Modern Economic Environment Concerns

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If we are to talk about the economic environment, what factors must be considered? How do these factors affect the growth of the economy? How does the state maintain good economic growth? These are some questions that enter an individual’s mind when it comes to the economy.

The economy is defined as the proper management of resources in an area. In simple words, the economy of a state is dependent on how to sustain the needs of the people with the existing resources.

One important consideration in analyzing the economic environment is the fuel economy. It is a fact that the oil price hike affects not the only cost of transportation but also affects the cost of living, specifically the increase of prices of basic commodities like food, transportation, and housing. As written by Durham, it was stated by President Bush that the increase in gasoline prices will cause slow growth in the economy because consumer tends to lessen the use of power. Hence, this will lessen the amount of gasoline to be purchased.

The significance of fuel in producing and transporting food shows a direct relationship between fuel and food. This relationship explains that if there is a high demand for fuel, there is also high demand for food. The supply and demand of fuel and food are greatly affected by population growth, climate change, and land conversion. Population growth increases the demand for food while land conversion, which refers to the changing of agricultural land to industrial and residential lands, decreases food supply.

Because of the continuous oil price hike, the supply of biofuels has increased. Since bio-fuels are extracted from oil-producing-crop and it has a higher price in the market, farmers shift to planting oil-producing crops rather than planting food crops. This situation leads to a decrease in the food supply which causes food shortage.

The United Nations is an international organization that aims to implement international laws, provide social and economic security, and protect human rights. One of the specialized programs of the UN is the Food and Agriculture Organization which is responsible for international food security.

The UN warned that the worldwide food shortage, where there is a price increase, can threaten economic security and growth, and social security and development.

The New York Mercantile Exchange is the world’s leading company in the oil industry. It is found that the price of oil in 2008 has increased three times since 2004. Erbe cited that the price hike was based on the volume and instability of oil every day.

The continuous oil crisis is also caused by the low exchange rate of the dollar. The lower the exchange rate of the dollar, the lesser amount of oil can be bought with the same amount.

The low exchange rate of the dollar has something to do with the mortgage crisis. This has caused homeowners to pay a higher amount of mortgage which leads to foreclosure of properties and bankruptcy not only to homeowners but also to different financial institutions. Some homeowners were also charged with arson because they could not pay the mortgage value of their houses. The crisis has had a great impact on the world’s financial status and has caused the lowering of stocks in the market.

To resolve the crisis, the Federal Reserve was asked to take action regarding the problem.

The Federal Reserve System is United States’ Central Bank. It is a government institution that aims to provide the state a safe and stable financial structure.

As a response to the crisis, the Federal Reserve has put effort to sustain the marketability of the properties and decreased the interest rates of the mortgage properties. The institution also provided short-term loans to banks that were foreclosed for them to sell the mortgaged properties.

Chossudovsky stated that the increase in the prices of food, oil, and water which leads to demoralizing the economic and social status. Furthermore, he considered that food, oil, and water determine the growth of the economy and social conditions which are handled by international institutions.

The oil crisis, food shortage, low exchange rate of money, and mortgage crisis are some factors that can display a worsening economic environment. These factors have decreased the Gross Domestic Product which is an indicator of depletion in the economy.

With the instability of the current economy, what factors must be considered to improve the current status of the economy?

A stable economy requires a balance between supply and demand. To obtain this, the increase in production must be measured depending on the demand of the consumers. Factors like climate and weather conditions must also be considered since the two factors affect the quantity of demand.

Another way to prevent the decline of the economy is to conserve energy. In conserving energy, natural resources are also being conserved and the chance of having a greater demand than what is available may be lessened.

Since population growth harms economic growth, it is better to lessen the risk of having too many children.

A strong and stable economic environment follows peaceful and secure living.

References

CHOSSUDOVSKY, M. (2008). The Global Crisis: Food, Water, and Fuel. Three Fundamental Necessities of Life in Jeapardy. Web.

DURHAM, E. (2008). Rising fuel costs impact economy. Web.

ERBE, B. (2008). The Growing Oil and Food Crisis. Web.

Wikepedia, The Free Enclopedia (2008). Web.

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Modern Economic Environment Concerns

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