Business Concepts in the News
Article# 1
Fed Raises Key Interest Rates, Citing Strengthening Economy Rates
This article in New York Times by Binyamin Appelbaum addresses the reason as to why the Federal Reserve embarked on a reason to raise the interest rates. The fed cited that it is important to race the interest rate for the second time since the global financial crisis of 2008 saying that it will facilitate a healthy pace in the economy which president-elect Donald J. Trump pushes for (Appelbaum 1). The considerable fast growth will create a significant employment growth in the economic measures. The rise of the interest rate has been used to prevent the economy from growing too quickly without being stable. With the rise, the economy is expected to perform well despite the fact that high rates discourage borrowing and risk taking (Appelbaum 1).
The benchmark between 0.5 -0.7 by the Federal Reserve has a positive impact to the economy. This is because it will reduce inflation and the money markets will be stable. This means that companies will be making good profits as well as strengthening its currency against that of other markets. This is supported by what the Federal Reserve committee sees happening in the market. They agree that the step will spur a faster growth after the presidential campaign which MR. Trump disparaged. The macro effects of the interest rate will be positive for the economy. The increase in interest rates also reduces the tension between the monetary and the fiscal policy hence the economic impact will not be adverse. The increase in interest rate can be considered to be a vote of confidence in the economy as unemployment will be minimized (Appelbaum 1).
Article #2
Oil Prices: What’s Behind the Volatility? Simple Economic
The article by Clifford Krauss looks at the volatility in the oil prices that is as a result of demand and supply. The oil industry has experienced a rise as well as a fall in the prices but with the greatest downfall since 1990 (Krauss 1). Despite that company in the oil industries have recorded profits in the recent years the oil supply has been limited. Despite the huge investment in the oil rigs in exploration production has not been at its best. Various companies have undergone bankruptcy laying off a large number of employees. The limited supply has plugged the oil prices high despite managed operations to cut down cost. High operation cost has limited the production of oil which has made numbers of wells to remain unprofitable pushing further the oil prices up (Krauss 1).
The increased in oil prices have a huge impact on the economy. The supply chain of the oil is interrupted by the less production driving the prices of other products that have both a direct and indirect connection to it. This means that people have to pay more for the same quality commodities as the demand for the oil is high but the supply is limited. With the high prices, economies lying on oil as a major income for the country have suffered as they have not been able to gain the maximum in oil production (Krauss 1). It is true to say that oil exploration is an industry that needs close attention in order to ensure that countries involved get profits in drilling while the consumer is not exploited as well as having a growing economy in the oil drilling countries.
Work Cited
Appelbaum, Binyamin. Fed Raises Key Interest Rates, Citing Strengthening Economy Rates. New York Times; December 14, 2016. Retrieved from http://www.nytimes.com/2016/12/14/business/economy/fed-interest-rates-janet-yellen.html
Krauss, Clifford. Oil Prices: What’s Behind the Volatility? Simple Economic. New York Times; December 12, 2016. Retrieved from
http://www.nytimes.com/interactive/2016/business/energy-environment/oil-prices.html?_r=0
