Chapter 10

Article: http://www.fox8.com/news/wjw-news-hummer-local,0,2851328.story

Since 2008, the iconic Hummer sold by General Motors has been predicted to be eliminated or sold because of the decreasing demand for large SUVs and high oil prices. Now, in the midst of GM declaring bankruptcy, it has finally been announced that the Hummer will be discontinued by GM. Instead, it has been sold to a Chinese company called Sichuan Tengzhong Heavy Industrial Machinery Co. Regardless, service will still be available for Hummer owners, and parts will still be under warranty, as stated by the federal government. This brand will then be under foreign ownership, as some three thousand jobs would be saved. Other brands sold by GM, such as Pontiac, Saturn, and Saab, are also on the brink of discontinuity, although there are sixteen potential buyers of the Saturn brand.

Although the textbook talks mainly about foreign ownership of Canadian industries, this article connects to the content in the textbook in terms of foreign ownership and types of business enterprises regarding the American company, General Motors. First of all, GM is selling one of their brands to China's Tengzhong, therefore a partnership enterprise is established. GM and Tengzhong's relationship is known as a partnership enterprise because the headquarters will remain at GM, but the brand will be owned by Tengzhong, resulting in two owners operating a business firm and are liable for any debts. The foreign ownership of China and the United States also creates good market access because the Hummer will now be more popular in the Chinese market, therefore increasing exports.

Not only for the United States, but also for Canada, General Motors' recent economic struggle has been what everyone is talking about. Since the beginning of the suspicion that General Motors would endure bankruptcy, a lot of what I've been hearing are how jobs would be lost, and what they plan to do in the future. I think this was the first article I've read that spoke about how jobs are being saved because of the selling of the Hummers. Selling some of the brands is a good idea because the North American owners of those particular brands could keep their warranties on their parts, and be provided with service when needed. This foreign ownership allows this to be possible. In addition, it was also possible for the three thousand jobs being saved because the Hummer is being sold, and not discontinued.

Chapter 8

Article:http://www.cbc.ca/canada/nova-scotia/story/2009/04/01/ns-minimum-wage.html

The increase of minimum wages in Nova Scotia on April 1st are just one of the three raises the government is going to provide for them. The minimum wage, $8.10, has increased by fifty cents, making the current minimum wage $8.60. With what's happening in other provinces, the government hopes that this raise will bring Nova Scotia in line with them. It was only two years ago that 36, 400 employees have been working for less than $8 an hour, and another 47, 600 worked for none over $10. In addition, considering the fact that the number of people working for a minimum wage has increased in the last few years, this increase in minimum wage will definitely create a positive impact on them. By fall of 2010, the minimum raise is expected to reach up to $9.65.

This article and the content in the textbook is similar in a way that wages in Canada are in discussion. Wage controls in Canada are only a temporary basis. Companies are allowed to increase wages and give raises to individuals, but the provincial government is in control of the wages all in all. Limits are made so that rapid wage and prices increases won't happen. The increase in the minimum wage for Nova Scotia will result in a stimulation of the economy. The income increase would encourage people to spend more. The more spending going on, the more it will benefit the economy. In addition, the relationship between unemployment and inflation is also discussed. The increased wages would result in higher employment rates, and that would result in a higher inflation rate.

Not only will the minimum wage raise increase spending, it will also create incentive for people to look for jobs as well. This incentive will create a decrease in unemployment. Even though fifty cents may seem little, this may help an individual, particularly the students who are entering the workforce, and will benefit them in many ways in the long run. On the other hand, the increase in wage may cause the employer to create products with poorer quality with the same price in order to compensate with the money loss. With Canada's current recession, I hope the increase in minimum wage will ultimately help the economy.

Chapter 7

The article: http://www.thestar.com/business/article/611151

Canada's recession and decreasing employments have caused the government to become more involved in credit card companies. Statistics say that credit card losses are quickly pacing up to the number of losses in past recessions. Because of this, many major banks are beginning to enforce rules that are more strict towards high-risk clients regarding lending out money, and raising the credit card limit. CIBC is one that has already begun doing so, and are seeing positive results. The growing percentages of consumer loss ratios, credit card losses, personal bankruptcies and job losses, are persuading the government in Ottawa to step up and take charge of the credit card industry. The NDP is already considering making a consumer bill of rights. On the other hand, many credit card companies such as Visa is arguing that government intervention may limit competition, therefore hurting consumers.

This article about credit cards and what the credit card industry is planning to do connects with the material in the textbook because Canadian banks are planning to change and make new decisions that will affect the consumers in Canada. Credit cards are very popular amongst households, and they may be the reason why many families are able to support themselves. Seeing the statistics of growing personal bankruptcies and job losses in Canada, it is safe to say that cash is becoming less available for Canadian households, making credit cards even more important. Banks that offer credit cards have to be more stingy in lending out money, as they're taking into account the amount of cash or assets they actually have before they can lend out big loads of money to just anyone.

Aside from the reason that many people are getting laid off from their jobs, which results in a lower income and less cash, I think another reason for the high credit card losses is because of what the consumers are spending it on. In my opinion, credit cards should be used for mainly necessities. If people start buying things that they don't really need with their credit card, along with the things that they do need, the amount of money they owe will of course increase. Whereas, if necessities were bought with credit, and the extras were bought with already existing cash or assets, one's debt would not be as great, making them being able to pay off easier. In addition, government intervention for credit card companies, and the fact that the rules may be more strict, may ultimately harm the economy instead of help. Consumers would spend less because of these limits, therefore not helping the economy.

Chapter 6

The Article: http://www.cbc.ca/money/story/2009/03/05/gmannual.html

Once again, General Motors Corp. is suffering from an financial crisis. It has been said that they have a high chance of bankruptcy if they don't come up with a restructuring plan soon. Recently, GM's shares have 17 percent. Even bailouts and loans worth billions of dollars from the government doesn't seem to be helping much. On February 17th, GM's restructuring plan was to lay off 47, 000 workers, 4000 of which would be in Canada, all by the end of the year. Following this, five GM factories would also be shutting down. This financial crisis is happening because of GM's "inability to create sufficient cash flow."

The reason behind why GM is on the brink of bankruptcy can be explained with the circular flow of money diagram mentioned in Chapter 6 of the textbook. According to the diagram, any time there is a lack of consumer spending, it hurts the businesses' profits. Because households and businesses are interrelated, once households start investing and saving, businesses will counteract by laying off workers, trying to regain balance in the economy and like how GDP tries to maintain an equilibrium. Because so many more people are saving their money, GM has to lay off many jobs. Households saving money also relates to the paradox of thrift, which explains the situation when one tries to save money, but end up saving less. If one is employed at GM and starts saving money, they are only hurting themselves, as they may be laid off, therefore having less money to save.

In my opinion, I think it is a shame that many people don't know that investing and saving their money will harm the economy even more. It affects GM in a way that forces them to lay off many, many workers, which then results in even more people trying to save their money. I think if everyone was informed about the circular flow of money, they would know that spending more would help the economy, and help any big companies that are on the brink of bankruptcy. If people spend on the big companies, they will produce more units, therefore creating more jobs. In addition, seeing that government bailouts and loans are not helping GM, it seems like the only way for GM to climb out of this financial situation is if consumers spend more and save less.

Chapter Five

Article: http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20090216.wjapanmarkets0216/business/Business/businessBN/ctv-business

Summary
On February 16, Japan's gross domestic produce was announced to be dropped by 3.3% in the fourth quarter last year from the previous quarter. Since 35 years ago, the Japan government has never seen the economy shrink at a rate so fast. This was because the global export demand has decreased, and it shows no signs of recovery. The government stated that a contracting GDP value will also decline in the current quarter. As for the last quarter, Japan's export decreased by 13.9% because of this global economic problem, and the fact that Japan has an export-dependent economy means Japan will be greatly affected. Many companies have been forced to cut jobs, resulting in higher unemployment rates, and less consumer purchases. This is Japan's third consecutive GDP value drop, officially marking Japan as being in a recession.

Connection
This article talks mainly about Japan's decline in GDP, and how it is in the midst of a recession, as if a country goes through two consecutive quarters of GDP declination, a recession occurs. GDP measures the market value of total goods and services produced in a given time period, and for this to be declining in Japan is because of the decrease in global demand for Japanese products. The fewer the demand, the less Japanese workers are needed to make the products, increasing the rate of unemployment. The type of unemployment explained in the textbook that corresponds with this situation would be the demand-deficit unemployment, where employees have to be laid off because there is so little demand that it is too hard to sell their products.

Reflection
It is a shame that Japan, having one of the world's most largest economies, is facing an economic recession. Since Japan depends so much on exporting goods, the decrease in global demand is sure to create a dent in their economy. Since unemployment is increasing in the fields of product selling, the government should hire people to work in the field of infrastructure instead. More jobs, such as construction workers can be created. This not only helps the workers by giving them an income, but it also benefits people in that community by improving their quality of living as well. By hiring more people in this field, there would be more jobs available, and this would stimulate spending, and the recession may slowly recover. In addition, global exporting is effective when there is much global demand, but Japan should not only focus on global exporting, but also on other ways for economic growth.

Chapter Four

Article: http://www.allheadlinenews.com/articles/7013593596

As of March 2009, Ontario's status will become a have-not country because of the global economic crisis. Ontario, being one of Canada's leading provinces, has remitted billions of equalization payments to Ottawa in the past years. This would be the first time in history that Ontario would have to depend on equalization payments. It has been predicted that by the end of March, Ontario will suffer a $500 million budget deficit, and they will qualify for $374 million from the federal government.. One of the reasons for this crisis is because the rate of unemployment has increased up to 7.1%. In November, Ontario suffered an amount of 660, 000 loss jobs in the manufacturing sector. Meanwhile, Newfoundland and Labrador, a former have-not province, will become a have country on the same day.

Like said in the article, this would be the first time that Ontario would have to receive equalization payments. This connects with the topic in the textbook that questions if equilization payments for a province would be more beneficial, or would it hurt their economy in the long run. The textbook explains how equalization payments may discourage provinces in trying to improve their economy because they want to be elegible for those payments. Equilization payments also cause higher tax rates, thus discouraging outside investment and causes entrepreneurs to move out. After Ontario becomes a "have-not" province, Ontario may suffer these consequences as well. The deficit of $500 million, the decrease in jobs, in addition to the negative side effects of the payments would surely have a great affect on Ontario. On the other hand, the province of Newfoundland would have to work hard in order to make their economy flourish as they become a "have" province and escape what Ontario will soon go under.

Personally, I think it's a shame that Ontario would have to have such a big debt. To me, Ontario used to be like one of the economic role models of the country. For it to suffer such great debts after being one of the wealithiest provinces in Canada makes me wonder if this will soon happen to BC. In the meantime, I think this would also affect BC because it would be one of the provinces providing a part of the revenue for Ontario. Will this create a significant effect for the people in BC? I would like to think not. Fortunately, Newfoundland and Labrador is becoming a "have" province, therefore lessening the federal government's amount of equalization payments for its provinces.

Chapter 3

The article: http://www.ausfoodnews.com.au/2008/11/24/alcopop-tax-loophole-to-be-closed.html

This article is about the Australian government catching alcopop companies finding loopholes in paying excise taxes. Excise taxes have been imposed on alcopop products in the hopes of trying to reduce alcohol consumption. Independent Distillers, one of Australia's alcopop companies, found a way out of the tax, which is making an alternative drink with the taste being very similar to alcopop. They strip the beer taste, leaving the alcohol in which they mix with fruit juices and other flavours. This alcoholic drink became known as 'Bolt'. This drink only has a $39.40/litre excise tax, whereas the regular alcopop tax is $66.70/litre. The Federal Government found out about this, and is now banning the further production of Bolt. Independent Distillers, however, still denies that this was not a form of a loophole.

This article connects to textbook in a sense that it explains the concept of excise taxes. Excise taxes, in the textbook, is explained as a tax levied by government on the suppliers of certain products. This tax only affects the suppliers and not the customers, and is usually a source of government revenue. The alcoholic products, such as alcopop, have been taxed for containing alcohol, which is what caused the Independent Distillers to create this alternate drink, to avoid paying so much excise tax. From the decrease in the excise taxes, they are able to lower their prices for the consumers as well, The article is an example of what companies would be willing to do to dodge excise taxes, although eventually, the government would probably find out, and stop the loophole.

I believe that although the main reason of excise taxes is to create a greater revenue for the government, part of it is also to reduce the amount of alcohol consumption. The Independent Distillers who made the new product, 'Bolt', is making an unethical choice of creating this in order to avoid paying the full excise tax. It's understandable to see why they are doing this, in order to increase their profit, but at the same time, they're decreasing the government's revenue as well. I think this situation resulted in the government being more alert that there may be more loopholes out there. This may cause the government to create stricter regulations on suppliers, and they will be certain to keep a closer eye out for companies like this.