Analyzing Inflation and Deflation in Global Economies
1(a) Japan: Sales Tax and Inflation
a) Which one of the following is most likely to explain the data? (1 mark)
Answer: C
C. In April 2014, Japan raised its sales tax from 5% to 8%.
The graph shows inflation rising sharply during 2014 before falling again. A higher sales tax directly increases consumer prices, causing a temporary increase in CPI inflation.
1(b) Defining Deflation in Japan
(b) With reference to Figure 6, explain the term deflation. (4 marks)
Deflation is a sustained fall in the general price
Read MoreTrade Theory and Political Coalitions: Rogowski’s Matrix
The Stolper-Samuelson Theorem and Trade Dynamics
According to the Stolper-Samuelson theorem, when a country moves from autarky to free trade, the owners of the country’s abundant factor of production gain, while the owners of the scarce factor lose. This occurs because trade allows countries to specialize in producing the goods for which they have a comparative advantage.
Heckscher-Ohlin Model and Income Distribution
As production expands in export industries, the demand for the abundant factor increases,
Read MoreStolper-Samuelson Theorem and Rogowski’s Political Coalitions
1. The Stolper-Samuelson Theorem Explained
The statement is grounded directly in the Stolper-Samuelson Theorem, an extension of the Heckscher-Ohlin model of international trade. The theorem demonstrates that a transition from autarky to free trade increases the real returns to a country’s abundant factor of production while decreasing the real returns to its scarce factor.
This outcome occurs due to shifts in production patterns driven by comparative advantage. When a country opens to international
Read MoreNegotiation Tactics: Case Studies in Conflict Resolution
Essential Negotiation Vocabulary and Principles
- 1. Common, human, acknowledge, flexible
- 2. Concessions, trust, readily, exploited
- 3. Position, unwise, inefficient, either
- 4. Mutual, judging, easy
Four Pillars of Interest-Based Negotiation
- Separate people from the problem
- Focus on interests, not positions
- Invent options for mutual gains
- Insist on using objective criteria
- 6. Negotiation, rules, motivated, essential
- 7. Fairness, standards, open, pressure
- 8. Adversaries
- 9. Day, conflict, decisions, negotiate
- 10.
Transfer Pricing and Intercompany Fund Transfers Explained
Transfer Pricing
Transfer pricing involves the internal exchange of goods and services within a multinational corporation (MNC). Because this practice can impact national tax revenues, many governments have established strict enforcement procedures. The primary objectives of transfer pricing include:
- Reducing tax liabilities
- Lowering tariffs
- Circumventing exchange regulations
- Hiding affiliate profitability
- Enhancing joint venture earnings
Tax Effects
Adjusting transfer prices can decrease overall tax burdens
Read MoreSocial Policy, Welfare States, and Economic Institutions
Society, Institutions, and the Social Contract
Policy Analysis: Positive is factual and descriptive, focusing on how reality is. Normative is value-based, focusing on how society should be.
Correlation vs. Causation: Correlation occurs when variables move together. Causation occurs when one variable changes another. Correlation does not equal causation because of confounding variables and reverse causality. Policy should rely on causal evidence.
Basic Institutions
- Family: Provides care and shared resources.