needs to adopt a global leadership strategy. Wood and Brotherton (2008) stated that a global leader should have prior industry experience, global strategic thinking, good forecasting ability, flexibility and should be highly sensitive to cultural diversity. Mc Donald has also adopted innovative strategy with respect to introduction of new products within the existing product line. McDonald has strategized to introduce new products like McBites, which are comparable to chicken popcorns of KFC (Goodridge, 2006). The innovation strategy needs to be implemented long with a process of change management within Mc Donald. Thus, the adoption of persuasive leadership style is necessary in this context. The adoption of these skills will help the management of Mc Donald to persuade the employees in adoption of the changes within the organisation. Apart from these leadership styles, Mc Donald should also adopt the participative leadership style within the organisation because adoption of participative leadership within the internal employee relations will help Mc Donald to maintain open culture and open communication within the retail food stores. Moreover, the participation of the employees decision with regard to the new strategies and new produc t development will encourage the employees and make the employees feel important within the organisational context (Sindell and Hoang, 2001). Application of Management and Leadership Theory to support McDonalds decisions Identification of selected management and leadership theories and their impact on strategy of Mc Donald Goodridge (2006) leadership theories show cases the different types of leadership styles that should be adopted by the management of the organisation for the attainment of the strategic goals. Lussier and Achua (2009) stated that transformational leadership theory states that the leader should be in charge of identifying the strategic objectives, vision and the creative changes that should be incorporated within the organisations. The adoption of the transformational leadership style within Mc Donald will help the management of Mc Donald to create future strategies and growth visions. The international expansion strategies and the product line expansion strategies are a result of the transformational leadership theory. London (2001) stated that transactional leadership theory involves motivating and providing necessary directions to the followers for achievement of the strategic goals. However, Northouse (2012) stated that in transactional leadership it is employees are motivated by reward and punishment and it is the duty of the sub ordinates to follow all the orders of the leaders without questioning the capability of the leaders. Thus, adoption of transactional style endangers the internal relationship between the employees and the superiors. In Mc Donald, the management avoids adoption of transactional style since open communication culture is generally followed in Mc Donald. Mc Donald highly depended on adoption of the participative leadership style and allowed the suggestions of all level of employees in terms of decision-making. However, as per Forbes, the strategic failure of Mc Donald marketing strategies like-the text message discount coupons, Food chain finder app and the introduction of the McVeggi for the vegetarian customer segment, questioned the leadership strategy within the retail food chain. London (2001) stated that in this context high degree of participative leadership strategy threatens the attainment of the organisational objectives since participative style does not encourage work schedule. The charismatic leadership theory states that leaders adopting this style are able to influence and persuade the employees to work according to their wish without being aggressive. Thus, Mc Donald should suitably adopt the persuasive or charismatic leadership style so that the open culture can be maintained and the organisational objectives can be achieved effectively. Martin (2006) in this regard added that as per the contingency leadership theory, the leaders should possess two major types of qualities namely maintaining a good rapport with the employees and secondly the leaders should be capable of planning, scheduling and role assignment so that the organisational objectives are attained within the given deadline. In context of achieving the above stated objectives, Mc Donal d should also resort to adoption of the contingency leadership style. Leadership Strategy supporting direction of Mc Donald The internalisation and product diversification strategy of Mc Donald requires high degree of flexibility, situational decisions and good degree of forecasting power in terms of the leaders and the management of Mc Donald. Thus, Morrill (2010) stated that adoption of Global and situational leadership style is favourable for the food retailer at the present context. The adoption of the situational leadership style will help the management of Mc Donald to change the product introduction decisions, pricing decisions and selection of the target market as per the changing business environment. Further, the adoption of the global leadership style will help the management of Mc Donald to effectively expand in the international markets. The Global leaders generally exhibit high degree of forecasting ability and have prior market experience. For expansion in the emerging markets like China, Asia and Japan, the leaders within Mc Donald requires to have customer preference of the respective mar kets. This will help them to determine the demand for the Mc Donald products and frame the pricing strategies accordingly. Assessment of the current leadership requirements of Mc Donald Current leadership requirements in Mc Donald The overall restaurant industry is currently yielding low profit margins and loosing the market share due to the cheaper rate of the food items offered in the emerging restaurants of the developing countries. The restaurants in the developing countries are generally getting the low labour cost and thus are able to adopt low pricing strategy in terms of the food items offered by these restaurants. Mc Donald in 2013 faced the same problem, which triggered the necessity of adoption of a new leadership style within Mc Donald. At present, Mc Donald uses democratic leadership style. The democratic leadership style is good for the organisation because the open communication can be maintained within Mc Donald. However, Morrill (2010) stated that democratic leadership would not help Mc Donald to attain the strategic objectives, which are set by the fast food retail chain. Thus, keeping the current context in mind the Mc Donald requires the following leadership qualities for the attainment of the strategic goals: High degree of flexibility and situational handling of the functions Situational leadership strategies Employee management and motivational skills High degree of creative skills Future leadership requirements in Mc Donald In terms of determination of the future leadership strategy, it may be recommended, Mc Donald in future should adopt the persuasive leadership style. The adoption of the persuasive leadership style will help the management of Mc Donald to interact freely with the employees and conduct the objectives within the given schedule and timeline. There are situations within Mc Donald that requires emergency attainment of marketing objectives. In such situations it is necessary for the management to adopt the persuasive leadership style so that using the charisma and the good communication skills the leader can motivate the employees and help them to attain the organisational objective within the given time schedule. Moreover, London (2001) stated that the company has franchisees on a global basis, hence the management of Mc Donald should be able to manage and co ordinate the functions of all the franchisees successfully. In this regard, Mc Donald should adopt centralisation strategy and tran sformational leadership style in future. High cultural diversity is also present within the employees of Mc Donald. Thus, it is necessary for leaders at Mc Donald to adopt a participative leadership style so that decisions can be obtained from all levels of employees. Moreover, the adoption of the participative leadership style will ensure the presence of open communication and a congenial environment within the organisation. Morrill (2010) thus stated that future strategic success of Mc Donald would largely depend on the adoption of the people leadership style. Employee satisfaction is a key factor to implement the internalisation policies within Mc Donald. Thus, the future leadership strategies should focus on employee developmental programs like training and development and mentoring programs (London, 2001). Conclusion In this report, a critical assessment has been carried out with respect to different important aspects related to leadership and the performance of analysis has indicated significant level of findings. It has been analysed that there has been positive existence of relationship between strategic management and strategic leadership in McDonald, as they aim at accomplishing organisational tasks and responsibilities in a positive manner. With respect to the current and future strategic objectives of Mc Donald, the adoption of situational leadership styles like persuasive leadership, charismatic leadership and democratic leadership strategies should be successfully incorporated within the food chain. There are different leadership styles that are being practiced by the leaders and they are aimed at handling different situations in a highly efficient manner. The analysis also leads to identification that there are certain important management and leadership theories that could be applied i n efficiently managing the leaders role within McDonald. The development of efficient leadership strategy has also been carried out with a view to support organisational direction in an efficient manner. The analysis also leads to identification of the current leadership requirements that must be addressed by the leader, and there is also an identification of the future major requirements that are also required to be considered by the leader in performing their role efficiently in future. Finally, there has been the planning being carried out with respect to development of leadership skills for a specific requirement of addressing employees within organisation and it is evaluated that the leader is required to consider large number of methods in ensuring the efficient development of leadership skills within McDonald. References Cameron, K. (2012), Positive Leadership: Strategies for Extraordinary Performance, Berrett-Koehler Publishers. Corporate Social Responsibility: Challenges, Opportunities and Strategies for 21st Century Leaders DuBrin, A. (2008), Essentials of Management, 8th ed., Cengage Learning. Goodridge, D. (2006), Relationships Between Transformational and Transactional Leadership with the Motivation of Subordinates, Concordia University (Canada). London, M. (2001), Leadership Development: Paths To Self-insight and Professional Growth, Psychology Press. Lussier, R. and Achua, C. (2009), Leadership: Theory, Application, Skill Development, 4th ed., Cengage Learning. Morrill, R.L. (2010), Strategic Leadership: Integrating Strategy and Leadership in Colleges and Universities, Rowman Littlefield Publishers. Mello, J. (2014), Strategic Human Resource Management, 4th ed., Cengage Learning. Martin, B. (2006), Outdoor Leadership: Theory and Practice, Human Kinetics. Northouse, P.G. (2012), Leadership: Theory and Practice, SAGE Publications. Okpara, J. and Idowu, S. O. (2013), CSR, Sustainability, Ethics Governance, Springer Science Business Media. Schein, E.H. (2010), Organizational Culture and Leadership, 4th ed., John Wiley Sons. Sperry, L. (2013), Effective Leadership: Strategies for Maximizing Executive Productivity and Health, Routledge. Sindell, M. and Hoang, T. (2001), Leadership Development: Management Development, American Society for Training and Development. Wood, R.C. and Brotherton, B. (2008), The SAGE Handbook of Hospitality Management, SAGE.

Using the example (simplified) bank balance sheet below show and explain why the Leverage And Capital Ratios are changed as a result of a 6m write-down in mortgages Essay Example

Using the example (simplified) bank balance sheet below show and explain why the Leverage And Capital Ratios are changed as a result of a 6m write-down in mortgages Essay The initial balance sheet shows that the total equity is  £16m and the total asset is  £305m. After the written-down of  £6m on mortgages, the mortgages have converted  £120m into  £114m so that the new total assets change to  £299m. In addition, due to the decrease of total assets, the total equity also turned into  £10m In order to make the total equity equal to total assets. As we know, the formula of leverage ratio and capital ratio is: Leverage ratio= Total Equity/Total Assets *100% We will write a custom essay sample on Using the example (simplified) bank balance sheet below show and explain why the Leverage And Capital Ratios are changed as a result of a 6m write-down in mortgages specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Using the example (simplified) bank balance sheet below show and explain why the Leverage And Capital Ratios are changed as a result of a 6m write-down in mortgages specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Using the example (simplified) bank balance sheet below show and explain why the Leverage And Capital Ratios are changed as a result of a 6m write-down in mortgages specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Capital ratio= Total Equity/Risk-adjusted assets *100% So, as the changing of total equity and total assets, the leverage ratio also change at the same time. Due to the changing of mortgages, the risk-adjusted assets of mortgages also change so that the total risk-adjusted assets turned into  £191m compared with previously figure  £194m. Therefore, capital ratio has changed attributable to changing of total risk-adjusted assets. In a word, the leverage ratio and capital ratio are changed as a result of a  £6m write-down in mortgages. Part B: In the event that this write-down in mortgage assets was widespread; explain what measures all banks would have to take in order to rebuild their capital ratios back to the required minimum of 8%. Answer: 1. The first method is by increasing total equity (with no change in risk-adjusted assets) 1. As we know, the capital ratio = total equity/ risk-adjusted assets *100% From the table, we can see the current capital ratio=5.24%.the target capital ratio =8%.given the risk-adjusted assets  £191, we suppose to find how much total equity is need to achieve capital ratio of 8%? Assume X=total equity. 8%=X/ £191m*100% X= £15.28m. In conclusion, total equity most increase to  £15.28m to achieve the capital ratio of 8% with no change in risk-adjusted assets. 1. From the table we can see, given the bank has £10 in total equity. From 1 X is given  £15.28m. X- £10m= £15.28m- £10m= £5.28m. In conclusion, bank needed additional equity  £5.28m from the existing equity of  £10m to achieve the total equity of  £15.28m so that the capital ratio of 8% can be achieved. 1. The second method is by decreasing risk-adjusted assets (with no change in equity) 1. With no change in equity, we calculate the total risk-adjusted assets. Using  £10m in equity The total risk-adjusted assets= £10m/8% *100%= £125m. In conclusion, assume total equity is fixed; the total risk-adjusted assets have to decrease to  £125m in order to achieve the capital ratio of 8% 1. Form the table, we can see, current risk-adjusted asset = £191m and the target risk-adjusted asset = £125m. The change of risk-adjusted asset =new risk-adjusted assets-old risk-adjusted assets= £125m-  £191m=- £66m. In conclusion: the total risk-adjusted assets must reduce by  £66m in order to get  £125m so that the capital ratio of 8% can be achieved. 2. We now have to change the composition of Assets to make risk-adjusted assets= £125m Because the risk weight of loans and advances is 100%. We need to make it smaller, old loans and advances= £125m, new loans and advances=old loans and advances +changes in composition of assets= £125m+ (- £66m) = £59m. In conclusion, to achieve the value of risk-adjusted asset= £125m, we need to reduce the loans and advances by £66m in order to get the new loans and advances = £59m 1. In order to achieve liabilities=assets, we also need to change the value of cash in tills. New cash in tills balance= current cash in tills + change in composition of assets= £5m+ £66m= £71m. In conclusion, to achieve the value of risk-adjusted asset= £125m, we not only need to reduce the loans and advances, but also need to increase the cash in tills by  £66m in order to get the new cash in tills = £71m. By reduce the loans advances and increase the cash, which will reduce the lending. The liquidity ratio will increase lead to the credit crisis. [C]New balance sheet with the capital ratio of 8% Liabilities  £m Assets  £m Risk Weighting Risk Adjusted Assets ( £m) Deposits Cash Current accounts 195 Cash in Tills 71 (0%) 0 Time deposits 94 Money at call 5 (0%) 0 Total Liabilities 289 Available for sale assets Gove Bonds ; Bills 10 (10%) 1 Other Bonds ; Bills 40 (20%) 8 Equity Shareholder Capital 7 Other assets Retained Profits 3 Loans and Advances 59 (100%) 59 Mortgages 114 (50%) 57 Total Equity 10 Total Liabilities + Equity 299 Total Assets 299 Total Risk- Adjusted 125 UK Liquidity Ratio 3.34% Leverage Ratio 3.34% Capital Ratio 8% Part C: Explain how, in rebuilding capital ratios, aggregate demand will change, as a result the economy as a whole, could slide into recession. Answerà ¯Ã‚ ¼ The bank starts to rebuild the capital ratios by reducing the risk-adjusted assets. Under the reducing the risk—adjusted assets, it will change the composition of the assets by reducing the loans ; advances and increasing cash in tills. It will cause the overflow of the liquidity. Bank is suddenly reducing profitability. Loans become lesser and lesser to firms, individuals and so on. The bank refused to give loans to others in order to rebuild the capital ratio to achieve a higher figure, which will cause the credit crisis. Assuming the entire bank do that, the aggregate will fall due to the falling of the consumption of domestically produced goods ; services and the investment. All of these are depend on loans. For people, they want to take loans from banks by buying cars and house. They also want to pay the educational fees. For the firms, they are in trouble they cannot finance the loans. Sometimes, they don’t have enough money to buy the new equipment and pay the sa lary to their employees, so they take loans from banks, the issue is they cannot take enough loans from banks so as to firms are tending to make less investment. Due to rebuilding capital ratio, banks don’t want to give loans to others, the Cd will fall down. As a result, the economic will go into the recession. The economic will experience a huge fall in terms of their aggregate demand. Also, the banks start to rebuild the capital ratio by increasing the equity. Through increasing retained profit, it can delay the payment of dividends and increase its loans rates ; bank charges, or by laying off staff and closing underperforming branches so that it will cause the increasing of the unemployment rate and reducing spending. Everything is tending to fall. Spending lesser and lesser, the aggregate demand will fall. Thus, GDP will fall leading to the recession.

Politics of Western Europe Essays - Michael Ignatieff, Free Essays

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